Friday, November 26, 2010

CMBS for the Holidays

After gaining extensions on most of the GGP loans, exiting bankruptcy, and general perceived market improvement, GGP is now looking to ramp up refinancings. We've looked at positions on both ends of the capital stack as front and next pay bonds may shorten, and in the first case that we reviewed GGP passed on a loss to junior bond holders despite not losing any money themselves on Water Tower Place.

Bridger teamed up with New York Mortgage Trust and is offering mezzanine debt to CMBS borrowers - this would be a great business to be in right now.

Berkadia announced that it was going to lend out $200mm for CRE.

CMBS prices are a little overdone, but compared to this week 2008, they are reflecting risks much better. This happens to be the same week that I decided to start getting really long CMBS, in 2008, when we had high teen yields on front pay AAAs, but I'm a seller today.

I'm most thankful that electronic strip searches and groping by government employees has finally gotten a groundswell of opposition from the American public against the government not only stomping all over our rights as citizens, but treating us like criminals, and implementing costly procedures that do not appropriately address the problem. No, I'm not talking about the Fed, I'm talking about the TSA - but take your pick.

However, I also fully support women choosing to wear bikinis through the security lines and men wearing kilts, and I hope that more folks will be choosing these options to help entertain me as I travel in December. I'll be in planes more than all other vehicles combined next month and will be traveling 8 of the 31 days. If you could please click the donate button and ads I could fly private - help me help you. In a day when I can fly private for under $1k and get there faster and on my schedule, $200-$500 tickets and losing 2 - 4 hours of my time dealing with commercial airports is demonstratively less attractive.

Thursday, November 18, 2010


Goldman's out, deal size is smaller, pricing today (maybe).

"Goldman may have simply decided the Libor plus 175 basis points investment was attractive for their own internal investment, whereas large banks are still in a loan exposure reduction mode," said Darrell Wheeler, senior managing director at Amherst Securities Group in New York.


"Not having a rating is fairly experimental and it was likely difficult to find investors for more than a billion of unrated paper," Wheeler said.

Dan Nigro, chief executive of Warfield Consultants, a Montclair, N.J., firm focused on asset-backed and residential mortgage-backed securities, thinks this bond is a precursor to other unrated bonds because the ratings agencies have been discredited during the past few years.

"There is an entire market that trades without ratings and there are enough people who can evaluate these bonds without needing ratings so there will be an evolution to a private market that will be largely unrated," he said.

Thursday, November 11, 2010

When Special Servicer's Attack

At the bottom of the WSJ's article, Street Aims to Reboot CMBS, there was an interesting piece of news: CWCapital is denying Trimont any of the $19mm in fees related to the Extended Stay workout. Trimont was serving as the Special for about a year until investors voted to replace them with CWCapital. The WSJ article implies that CWCapital thinks that Special Servicing Fees are performance based with the following excerpt pulled from the court filings: "during the nearly one year that Trimont was the special servicer, it had no success working out the loan or resolving the bankruptcy case."

The article also talked about the Innskeeper loan dispute between LNR and Midland. I excerpted below so you can skip over the beginning of the article, which is wholly uninteresting, but CrabsOfSteel has reminded us all that it's sometimes worth reading threw the entire article for the good bits. h/t CrabsOfSteel.

That type of gamesmanship is highlighted in two recent lawsuits related to the bankruptcies of Innkeepers and Extended Stay. In the Innkeepers case, LNR Partners Inc. alleges in a lawsuit filed Oct. 27 in New York state Supreme Court that another investor reneged on an agreement to name LNR the special servicer overseeing Innkeepers' $825 million CMBS loan.

LNR alleges that it had a pact with CRES Investment, a division of Presidio Holdings II LLC, stipulating that CRES would hire LNR as special servicer if CRES's slice of the mortgage was deemed the controlling stake. As a side bet, LNR bought slices of the mortgage on its own to better its chances of getting the designation.

However, LNR claims in its lawsuit that CRES, once it was named controlling stakeholder, didn't hire LNR, instead keeping Midland Loan Services as special servicer. "CRES' failure to comply with its contractual obligations is depriving LNR of its bargained-for right to control workout and resolution of the Innkeepers loan," the lawsuit reads.

CRES representatives didn't return calls seeking comment. LNR declined to comment.

A similar dispute emerged in the Extended Stay bankruptcy. Trimont Real Estate Advisors Inc. alleges in a lawsuit filed Sept. 21 in U.S. District Court in Washington, D.C., that rival special servicer CWCapital Asset Management LLC owes it a portion of a $19 million restructuring fee. CWCapital received the fee as special servicer of Extended Stay's $4.1 billion securitized mortgage.

However, Trimont said it is entitled to some of the fee because it was the special servicer in the case for roughly a year.

Prior to a bankruptcy auction that resulted in a sale of Extended Stay and its 680 hotels, Trimont was abruptly replaced as special servicer with CWCapital by investors Bank of America Corp., UBS Securities and Cerberus Capital Management LP.

CWCapital has asked a judge to dismiss the case, noting in its court filing that "during the nearly one year that Trimont was the special servicer, it had no success working out the loan or resolving the bankruptcy case."

Friday, November 5, 2010

NCUA issues $3.8billion ReREMIC (NGN 2010-C1)

NCUA issued a $3.8 billion ReREMIC this week with 3 tranches with WALs from 4.00 - 6.73. All were rated AAA because NCUA wrapped them with their own guarantee for a monthly 2.9bp fee.

CMA reports Barclays was the lead.

The NCUA plans to conduct 8-10 resecuritizations totaling $35 billion, but all of the other deals will be backed by residential MBS. The first such offering, a $3.9 billion issue, priced Oct. 18.

After this week's offering, the agency still has about $560 million of CMBS from other failed credit unions. A spokesman said the NCUA doesn't plan to resecuritize them. While the agency didn't specify an exit strategy, it will presumably sell the remaining paper in the secondary market.

The CMBS resecuritization (NCUA Guaranteed Notes Trust, 2010-C1) is backed by bonds from the investment portfolios of Western Corporate Federal Credit Union and U.S. Central Corporate Federal Credit Union, which were seized last year.

Class Size (mm) WAL Talk Pricing
A1 $613.20 4.00 +70-75 +60
A2 $1,360.80 6.73 +110-115 +100
APT $1,786.00 5.88 +105-110 +100

Thursday, November 4, 2010

PCV/ST 6.67% loss projected by Appraisal

Not too shabby. Does this mean that the ASER will be that low? Probably not - they're still short 40% or so of the monthly debt service.

Wednesday, November 3, 2010

Delinquencies Improve in CMBS

Trepp notes that delinquencies improved 47 bps last month mostly due to the resolution of the ESH loan, which had been delinquent since '09.

Lodging improved 441 bps (ESH-reltaed), but all other sectors worsened:
  • MF worsened 20bps
  • Industrial - 21 bps
  • Office - 6bps
  • Retail - 4bps

Trepp also notes the rally ran out of steam late in October, which is very true. Lofty levels were being hit as late as the third week, but Monday of the last week found a back up in bids. Today started off mixed with the NAIC loss forecasts being adjusted downward.

WBCMT 2007-C33 - The Renaissance ($84mm)

CRENews reports (sorry no link) that Moinian is trying to restructure the terms on this $84mm loan. This was reported initially back in August, but there must be some increased velocity around the negotiations - any big NYC loan mod is going to be watched carefully for indications how others may be handled.

This is not a pure rent-control flip story, although they do receive the j21 tax abatement according to the servicer's notes. Average rents have gone from $2,645 per unit at issuance to ~$2,507 (I'm estimating), although occupancy has increased from 97% to 100%. Also, there is both a condominium and office component (the building was 100% office pre-1999) to the property on the first 13 floors. The property is located in the Financial District

The loan has a debt service reserve that has to be rebalanced on a yearly basis for a forward looking 1.10x DSCR. It also is currently secured by a hard-upfront lockbox. It was appraised on 5/13/2010 at $61.6mm (27% loss to senior, 47% decline from origination appraisal).

How the Elections Affect Retail Real Estate

David Bodamer ponders over the impacts of the elections on our world:
  • Carried Interest tax hike less likely
  • Gridlock in terms of legislative changes.
  • Somewhat counter the prior point, less uncertainty with a Republican in terms of tax increases and pro-business measures
  • Slot machines coming to Arundel Mills (BACM 2007-4 and BACM 2007-5)
In the near term, say 2-4 years, I foresee gridlock, uncertainty, and a lot of negative stuff. How can you make a business decision in this climate without being able to measure the political risk, which is arguably the most predominant risk in MBS markets.