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

Commercial Real Estate and the Trump Administration

by Rob Seidenwurm


Whatever your opinion on the results of this November’s election, it is clear that the Trump Administration will have an effect on many economic markets, including the commercial real estate market.

On one hand, it is easy to react that since Trump made his career in commercial real estate, that any effect on that market should be positive.  However, given the lack of specifics of Trump’s plan, it is more realistic to consider how a Republican President with a Republican Congress might effect the markets:

  1. Regulation – The most likely scenario is that underwriting regulation is likely to be eased, thus making financing easier. This is at least a short term positive for the commercial real estate market, as it should be easier to complete purchases and refinances.

  2. Foreign Investment – This is a tricky one. On one hand, if regulations get eased, it may be easy for foreign investment to continue coming in and feeding the US CRE market.  On the other hand, if trade is restricted, or the dollar gets too strong, foreigners could look elsewhere to put their dollars and exit the US CRE market.  Way too soon to know.

  3. Strength of Economy – It stands to reason that if the economy is stronger, and more jobs are created, the retail and office sectors should benefit. If taxes are lowered, there will be more money to put into CRE investments, driving up prices.  Again, this is conventional wisdom of Republicans, not necessarily Trump.

Overall, if we consider the election as a win for Republicans, and not Trump, the Commercial Real Estate market outlook should be bullish. Trump Administration and Commercial Real Estate.

 

 

Whatever your opinion on the results of this November’s election, it is clear that the Trump Administration will have an effect on many economic markets, including the commercial real estate market.

ARD vs. Maturity

ARD

What’s the difference between an ARD vs. maturity of your loan?

by Ann Hambly


The simplest way to explain the difference between an ARD and a maturity of your CMBS loan is this:  An ARD is a suggested maturity date and a true maturity date is a demand, not a suggestion.

ARD stands for Anticipated Repayment Date and although it is simply a suggested date by which the CMBS loan should be paid off, there are steep consequences for not paying the loan off at this suggested maturity date.  The consequences typically include an increased interest rate for the loan as well as a provision that requires all net cash flow after debt service to be applied to principal.  So, the net -net to an owner when a loan is not paid off by the ARD is that the interest rate increases by typically 2% and the owner will not have access to any cash generated from the property other than what is required to pay necessary operating expenses.  Although these consequences are painful, the owner can keep the loan in place under these conditions until the actual maturity date; which is typically at the end of the 30-year term of the loan.

It is vitally important for an owner to know if they are facing an ARD or a true maturity of the loan.  A true maturity of the loan carries steeper penalties for not paying off, including foreclosure if a forbearance or extension is not granted.

ARD stands for Anticipated Repayment Date and although it is simply a suggested date by which the CMBS loan should be paid off, there are steep consequences for not paying the loan off at this suggested maturity date.  The consequences typically include an increased interest rate for the loan as well as a provision that requires all net cash flow after debt service to be applied to principal. 

CMBS Workouts: Truth or Fiction?

CMBS Workouts

CMBS Workouts: Truth or Fiction?


Like the mythical Unicorn of days gone by, many people say that they know people that have successfully completed positive CMBS Workouts, but few have first-hand experience.

As restrictive as CMBS Loan Servicers, and, REMIC (“Real Estate Mortgage Investment Conduit”) rules are, CMBS Workouts are, to say the least, difficult and very complex to complete. Many of our clients call us after having tried to complete CMBS Workouts on their own, only to throw up their hands in frustration before seeking our assistance.

There are definite DO’s and DONT’S to successful CMBS Workouts. The “lender” (Noteholder) on your CMBS loan is NOT your local bank. In addition to the inherent restrictions of REMIC rules, CMBS is NOT a relationship based business. The Servicer is not concerned about the borrower or their interests in the collateral property(s).

What you say, what you DON’T say, how and when you say it are all CRITICAL factors in working with your servicer to achieve CMBS Workouts. Unless you have a REALLY big loan, complex, convoluted structures are often discarded simply out of convenience by the servicer. Simpler more “straight forward” structures tend to be more successful.

The Servicer holds all the leverage and, pursuant to your loan docs, doesn’t even have to talk to you. The key to mythical CMBS Workouts is approach, structure, and having an experienced guide to help you navigate the murky waters that are CMBS lending.

If you have questions about your situation/loan, and think you might need some help, give us a call, we are happy to offer every client a free, no obligation consultation. We won’t hit you with high pressure sales, and we won’t try to take your money if we can’t add value to the equation.

As Seen On TV – Rated

As Seen On TV – RATED


Ever seen an infomercial where some loud obnoxious, screaming at the top of their lungs, spokesperson is selling based on the big financial windfall due to some misfortune that happened in the past?

The in your face, over the top, and angry approach often catches us off guard and pulls us into what their selling. It’s a proven marketing strategy. Before you know it, you’ve scrambled for pen and paper to take the number down, not really knowing why…other than you were told to by this hyperventilating nut—-they shocked you into it!

Just as you start to take the information down, you notice the fine print. You know…the wording at the very bottom of the screen which says, “Not Board Certified.” Meaning, they’re really not who they say they are, or they couldn’t pass the test, or they had their credentials removed for one reason or another. Not Board Certified is the same as They’re Not Rated!

Is that who you want to represent you when you need guidance on a CMBS loan workout? Good rule of thumb, when dealing with or needing a borrower advocate on any CMBS loan, always use someone who is “rated” by a credible rating agency and not some outfit promising over the top, unrealistic outcomes…what you want to hear. You know, those loud souls who have just hung a shingle in borrower advocacy space because they think if they yell loud enough, talk fast enough and put the fear into you, you’ll not read the fine print…”Not Rated.”

There’s only one rated borrower advocate, 1st Service Solutions.

** 1st Service Solutions is the 1st and ONLY rated borrower advocacy firm. **

CMBS Risk Retention

Risk Retention

What is CMBS Risk Retention and why should I care as a Borrower?

by Rob Seidenwurm


What is CMBS Risk Retention and why should I care as a Borrower?

For years, CMBS loan securitization follow the same process.  Lenders originate the loans, package them up, securitize them, and sell them to Wall Street.  Then they move on to the next deal.

In an effort to incentivize CMBS originators to make quality loans, new regulations are taking effect called “Risk Retention” requiring originators to retain 5% of the interest in the securitization.  The rationale is make sure originators put their money where their mouth is.

Why does this matter to Borrowers?  Because the new regulations are having the effect of driving many originators out of the CMBS market entirely.  In the first half of 2016 CMBS origination is down 43%, from $54.5 Billion to $30.7 Billion.  Less competition means: 1) It may be harder to successfully refinance; and 2) Rates are trending up.

Bottom line, if you have a CMBS loan that is coming due… best to plan ahead.

Is your pension fund invested in CMBS?

Is your pension fund invested in CMBS?

by Ann Hambly


I got a call from my dad the other morning. He was panicked because his pension check, which always hits his bank account on a certain day each month, hadn’t been deposited yet this month.  He had placed a call to the pension company and was waiting to hear what happened.

The FIRST thought that entered my mind was “oh no, I bet his pension fund invested in CMBS”. Pension funds often invested in CMBS senior level bonds in the mid 2000s.  Some of them are being hit with losses today and more are coming in the future as the wave of over-leveraged maturities get worked through.

Luckily my dad’s pension check was simply a glitch in someone’s system.  Some people will not be so lucky!

Pension Funds and CMBS