Who is 1st Service Solutions?
Based in Dallas, Texas, 1st Service Solutions is a full-service commercial real estate (CRE) mortgage advisory firm specializing in the commercial mortgage backed securities (CMBS) loan industry. CMBS loans make up about 20 percent of the total nationwide CRE loan inventory.
What is CRE, CMBS and LTV?
CRE is an acronym for commercial real estate. CMBS is an acronym for commercial mortgage backed securities. LTV is an acronym for loan-to-value.
What does 1st Service Solutions Do?
Since the advent of securitization, commercial real estate is not a relationship business anymore. Owners cannot sit across the table from their lender and negotiate as they used to and owners are not even privy to the documents that drive the decisions that can be made on their loan in a securitization. 1st Service Solutions serves as the owner’s advocate, equipping them with first-hand knowledge of the CMBS decision making process and access to the correct decision makers. 1st Service Solutions created this niche in the industry over 9 years ago.
What will happen to all of the Maturing CMBS Loans?
Using statistics provided by market analysis, approximately 34% of the CMBS loans maturing in 2015 have current LTVs above 80 percent; meaning they will not qualify for refinancing using traditional lending sources. Over 10% of those have over 100% LTV! There is approximately $350 Billion of CMBS loans maturing in the next three years (2015-2017) and many of those will be overleveraged at maturity. These loans were originated in the years 2005 – 2007, when underwriting standards were loose and property values were inflated.
Can You Provide a Case Study Example?
Sure. Say that a commercial real estate property owner purchased a building that was worth $90MM 2005 and he got a CMBS loan for $75MM. The economy crashes in 2008, the building loses some of its tenants while some have renegotiated their rent causing the property value to drop to $65MM. The loan matures January 2015. The borrower can either (1) come out of pocket $10MM cash to pay the loan off, (2) request a discounted pay off for current value, or (3) ??. Bottom line is he needs the help of an experienced CRE advisory firm like 1st Service Solutions so he knows what all his options are!