The document summarizes the commercial mortgage-backed securities (CMBS) loan restructuring market. It notes that outstanding commercial real estate loans total $2.9 trillion, with CMBS loans accounting for 21% of that amount. Approximately 50% of CMBS loans from 2006-2007, representing 84% of the balance, are currently in special servicing. The document outlines the key parties involved in CMBS restructurings, including special servicers, bondholders, and property owners. It discusses factors considered in CMBS loan restructurings such as net present value calculations and the need to present a well-thought out restructuring plan to the special servicer.
7. Who Are The Special Servicers?
Rank Company AmountÂ
($millions)
1 LNR Partners, Inc (U.S.) $192,304
2 CWCapital LLC & CWCapital Asset Mgmt. $158,949 85%
3 CâIII Asset Management LLC $112,238
4 PNC Real Estate/Midland Loan Services $62,953
5 Berkadia Commercial Mortgage LLC $28,176
6 Torchlight Loan Services $26,000
7 Wells Fargo $25,016
8 Bank of America Merrill Lynch $16,755
9 KeyBank Real Estate Capital $13,400
10 ORIX Capital Markets, LLC $7,497
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8. Who Owns Them?
Top Three Special Servicers:
⢠LNR
â Recapitalized by a group of five opportunistic buyers (Vornado Realty
Trust, Cerberus, Oaktree, iStar Financial and Aozora Bank)
â $27.1 billion in UPB of loans in Special Servicing
⢠CW Capital
â Bought by Fortress Investment Group
â $20.2 billion in UPB of loans in Special Servicing
⢠C-III
â Formerly Centerline, bought by Island Capital, and changed name to
C-III
â Island Capital also acquired JE Robertâs Servicing platform recently
â $16.1 billion in UPB of loans in Special Servicing
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9. Servicing Standard
⢠Special Servicer Servicing Standard â Maximize
return to all bondholders without regard to your own
position and no benefit of 20/20 hindsight.
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10. How Losses Affect Special Servicers
⢠Current CCR appoints special servicer
⢠Losses hit lowest tranches of bonds first
⢠As losses wipe out a class of bondholder,
CCR charges
EXAMPLEÂ ($100Â pool)
Original Face Losses CurrentÂ
Amt of Bond Bond Amt
AAA 50 â 50
AA 20 â 20
A 10 5 5Â (CCR)
BBB 10 10 0
B 6 6 0
UR 4(CCR) 4 0
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11. Shares of Bonds Taking Interest Shortfalls
120%
100%
80%
C-III
60%
CWCap
LNR
40%
20%
0%
AA A BBB Below BBB
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12. CMBS Maturities
⢠There are massive scheduled loan maturities coming due that will need to be
refinanced. In the next 5 years the total amount is estimated to be $1.7 Trillion.
400
350
71.2 72
300 68.5 58.5
23.2 24.1
23.2 22.1 50.5 43.4
250 62.4
53.8
21.4 20.2
66.8
200 101.8
150 110.9
138.8
100 213.1 209.2
183.1
150.6
50 106.4
79.2
0
2012 2013 2014 2015 2016 2017
Banks CMBS Life Companies Others
Source: Foresight Analytics
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13. Most Maturing Mortgages are Under Water
% of Maturing Commercial Mortgages Under Water
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012 2013 2014 2015
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15. What Does It Take to Get One Done?
⢠New capital
⢠Know the special servicerâs ârulebook,â drivers and
motivations
⢠Present a well thought-out plan in writing
⢠Be patient
⢠Be transparent
⢠Understand the special servicerâs options
⢠NPV
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16. NPV
⢠In PSA
⢠NPV is calculated for all options
CURRENT APPRAISED VALUE OF PROPERTY
â Hold Costs
⢠Carry Costs (varies greatly
⢠Advancing by state)
â Foreclosure & Legal Costs
â Selling & Disposal Costs
â TI, LC
â Property Taxes, Insurance
NET IS THEN PRESENT VALUED USING
DISCOUNT RATE
⢠Decision is driven off of highest NPV
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18. Primary Considerations in Restructure
⢠Is property under water today?
â If NO = Payment modification
â If YES = Will it likely recover most or all of its value by
maturity?
⢠If NO = Debt forgiveness OR DPO OR note Sale
⢠If YES = Debt deferral OR A/B structure OR A/B/C structure
⢠Know your ultimate exit strategy
⢠Know your menu of options
â Not all A/B structures are the same
⢠Hire a sherpa
⢠Know the ultimate decision-maker
â CCR
â CCR life expectancy
â How will a change affect the outcome?
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