Friday, June 27, 2014

et encore! another $150MM goes to special

Transaction: GECMC 2006-C1 & GMAC 2006-C1
Property: James Center
City/State: Richmond, VA
Property Type: Office
Balance: $150,000,000
MS: Berkadia Commerical Mortgage LLC
SS: LNR Partners, Inc.
Reason for Transfer: Potential/ Imminent Default

Wednesday, June 25, 2014

Hey now! Another $150MM in loans transfer to special servicing in one day

Transaction: MLCFC 2007-9
Property: 300 Capitol Mall
City/State: Sacramento, CA
Property Type: Office
Balance: $104,330,000
MS: Wells Fargo
SS: LNR Partners, Inc.
Reason for Transfer: Imminent Maturity Default

Transaction: BSCM 2006-PWR13
Property: First Industrial Portfolio
City/State: Various, GA
Property Type: Industrial
Balance: $47,497,720
MS: Wells Fargo
SS: Situs Asset Management
Reason for Transfer: Imminent Monetary Default
Fitch recently released their "new" loss estimate of 15.7%
for the 2007 vintage. Who wants to bet that will change 
within three months?  It's subprime all over again!

Sunday, June 22, 2014

CMBS Repurchase claims

Hello once again.

We know that a lot of sketchy loans went into legacy CMBS.  Often, the special servicer delights in pointing out how actual performance differs from predicted performance (even though they bought the at-risk B pieces).  The sole recourse left to the trust is to sue the originator for a breach claim.  This has happened before but seldom.  Orix took Nomura to the cleaners for Doctor's Hospital at Hyde Park (ASC 1997-D5) to the tune of $65MM including legal costs but it took over five years to resolve.   I am aware of only one repurchase claim in the current market, City View Center in MSC 2007-IQ14.  The story here is that a shopping center was built on top of two landfills in a suburb of Cleveland, with a methane remediation system to vent gas through lighting posts in the parking lot.  Wal-mart moved in, decided it stank of fart gas, and moved out, triggering co-tenancy clauses.  MSC is being sued for a breach claim for not having adequately disclosed environmentals.  The loan has been declared non-recoverable and shortfalls are hitting the AJ class.  Any others you know about?

Monday, June 9, 2014

CMBS University: What is the difference amongst CMBS 1.0, 2.0 and 3.0?

Dear CMBSers,

The question you were afraid to ask is answered here.

In CMBS 1.0, also known as legacy CMBS, payments of interest are senior to payments of principal.  Thus, when a deal had shortfalls due to delinquency and there was a sale of property which did not result in loan liquidation (e.g. Beacon Seattle in GECMC 2007-C1, or West Hartford Portfolio in BACM 2007-5), proceeds would be applied to paying off prior interest shortfalls in lower-rated classes rather than being applied to paying down principal in the front-pay higher-rated classes.

Understandably, this got AAA investors upset.  Why were lower-rated bonds receiving any sort of cashflow when they were not?  What were the ratings agencies thinking?  Thus, in CMBS 2.0 starting with the JPMCC-initiated deals in 2009, all cashflow is directed at the senior-most classes.  This means that if a class suffers an interest shortfall, that shortfall is permanent until that class becomes a front-pay and becomes eligible for recoveries.

What makes CMBS 3.0 any different?  As far as I can tell, the difference is that 3.0 deals include an operating advisor (e.g. Pentlalpha) as a party to the transaction.  The operating advisor does not seem to have any fiduciary role and seems to exist for the sole purpose of gathering fees as an advisor to the special servicer, but hey, we're all friends here so why not.

Can anyone shine more light on this?  What do you think?

Friday, June 6, 2014


Roger (who I assume you all know) says it best:
On Tuesday, CWCapital Asset Management, on behalf 
of the trusts it represents, formally took ownership 
of Peter Cooper Village and Stuyvesant Town, via a 
deed in lieu of foreclosure. This action means that
the properties are now REO assets of the trusts.
In addition, as result of the change in ownership, 
the foreclosure auction, of the top three layers 
of mezzanine debt, planned for next week, has been 

Thursday, June 5, 2014

Trepp to deliver Morningstar CMBS surveillance reports


This is good news for those of you who subscribe to both services, provided that Trepp doesn't tack on the Mstar subscription fee (around 60K per year for each service).  Although I think Morningstar is dreadfully slow in putting out their monthly surveillance reports, they are generally pretty good in providing accurate loss estimates.

Tuesday, June 3, 2014

CMBS University: why credit support levels differ depending on where you look

According to the remittance from Wells Fargo on WBCMT 2007-C30, credit support on class G is 5.84% which will match Trepp.  However, that same c/s level will be different should you consult it on Bloomberg or Intex.  Why?

The main culprit are WODRAs.  For those of you who have not had the pleasure, WODRAs represent servicer recoveries of advances from principal as opposed to interest cashflow.  In the case of C30 as of May 2014, $6.813MM of bonds are supported by $6.807MM of collateral.  This $0.06MM principal shortfall can only be recovered if REOs are sold for more than their loan balance, which is usually not the case.

What does Trepp do? They match the trustee remittance, which totals all bond balances inclusive and subordinate to the given bond and divides that by the total bond balance.  To Trepp's credit, they also report an ARA-adjusted c/s level which takes into account B-notes (which are usually 100% loss) and appraisal reductions (although surprisingly, not loans declared non-recoverable which have a 95% loss severity on average, last time I looked).

What does Bloomberg do?  They total all bond balances inclusive and subordinate and divide by the total collateral (as opposed to bond) balance.  Better, but still incorrect since B-notes, appraisal reductions, and non-recoverable loans are considered money-good.

Finally, we consider Intex.  Although they do not adjust their c/s levels for B-notes or ARAs, they do back out under-collateralization resulting from WODRAs from collateral balance as their denominator.  And they provide forbearance and non-recoverable loan data so that the enterprising investor can figure out what real c/s levels are.  All hail Intex!

Monday, June 2, 2014

Willis (Sears) Tower is transferred to special for imminent default

Well, well,  what do we have here?  According to Fitch:

Transactions: LBUBS 2007-C2 ($337.6 million) & LBUBS 2007-C7 ($49.6 million)
Property: Sears Tower (Willis Tower)
City/State: Chicago, IL
Property Type: Office
Balance: $498,885,497 Senior CMBS Debt* ($774,389,429 Total Loan Balance)
*Also includes loan pieces in LBUBS 2008-C1 and JPMCC 2013-WT (Not Rated by Fitch)
MS: Wells Fargo
SS: CWCapital Asset Management
Reason for Transfer: Imminent Monetary Default (Borrower requested a loan modification)

According to the servicer, the borrower anticipates significant 
capital costs going forward in order to secure additional new leases.  
Occupancy has improved to 83.8% as of March 2014, from 75% in December 

One of the co-owners, Joe Moinian, is known for asking for loan modifications (e.g. The Renaissance).  Another co-owner, Joseph Chetrit, has quite a reputation in CRE circles.
It is interesting that LBUBS 2007-C2 AJ is already a first-loss piece (thanks to Orix dumping all the loans they serviced in one single month).  An A/B note modification could make it the first zombie AJ!