News

Bank Failure Impact on Clean Tech Finance 

March 20, 2023

The climate tech sector is worried about funding options following Silicon Valley Bank’s (SVB) collapse. According to Axios, SVB was “a pillar of the start up ecosystem…[with] roughly 1,500 venture-backed startup clients working in climate tech.”  

Why it matters: Climate tech has becoming increasingly important as businesses seek to participate in efforts to mitigate climate risk and meet international carbon reduction commitments. Over $350 billion in tax incentives from the 2022 Inflation Reduction Act further spurred investment in clean tech. A significant constriction in financing availability could put the brakes on climate innovation.

Who finances clean tech: Small start ups have turned to regional and community banks to finance their ventures. As Tom Steyer, former presidential candidate and co-founder of a climate investment firm, explained to Bloomberg:

“Most banks, they’re banking against assets or cash flow. When you think about a startup, which has a good chance of having neither, you understand why many banks shy away. They chose to understand and work with startups.”

Yes, but: Given that recent banking troubles were not the result of any underlying credit issues, many market participants believe that losing SVB as a key climate tech funding partner will result in only a temporary pause. With ample tax incentives and other financial institutions likely to recognize key opportunities, healthy start ups might continue to find the financing they need. According to another venture capitalist:

Contact

News Archive

News

Forum Spotlight: Servicers

March 20, 2023

Together, Stacy Ackermann, Leslie Hayton, Rich Carlson, Carl McLaughlin, Andrea Helms, Tony Yousif and Niral Shah form the “Leadership Working Group” for the Servicers and Special Situations Forum.  The group sets agendas and priorities for the Forum, as well as represents the constituency on CREFC’s Policy Committee.

What’s new:  In January, the forum debuted its new expansion as we combined the servicing administration and special situations forums. The Special Situations component newly incorporates the special servicing/special situations and distressed asset management as part of the forum.  The decision to evolve and formally combine servicing administration and special situations was due to feedback from members regarding current market conditions and related pressing issues that the members want to explore and address. 

The newly recast forum will have two sets of leadership – one representing servicing administration and the other representing special situations. Importantly, both sets of leadership will continue to work together to address all aspects of member interests and concerns.

Key Servicer Focus Areas

• Monitoring and tracking servicing activity 
• Transfers of interest and assumptions
• Distressed asset resolutions for securitized and portfolio assets
• Floating rate - transitioning away from LIBOR
• Collateral Valuation

What they’re saying:  Discussions at the January conference focused on the following points:

• Payoff efficiencies and success during 2022
• Increased defeasance volume – will it continue in 2023?
• Moderate uptick in transfers of interest and assumptions
• Increased requests for rate cap modifications and differences across portfolio vs securitized
• Continued valuation uncertainty  - impact on default resolution/enforcement and servicer advances
• Bespoke distressed asset resolution requests and approaches

Looking ahead, servicers are highly focused on current market conditions and the impact on maturing loans and default resolution and enforcement.  The forum leadership expects our forum discussions at the June conference to focus on the current state of the market and what servicers are seeing as “boots on the ground” with respect to the point of contact with borrowers.

 Key Policy Issues:

• SEC’s Conflicts of Interest in Securitization Proposal. The proposal would limit CMBS and CRE CLO sponsors from certain transactions in the first year after issuance. CREFC is asking for express exclusion for servicers from being treated as a “sponsor” under the regulation.
• LIBOR transition:  US Dollar LIBOR is scheduled to cease being published on a representative basis beyond June 30, 2023. Servicer Forum members and CREFC have published the CREFC LIBOR Legacy Playbook, which is designed to address operational issues related to transitioning floating-rate loans currently indexed to LIBOR to the recommended SOFR index plus the ARRC recommended spread adjustment or another contractually agreed-upon benchmark.

What’s Next:  Forum Leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.  Please send any nominations to Kathleen Olin.

To join the Servicing Administration and/or Special Situations Forums, please register here.  For any forum related questions, please contact Kathleen Olin.

Contact 

Meet CREFC's Servicers and Special Situations Forum Leaders - Stacy, Leslie, Rick, and Carl

News Archive

News

NY Leg Counters Gov's Budget; No Mezz Tax or Rent Control

March 20, 2023

On March 15, the New York State Assembly and State Senate released their counterproposals to Gov. Kathy Hochul’s budget.

• The bills do not include a mortgage recording tax on mezzanine debt or preferred equity investments. CREFC opposed a similar tax in 2021.
• State rent control via a good cause eviction law was not included.

Why it matters: The Governor’s Budget Process is the main legislative vehicle for enacting laws in NY. While the Governor did not propose the mezz tax or good cause eviction, the legislature could have added them to its own proposals.

Hochul still could have vetoed the provisions, but inclusion in the counterproposal would have put the policies much closer to enactment if they were used as a bargaining chip or funding source.

By the numbers: While the legislature did not add in the mezz tax or rent control that could negatively impact CRE and multifamily finance, the Assembly did eliminate several affordability focused proposals that Hochul had proposed.

• Update Tax Abatement Incentives for Affordable Multiple Dwellings in New York City: The Assembly did not include the Executive proposal to establish a partial real property tax abatement for capital improvements made to certain rental and owner-occupied buildings located in the City of New York or any city in which the multiple dwelling law applies at local option
• Establish a Local Option Tax Incentive for Affordable Multi-Family Housing: The Assembly did not include the Executive proposal to establish a real property tax exemption for the construction of certain multi-family housing projects on previously vacant or underutilized land. The exemption would be at local option, and would apply to municipalities located outside the City of New York.
• Authorize Tax Incentive Benefits for Converting Commercial Property to Affordable Housing: The Assembly did not include the Executive proposal to establish the Affordable Housing from Commercial Conversions Tax Incentive Benefits (AHCC) program, which would provide a partial real property tax exemption for the conversion of commercial, manufacturing and other non-residential buildings to residential rental buildings located in the City of New York.
• Extend the Project Completion Deadline for Vested Projects in Real Property Tax Law 421-a: The Assembly did not include the Executive proposal to extend the completion deadline for projects vested in the expired 421-a program for four years, from June 15, 2026 to June 15, 2030.

What’s next: The Governor and the legislature will continue to negotiate on the provisions to pass a final budget by April 1 (though that timing may slip). CREFC will continue to monitor developments.

Contact David McCarthy (dmccarthy@crefc.org) with questions. 

Contact

News Archive