Reversed many of the tax reforms of 1981. Properties that were profitable in the tax environment of 1981-1986 were not economically viable after the TRA. Many markets had become oversupplied due to tax advantaged construction of properties which the underlying economic and demographic demand could not support. As a result, TRA triggered a sharp drop in new construction, particularly of apartments. Also see Economic Recovery Tax Act, 1981.

See Concessions.

These include the costs of new carpeting, painting, walls, cleanings, etc. The cost is borne generally by the landlord; tenants are often provided with a maximum TI allowance (expressed in dollars per square foot) that the owner will contribute toward improvements. In markets with strong demand, TI may be passed on to the tenant in terms of higher rent. In times of weaker demand, TI allowances may be more generous, thereby adding uncertainty to net cashflow from a building.

The possibility that the borrower may not make periodic loan payments when due during the term of the loan.

The terrorist attacks on September 11th, 2001 resulted in the horrible loss of life and insured damages of approximately $35 billion. The attacks also created tremendous uncertainty in the insurance market, which was further exacerbated by the threat of future terrorist attacks and the inability to price for terrorism risks. Consequently, reinsurers stopped writing coverage and primary insurers withdrew, or tried to withdraw, from the market, which led to dramatic increases in the price of commercial property-casualty insurance.  Commercial policyholders soon faced exclusions for terrorism in standard insurance policies, and coverage became extremely expensive and altogether unavailable in certain areas. 

In response, Congress enacted the “Terrorism Risk Insurance Act of 2002 (TRIA)”, which has served as the structure for the program that exists today. TRIA created a public-private partnership between the federal government, the property-casualty insurance industry and commercial policyholders to share future insured losses from international acts of terrorism. The program was extended in 2005 and again in December 2007.

Protects investors from any losses on the mortgage loans. The bond insurer, paid an annual fee by the issuer, will absorb the losses. The CMBS is usually never rated higher than the credit rating of the third-party issuer. A form of credit enhancement.

See Tenant Improvements.

Protects real estate owners and lenders against property loss or damage from mistakes or missing information from the title due to liens, encumbrances, or defects.

See Tax Reform Act, 1986.

Each discretely-rated class of CMBS securities, which is typically paid a coupon stipulated at the time of issue and principal based on a predetermined payment sequence. Typically, lower-rated tranches have higher coupons and longer lives, since they receive no principal payments until the higher-rated tranches have been retired or paid off.

A lease whereby the tenant pays rent, real estate taxes, expenses as well as maintenance fees. This implies no running costs for the owner.

The Trustee’s primary role is to hold all the loan documents and distribute payments received from the Master Servicer to the bondholders. Although the Trustee is typically given broad authority with respect to certain aspects under the PSA, the Trust typically delegates authority on loans to either the Special Servicer or the Master Servicer. As holder of the loans, the Trustee will be named in enforcement actions related to the loans (such as lawsuits or non-judicial foreclosure actions) yet in most instances the Trustee is acting by and through either the Master Servicer or the Special Servicer. All Borrower interaction is handled by the servicers, and the Borrower rarely, if ever, interacts with the Trustee.  In many cases the role of administering payments to certificateholders is split apart from the trustee role and is termed the Certificate Administrator.  Also see Certificate Administrator.