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CRE Finance World - Winter 2012




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Articles
Page # Title Author
3 Letter from the Editor

 Welcome to the January 2012 conference issue of CRE Finance World. One year after the optimism of last year’s conference, the commercial real estate finance market finds itself in a more sobering position

by Brian P. Lancaster, Royal Bank of Scotland
 
4 Welcome Letter From Stephen Renna

 About eighteen months ago, the leadership of CRE Finance Council developed a new strategic plan for CREFC. Recognizing that the commercial real estate finance industry needed an effective association

by Stephen M. Renna, CRE Finance Council
 
6 Roundtable - Outlook for 2012

Good afternoon and thank you all for participating in the Commercial Real Estate Finance Council 2012 Outlook Roundtable. The purpose of the Roundtable is to get the views and insights for the year ahead from the best and brightest professionals in commercial real estate finance. With me, I have

by Brian P. Lancaster, Royal Bank of Scotland
 
24 CRE Fundamentals and Slow Economic Growth

Fears of a possible double-dip recession roiled financial markets from May through November, fueled by sloweconomic growth and political paralysis in the US and

by Victor Calanog and Faruk Ozdemir, Reis, Inc.
 
29 CMBS Special Servicer Behavior

In the past year, ownership of several special servicers has changed hands to opportunistic investors or funds. Many of these special servicers owned the underlying subordinate bonds in the transactions they service while others simply

by Darrell Wheeler, Amherst Securities Group LP
 
35 Valuing Appraisals

Particularly during volatile markets, commercial real estate professionals are often skeptical of the connection between appraisals and transaction outcomes. Much of this skepticism is based on anecdotal and personal experience. With the turbulence in CRE markets

by Brian Olasov, McKenna Long & Aldridge LLP and KC Conway, Colliers International
 
41 Special Servicing - Challenges and Recommendations

Some $81 billion of CMBS loans are currently in Special Servicing, while more than $130 billion have been subjectto special servicing over the last three years. Additionally, many of the more than $300 billion of CMBS loans that

by Edward L. Shugrue III, Talmage, LLC
 
45 TRX.II.AAA.1 Primer

The TRX.II indices were launched “officially” on October 1 with trading beginning on Monday October 3. The TRX-II indices reference a maximum of 25 “qualifying”1,2 lastcashflow AAA bonds from CMBS 2.0 / 3.0 deals issued after January 1st, 2010. The purpose of the new indices

by Brian P. Lancaster, Richard Hill and Joseph Ruszkowski, Royal Bank of Scotland
 
49 Lodging Sector in CMBS

 While lodging comprises a relatively small percentage of outstanding CMBS conduit collateral, the sector has been performing well below average — contributing an outsized share to overall CMBS delinquencies

by Julia Tcherkassova, Barclays Capital
 
54 Mixed Implications of the Super-Senior Structure

Spreads have not been the only uncertain factor CMBS investors have been facing recently. The market experienced settlement risk when a priced deal did not settle because of an unprecedented action by a rating agency

by Jeffrey Berenbaum and Stav Gaon, Citigroup Global Markets
 
58 US CMBS Servicing Update

 CMBS special servicers have resolved $93.0 billion since 2007, with $74.4 billion resolved in the 21 months ended Sept 2011. The recovery rate for resolved loans has remained at or better than 86% since 2007. Recovery rates for liquidated loans declined to

by Stephanie Petosa, Fitch Ratings
 
63 CMBS Collateral Performance

Every month, Trepp publishes the monthly delinquency report for a set of U.S. CMBS collateral. Although the headline number remains above 9%, it has come off the highs seen earlier in the year

by Thomas A. Fink, Trepp, LLC
 
66 The Washington Minute

With the presidential and congressional elections just 11 months away, conventional wisdom is that partisan divide will bring the legislative process to a grinding halt. It certainly appears that the game plan for both Democrats and Republicans

by Mike Flood, CRE Finance Council
 
78 New CREFC Mediation Proposal

 The Commercial Real Estate Finance Council (CREFC) has created proposed “Model Dispute Resolution” language to be included into CMBS transactions to serve as a template to resolve disputes between issuers and

by Joseph Philip Forte, Esq, Alston & Bird LLP
 
Forum Updates
Page # Title Author
69 CREFC B-Piece Buyers Sub-Forum Update

 The B-Piece Investor Forum was created this year to bring B-Piece participants together and establish a dialogue — not only within our group but also

by Dan Sefcik, BlackRock, Chair, CREFC B-Piece Buyers Sub-Forum
 
70 CREFC High Yield Debt and Investment Forum Update

The newly created High Yield Debt and Investment Forum is dedicated to industry participants seeking high yield through direct lending or debt investment in commercial real estate. Participants include investors in B-notes

by William O’Connor, Crowell & Moring LLP, Chair, CREFC High Yield Debt and Investment Forum
 
71 CREFC Investment Grade Bondholder Forum Update — Trials and Tribulations

Recent trials and tribulations of the CMBS market have brought investors back to focus on the basics. While many would argue new deals are getting done, the CMBS machine is not working as efficiently as it should. It only makes sense that investors want the sector to function normally, and a healthy pipeline and liquid market are keys to that

by Stephen Kraljic, TIAA-CREF Financial Services, Chair-Elect, CREFC Investment-Grade Investors Sub-Forum
 
74 CREFC Issuers Forum Update

2011 has been an adrenaline filled year for CMBS issuers with increased loan originations weighed against increased competition, increased volatility and increased external pressures. The first half of 2011 was characterized by strong CMBS issuance volumes fostering energetic new

by Jonathan Strain, J.P. Morgan, Chair, CREFC Issuers Forum
 
75 CREFC Multifamily Lenders Forum Update

In 2010, multifamily CMBS delinquency rates were at all-time highs, and the YE multifamily vacancy rate, while improving from 8.0% at YE 2009 to 6.6% at YE 2010 (REIS, Maximus Advisors), masked underlying weakness

by Jeffrey Day, Deutsche Bank Berkshire Mortgage, Chair, CREFC Multifamily Lenders Forum
 
76 CREFC Portfolio Lenders Forum Update

The Portfolio Lender Forum, under the leadership of Chair-Elect Todd Everett of Principal Real Estate Investors, has had a busy inaugural year seeking to deliver tangible benefits to its membership. To that end, the Forum leadership has been working diligently to produce a member

by Richard Coppola, TIAA-CREF, Chair, CREFC Portfolio Lenders Forum
 
77 CREFC Servicers Forum Update

As mandated by CRE Finance Council, the Servicers’ Forum represents master, primary and special servicers with additional input from trustees, NRSROs, asset managers and third party providers involved in the CMBS postsecuritization process. This Forum offers a thorough

by Erin Stafford, DBRS, Inc., Chair, CREFC Servicers Forum
 

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