Scotsman Guide, May 2012

By Ann Hambly, founder and co-CEO of 1st Service Solutions


Commercial mortgage brokers may sense a feeling of despair among clients who hold commercial mortgage-
backed securities (CMBS). The prospects of the CMBS markets are not promising: Collateral property values have
deteriorated and your clients’ sense of being stuck has legitimate grounds. If you’re aware of the alternatives available to tackle their individual distress situations, however, you can help them make knowledgeable decisions about what courses of action they should take. The first step for you and your clients is to diagnose the problem. See which of the following
six scenarios best describes a given client’s situation:

• Scenario 1: The value of the property is less than the debt.
• Scenario 2: The loan is approaching its maturity.
• Scenario 3: There are no funds to recapitalize the property.
• Scenario 4: The client anticipates impending cash-flow shortfalls.
• Scenario 5: The client wants to sell the property, but the value is less than the debt.
• Scenario 6: The client just wants to “hand in the keys.”
Before jumping into possible solutions, it is important for you and your clients to understand the different roles of the parties involved in a CMBS-restructuring deal.