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
Friday, June 27, 2014
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?
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?
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
PCV/ST now REO!
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
canceled.
Thursday, June 5, 2014
Trepp to deliver Morningstar CMBS surveillance reports
Whoopee!
https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=tEYeKOmtfXI%3d&m=i0Pyc%2bx7qZZ4%2bsXnymazBA%3d%3d&s=LviRtUKXqs8kml5dHt7FTeE2SZmY0Fvqd4iX49Mk%2f9UapyiFTEO6TA%3d%3d
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.
https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=tEYeKOmtfXI%3d&m=i0Pyc%2bx7qZZ4%2bsXnymazBA%3d%3d&s=LviRtUKXqs8kml5dHt7FTeE2SZmY0Fvqd4iX49Mk%2f9UapyiFTEO6TA%3d%3d
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!
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:
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!
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 2012.
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!
Friday, May 16, 2014
Au revoir, JPMCC 2007-LDPX classes E->G
It's not every month that a deal takes $150MM of losses but that was the case for this misbegotten deal. Stratreal Industrial turns out to be unreal, contributing 30MM+ losses for three months in a row. Meanwhile, we wait for Solana to resolve.
Monday, April 21, 2014
Goodbye
We've had a good run, but have just gotten too busy to keep posting on a regular basis. So, we're going to shut this blog down.
If anyone wants to take it over, email me at credarkspace@gmail.com.
If anyone wants to take it over, email me at credarkspace@gmail.com.
Monday, April 14, 2014
We have met the Enemy, and He is Us
SEC investigating big players in bond market, but not the biggest:
"The lopsided bond market has caught the attention of the U.S. Securities and Exchange Commission. Not only is the SEC examining whether the biggest players get preferential prices and access because of their influence...Bill Gross and Larry Fink manage a $3 trillion pile of bonds...". What?!?!, the Fed balance sheet just surpassed $4 TRILLION all by its little ol' self. You take Mortgages + Treasuries and you're right around the $30 trillion mark, and the largest investors are the US Treasury and the Fed, and its almost impossible to mark the size of the exposure the US Treasury has but their risk is certainly higher than the Fed, and canyons of risk larger than any group of private funds.
You have to assume the article was written by a comedian, except they're being serious and we really do live in a world where the government creates a false market, private companies change their rules so they can operate in the fake market place, and then the government investigates the private companies for "creating" new risks. "We're going to need new regulations to regulate the private players who adapted to our old regulations, which in hindsight caused more problems than they solved, but, hey, we didn't see that coming". (that isn't an actual quote from the article, it is an attempt at sarcasm)
Here is another one, from the article, "While regulators have looked at the threat to the financial system posed by too-big-to-fail banks, hazard has migrated to money managers." Bless their hearts. They still don't realize they are, themselves, the problem.
"Investors typically get worse prices when they trade smaller blocks of bonds. One day last month, dealers sold $15,000 of steel company ArcelorMittal SA’s bonds maturing in 2041 for 3.5 cents on the dollar more than they paid to buy $25,000 of the same securities an hour later. By contrast, two exchanges of $100,000 or more of the debt that day were within 0.05 cent of one another, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority." I saw a plus-sized lady just this weekend buying a 12 pack of pepsi with extra sugar and the per can price was far below a single-can price. We need a regulator to start looking at this type of activity at CostCo and Super Walmart, someone call their congressman pronto!
"The lopsided bond market has caught the attention of the U.S. Securities and Exchange Commission. Not only is the SEC examining whether the biggest players get preferential prices and access because of their influence...Bill Gross and Larry Fink manage a $3 trillion pile of bonds...". What?!?!, the Fed balance sheet just surpassed $4 TRILLION all by its little ol' self. You take Mortgages + Treasuries and you're right around the $30 trillion mark, and the largest investors are the US Treasury and the Fed, and its almost impossible to mark the size of the exposure the US Treasury has but their risk is certainly higher than the Fed, and canyons of risk larger than any group of private funds.
You have to assume the article was written by a comedian, except they're being serious and we really do live in a world where the government creates a false market, private companies change their rules so they can operate in the fake market place, and then the government investigates the private companies for "creating" new risks. "We're going to need new regulations to regulate the private players who adapted to our old regulations, which in hindsight caused more problems than they solved, but, hey, we didn't see that coming". (that isn't an actual quote from the article, it is an attempt at sarcasm)
Here is another one, from the article, "While regulators have looked at the threat to the financial system posed by too-big-to-fail banks, hazard has migrated to money managers." Bless their hearts. They still don't realize they are, themselves, the problem.
"Investors typically get worse prices when they trade smaller blocks of bonds. One day last month, dealers sold $15,000 of steel company ArcelorMittal SA’s bonds maturing in 2041 for 3.5 cents on the dollar more than they paid to buy $25,000 of the same securities an hour later. By contrast, two exchanges of $100,000 or more of the debt that day were within 0.05 cent of one another, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority." I saw a plus-sized lady just this weekend buying a 12 pack of pepsi with extra sugar and the per can price was far below a single-can price. We need a regulator to start looking at this type of activity at CostCo and Super Walmart, someone call their congressman pronto!
Tuesday, March 25, 2014
CRE NPL Deal in the market - includes some assets from the CWCapital auction
See write-up from Herschmeyer over at Co-Star:
The assets have an aggregate unpaid principal balance (UPB) of $899.3 million, were acquired for $455.8 million...
...The largest portfolio (34%) is comprised of 18 CRE assets that previously served as collateral in various CMBS transactions and were acquired by Oaktree from special servicer CW Capital Asset Management LLC (CW Capital) in February 2014.
Tuesday, February 18, 2014
JC Penney Store Closings
Bloomberg had an article regarding JC Penney closures and their impact on CMBS out last week. It noted that JC Penney is the biggest tenant in the CMBS market (is this accurate?) and the move highlights the "widening chasm" between successful malls and dying malls.
CW Capital Auction
We're starting to see results from the CWCapital Auction trickle out in servicer reports and in the news.
In particular:
As an aside, the BBG article mentioned PCV/ST in the context of the $3.4 billion appraisal from 9/2013, and the increasing likelihood of a disposition in the second half of 2014.
In particular:
- 119 West 40th Street (GSMS 2007-GG10) - latest file reflects a $171mm sales price (note this reflects the listed proceeds in the monthly report and is higher than the BBG article estimate). Unlike the other loans in this list, this is a loan sale (the others were REO already). It is 106% of outstanding loan balance, a 40% premium over the 9/2012 appraisal, and resulted in a 30% loss severity.
- Two California Plaza (GSMS 2007-GG10) - CIM purchased. No price or estimate available. Largest asset in the sale. BBG noted that part of the transaction included CIM taking over property at the end of 2014 (REO sale). The most recent appraisal was $343mm in 1/2013 vs a $468mm loan balance outstanding.
- Montclair Plaza (WBCMT 2006-C28) - CIM purchased for $170mm, 89% of outstanding balance, 13% over 2/2013 appraisal, 29% estimated loss severity (after accounting for advances, etc.).
- Four Seasons Resort and Club Dallas (WBCMT 2006-C28) - BBG estimates $150.5mm sales price, 86% of outstanding loan value, 12% premium over the 9/2013 appraisal, 28% estimated loss severity (after accounting for advances, etc.).
As an aside, the BBG article mentioned PCV/ST in the context of the $3.4 billion appraisal from 9/2013, and the increasing likelihood of a disposition in the second half of 2014.
Thursday, January 16, 2014
JCP Closing 33 Stores
According to the WSJ, JCP is closing 33 Stores. I'll update this entry with CMBS exposures if/when I get a chance.
*UPDATE*
Deal Exposures:
Source: Credit Suisse.
AL
|
Selma
|
Selma Mall
|
CA
|
Rancho Cucamonga
|
Arrow Plaza
|
CO
|
Colorado Springs
|
Chapel Hills Mall
|
CT
|
Meriden
|
Meriden Square
|
FL
|
Leesburg
|
Lake Square Mall
|
FL
|
Port Richey
|
Gulf View Square
|
IA
|
Muscatine
|
Muscatine Mall
|
IL
|
Bloomingdale
|
Stratford Square Mall
|
IL
|
Forsyth
|
Hickory Point Mall
|
IN
|
Marion
|
Five Points Mall
|
IN
|
Warsaw
|
Marketplace Shopping Center
|
MD
|
Salisbury
|
The Centre at Salisbury
|
MI
|
Marquette
|
Westwood Plaza
|
MN
|
Worthington
|
Northland Mall
|
MS
|
Gautier
|
Singing River Mall
|
MS
|
Natchez
|
Natchez Mall
|
MT
|
Butte
|
Butte Plaza Shopping Center
|
MT
|
Cut Bank
|
(N/A)
|
NC
|
Kinston
|
Vernon Park Mall
|
NJ
|
Burlington
|
Burlington Center
|
NJ
|
Phillipsburg
|
Phillipsburg Mall
|
OH
|
Wooster
|
Wayne Towne Plaza
|
PA
|
Exton
|
Exton Square Mall
|
PA
|
Hazleton
|
Laurel Mall
|
PA
|
Washington
|
Washington Mall
|
TN
|
Chattanooga
|
Northgate Mall
|
VA
|
Bristol
|
Bristol Mall
|
VA
|
Norfolk
|
Military Circle Mall
|
WI
|
Fond Du Lac
|
Forest Mall
|
WI
|
Janesville
|
Janesville Mall
|
WI
|
Rhinelander
|
Lincoln Plaza Center
|
WI
|
Rice Lake
|
Cedar Mall
|
WI
|
Wausau
|
Wausau Mall
|
*UPDATE*
Deal Exposures:
| Shopping Center | Deal | Loan PCT Deal |
| Military Circle Mall | GMACC 2004-C2 | 9.80% |
| The Centre at Salisbury | JPMCC 2006-LDP7 | 3.70% |
| Hickory Point Mall | BSCMS 2006-PW11 | 1.90% |
| Laurel Mall | BSCMS 2007-PW17 | 1.70% |
| Wausau Mall | WFRBS 2011-C4 | 1.30% |
| Marketplace Shopping Center | CGCMT 2004-C2 | 0.90% |
| Bristol Mall | BACM 2006-5 | 0.90% |
| Wayne Towne Plaza | MSC 2007-IQ15 | 0.60% |
| Natchez Mall | CGCMT 2006-C4 | 0.50% |
| Lincoln Plaza Center | GSMS 2006-GG6 | 0.10% |
Source: Credit Suisse.
Tuesday, January 14, 2014
Macy's is moving out of five malls
Three are not in CMBS deals: Metcalf South Shopping Center, Jamestown Mall, and Medley Centre.
One is part of the collateral in Fashion Place Murray, UT in BBUBS 2012-TFT.
One is not part of the collateral but does serve as an anchor in the REO Fiesta Mall Mesa, AZ in BACM 2005-3. Formerly a Macerich asset.
One is part of the collateral in Fashion Place Murray, UT in BBUBS 2012-TFT.
One is not part of the collateral but does serve as an anchor in the REO Fiesta Mall Mesa, AZ in BACM 2005-3. Formerly a Macerich asset.
Monday, January 13, 2014
OfficeMax to move headquarters to Florida
Currently headquartered in Naperville IL in the OfficeMax Headquarters building on Shuman ($49mm, MLMT 2007-C1, maturity date=7/1/2017, 100% occupied by OfficeMax) announced plans last month to relocate to Boca Raton. Some jobs may stay behind, but I'm guessing not for long.
The loan represents 1.75% of the deal.
The building is pretty decent if anyone is shopping. It was built in '86, renovated in '06, and has over 354k square feet. The sole tenant is paying $13.6 psf in rent, much lower than the average $17 psf for Naperville, and also lower than a competing newer office on the same street with space currently offered at $15.50 psf.
The loan represents 1.75% of the deal.
 |
| OfficeMax Headquarters |
Thursday, December 12, 2013
Stuyvesant Town/Peter Cooper Village
Dear readers,
What is the latest on this one? Go ahead, post anonymously, just curious. Something gave me the suspicion that something is going on over there.
Also, I checked our analytics just now to see if anyone had stuck with us even though posting volume has been diminished in recent months due to actual work, and was surprised to see it wasn't down as much as I expected. So, thanks.
What is the latest on this one? Go ahead, post anonymously, just curious. Something gave me the suspicion that something is going on over there.
Also, I checked our analytics just now to see if anyone had stuck with us even though posting volume has been diminished in recent months due to actual work, and was surprised to see it wasn't down as much as I expected. So, thanks.
Wednesday, December 11, 2013
The Troubled Ghosts of Christmas Past
A recent Reuters article highlighted two legacy CMBS loans that had been worked out of their former deals, came back to the market in New Issue deals only to be kicked out for their past transgressions.
In a mid-November deal:
In a mid-November deal:
One shopping mall-related US$47.5m loan from the US$1.1bn GSMS 2013-GCJ16 conduit - a refinancing of a maturing loan in an earlier deal - was kicked out of a new CMBS that priced in early November.And in another deal a week later:
Questions arose about how the borrower renegotiated the new terms via a discounted payoff (DPO) of the old loan, and whether the servicer extracted the most recovery value for investors in the old deal
Last week, meanwhile, the ninth-largest loan in a mixed-use commercial real estate (CRE) pool, also a refinancing of a troubled maturing loan, was removed from the US$873m MSBAM 2013-C13 conduit two days after launch but prior to pricing.
Sources said there were disclosure issues regarding the servicer selling the older loan to an investor who conducted a DPO and extracted a higher value for the underlying property than what the servicer had got.
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