Welcome to 1st Service Solutions’ official blog!

One of the best things a borrower advocate can do for a borrower is to provide information and insight into the “Lender/Servicer” side of the commercial real estate industry. These blogs are written freely by the staff of 1st Service Solutions. They offer our views, insight, and opinions and will, at times, be seen as controversial. We would rather a borrower hear it like it is though!

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  • Cash Trap
  • BOO
  • Bill Gates and Ann Hambly
  • Why Do I need YOU?
  • If it sounds too good to be true...it probably is!
  • Non-Performing CMBS vs. Performing CMBS Loan
  • Importance of a Proper Advocate
  • Late Fee - Look Out
    Rates are up – Now what?
  • CMBS Loan Restructuring Firms
    CMBS Loan Restructuring Firms
  • Trump Administration Commercial Real Estate
    Commercial Real Estate and the Trump Administration
  • ARD
    ARD vs. Maturity
  • CMBS Workouts
    CMBS Workouts: Truth or Fiction?
  • As Seen On TV - Rated
    As Seen On TV - Rated
  • Risk Retention
    CMBS Risk Retention
  • Pension Funds and CMBS
    Is your pension fund invested in CMBS?
  • Oil & Hotels
    The Oil Collapse & Its Impact on Hotels
  • Request Denied – Game Over?
  • ABC's of CMBS
  • Re-Do’s
  • Illogical
    “That’s Highly Illogical…”
  • How do I return my whole retail property?
  • Losses
    Losses to CMBS bondholders
  • Hot Coals
  • Late Fee - Look Out
    Late Fee - Look Out
  • Do you like short lines or long lines?
  • To Forbear or not to Forbear…that is the question
  • Rack Em Up
  • The Role of the Borrower Advocate
  • Workout, Modification, Restructure
  • CMBS Assumption Conditions
    CMBS Assumptions Have Painful Conditions!

Cash Trap

And it’s a trap!



by: Ann Hambly

Developer Joe developed an office building and got a new CMBS loan in late 2016 to pay off his construction loan.  At the time of origination of the loan, the property was 80% occupied and 2 tenants were set to take occupancy a month after origination, so the property was effectively 100% occupied. All good so far.

The new CMBS documents required Joe to send his operating statement to his servicer every quarter.  He proudly sent the good results of his property the at the end of the first quarter 2017. Sounds good still, right?

This is not a made-up story! It is, unfortunately, real!!!

His springing cash management feature was all of a sudden sprung, meaning the servicer took control of his cash and all net cash flow would now be applied to a reserve account. What? His property is 100% occupied. How could that be right?

The problem is that the CMBS loan documents directed the servicer to use the GREATER OF actual vacancy, vacancy at origination, or market vacancy in determining the debt service coverage ratio.  Since the reported vacancy at origination was 20%, the servicer used 20% and the DSCR triggered cash management. So, Joe effectively lost the ability to have any distributions for the next 9 years of his loan regardless of how well the property performed.

How does Joe get out of cash management? He can’t because the DSCR will always be less than the required threshold!

This is not a made-up story! It is, unfortunately, real!!! Be sure your loan documents don’t contain similar language when signing new CMBS loan documents. It’s called cash TRAP for a reason!


So Don’t Get Caught In A Cash Trap, because it’s a trap!





by: Ann Hambly

What are you most afraid of? To me it is not knowing what is ahead or just around the corner. Things are much less scary to me when I understand what is going to happen, or why something happens. Surprises are emotion provoking; scary or otherwise.

If you had a way to see what is ahead or just around the corner, wouldn’t you want to know?

You have that ability when it comes to your CMBS loan at least.  Whether you have an upcoming large tenant that is expiring, suffered damage as a result of one of the natural disasters recently, or waited so long that you are actually coming out of pocket to keep the loan current; you can gain an understanding of the monster around the corner. We are already around the corner, so allow us to share with you what we see.

Why would you not do that? That is, unless you liked to be scared! It IS that month after all!


Bill Gates and Ann Hambly

Bill Gates and Ann Hambly



by: Ann Hambly

It is always interesting to get people’s feedback on the CMBS assumption process. It is either horrible or fine; and the reaction is always predicated on whether the strongest party in the transaction was the seller or buyer.

So, let’s say on one hand, Bill Gates is selling his commercial real estate property to me and I am assuming the CMBS loan.  I promise you we will BOTH have a horrible experience with the CMBS assumption approval process in this scenario!  Not to mention the “God awful” conditions that will be placed on me!

Now, on the other hand, let’s assume Bill Gates is buying the same property and I am the seller this time. This time we will probably both have a good experience with the process.

“I promise you we will BOTH have a horrible experience with the CMBS assumption approval process in this scenario!”

WHY is that?

Because the main objective of the whole CMBS assumption underwriting process is to ensure the CMBS Trust is no worse off with the buyer than they were with the current owner (or their current borrower).  Now it should be crystal clear why the process would be horrible if Bill Gates was the current owner and I was the buyer – and yet, flipping the parties around, the process would go smooth. The CMBS Trust is much better off with Bill Gates than they are with me! No question!

So…now the penultimate question is this?  Which party in the CMBS assumption approval process can see BOTH the buyer’s information AND the seller’s information? The servicers can, of course, but they are the very party you have to negotiate with on the conditions. How can you effectively negotiate conditions if you don’t even know what the servicers are seeing?

And THAT is the primary role of the CMBS facilitator or expeditor!

Why Do I need YOU?

Why Do I need YOU?
JUNE, 2017
by: Kevin Duty

Every so often, during our initial consult call with a potential client, we get asked a question somewhat along the line of the title of this blog. Sometimes it is: “What do you bring to the table that I can’t accomplish myself?” Or, “How do you make the Special Servicer do what I want them to do?”.

To be frank, when we hear these questions, it prompts us to ask a series of probing questions of the borrower to determine; if/when/how many CMBS workouts the borrower has experienced prior to talking with us. Usually, the answer is “None” or “I did one (or more) two or three years ago”.

That is a very revealing statement. Many borrowers have a long resume of CRE experience and may have worked out a loan with a Life Company, Bank or other Lender. Some have even had experience working out CMBS loans in past years. As a result, they think they know what they need to know to proceed on their own. In fairness, some borrowers are very successful working out their loans by themselves. They should be congratulated! Those borrowers achieve something very rare.

However, for most borrowers a few simple facts should be VERY telling;

  1. MANY borrowers who reach out to us do so after they; run into the buzz saw that is CMBS Special Servicing, make no progress with the Special Servicer, can’t understand why, are facing imminent foreclosure and call us begging for us to help them.
  2. Quite a few of our repeat clients are LARGE institutional CRE investors that seek our assistance in a workout scenario.
  3. In some instances, Special Servicers recommend to borrowers that they reach out to us for assistance!

“Having experience in working out other CRE loan products will have little bearing on what will be faced with their CMBS loan”

The reality of CMBS, that we tell virtually EVERY borrower we consult with is that CMBS is unlike ANY other CRE loan product. Having experience in working out other CRE loan products will have little bearing on what will be faced with their CMBS loan. Even having past CMBS workout experience won’t help, much, if that experience was more than 6-12months ago. By its nature CMBS is an evolving industry. Governing rules have/will continue to change. Strategies that were in vogue a year ago are no longer applicable. We even have borrowers that tell us “the servicer said I shouldn’t reach out to you.” OF COURSE they don’t want us involved. That would level the playing field! Why would the lender want the equation to be equal? Getting us involved certainly doesn’t help the Servicer?!? It helps the BORROWER!

So, what do we bring to the table? What can we provide that you can’t do on your own? Simple. 50+ years of experience working in leadership positions in major CMBS Servicing Shops. Not only do we “know them”, WE WERE THEM! That provides us with an INTIMATE knowledge of how CMBS works, PARTICULARLY what goes on behind the scenes that borrowers aren’t even aware of.

In summary, a great analogy for this topic is: We all pay taxes and can read the tax code, but, would you rather go into an IRS audit by yourself, or with a former IRS agent by your side, working for you? And would you get a better outcome on your annual taxes by having a tax expert or by buying the latest version of tax software and doing it yourself?

If it sounds too good to be true…it probably is!

If it sounds too good to be true…
it probably is!

JUNE, 2017
by: Ann Hambly

We all know the commercials that say you can win $1MM if you have been in a car accident and were injured.  Most of us know by now that what you might really ‘win’ likely won’t be near the amounts touted on the commercial.

Unfortunately, some CMBS borrowers fall trap to this very kind of advertising!  Some companies claiming to be borrower advocates are telling unsuspecting borrowers that they can get a discounted payoff with XX special servicer.  It sounds enticing to the borrower, so the borrower engages the firm to help them. Unfortunately, the end result is often not what the initial call led the borrower to believe.  These borrower advocates are most interested in getting the borrowers engagement fee and less concerned (if at all) about the company’s future reputation. Heck, if they can get enough money in engagement fees, they may not need to worry about their future.

“Just remember…if it sounds too good to be true…it probably is!”

Think of a Sherpa for a moment.  I decide to climb a 14,000-foot mountain today. I call a Sherpa to help me.  Now, a Sherpa could just tell me to join them the next morning with tennis shoes on and I would probably die on the way up.  An experienced Sherpa would spend time telling me what to expect so I was sure I was prepared for what the climb would require. I may not like to hear what the experienced Sherpa has to tell me, but I will end up with a better outcome if I listen to the experienced Sherpa!  That’s the same thing an experienced borrower advocate should be doing for you.  Not selling you on a wonderful outcome that is likely not to happen, but to prepare you for the journey so you aren’t caught off guard on the climb!

Just remember……if it sounds too good to be true…..it probably is!  Do your research and don’t fall trap to the wonderful advertising you may hear from someone looking to just have you wire your first fee to them!

Non-Performing CMBS vs. Performing CMBS Loan

Non-Performing CMBS vs. Performing CMBS
MAY, 2017
By: Ann Hambly

What is the difference between a non-performing CMBS loan and a performing CMBS loan?

That is the question!

The reason that is a very important question is because there are very different options available to an owner on a performing CMBS loan than a non-performing CMBS loan.

A performing CMBS loan is one that is in master servicing and has not been transferred to the special servicer

A non-performing CMBS loan is one that is currently in special servicing

IRS rules which govern CMBS loans before understanding what can and can’t be done on the CMBS loan

When a loan is a CMBS non-performing loan and in special servicing, the resolutions available to a borrower open wide up. Anything that will get the most amount of money for the bond holders should be considered. There are industry best practices that have been adopted throughout the years by special servicers and those will come into play, but overall, the structure of the resolution is wide open.

When a loan is a performing CMBS loan and in master servicing, the resolutions are very restrictive. The master servicer cannot do anything that would result in a change to the bond holder’s payments; which virtually eliminates any kind of modification. These restrictions are in place to protect the pass-through tax structure of CMBS. There are many things that can be done to the PROPERTY (such as releasing an out-parcel) but monetary concessions of any sort are generally not something the master servicer can consider. It’s easy for a borrower to believe its loan is “non-performing” if the value of the property is less than the debt, but that is not the deciding factor.

In summary, a borrower will need to clearly understand the IRS rules which govern CMBS loans before understanding what can and can’t be done on the CMBS loan and ultimately the driving factor is whether the loan is “performing” or “non-performing”. That’s what a good borrower advocate will do for you!