Defeasance consulting is a specialized service and relationship that lasts beyond the closing of the defeasance transaction. Choosing a defeasance consultant is an important step that is often overlooked or pushed off to a third-party broker or servicer whose interests may not be directly aligned with the Borrower. Not all consultants are created equal, so it is wise to take a little time to research your options.
In 2016, CMBS 2.0+ loans have comprised nearly 40% of all defeasance activity. The defeasance of these newer vintage CMBS loans highlights hidden Borrower risk, in the area of defeasance portfolio structuring and pricing. Borrower exposure to securities portfolio markup grows exponentially with 2.0 loans due to a combination of longer maturities and alternative collateral options. Sloppy structuring and poor pricing equate to higher Borrower costs.