Beware of the Defeasance Gray Market

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.

Defeasance Keeps Rising, Pace Slows

U.S. defeasance activity reached a post-crash high of $22.4 billion last year, but the rate of growth slowed sharply. The volume of commercial MBS loans defeased in 2015 was up by $1.5 billion, or 7%, from $20.9 billion the previous year, according to a draſt of an annual Moody’s report to be released today. That was a modest increase compared to jumps of $7.7 billion (58%) in 2014 and $7.3 billion (124%) in 2013.

Statement on the Loss of Board Member Joseph Trustey

Commercial Defeasance and QuietStream Financial mourn the loss of board member Joe Trustey. He was a valued advisor and good friend. Our hearts are breaking for his wife and colleagues, and our thoughts and prayers are with them.

Will interest rates increase twice this year?

embedYes, investors, interest rates will go up this year.

Here’s the question we really want answered: Will two rate hikes happen before Christmas?

Historically, multiple successive rate hikes have followed a period of prolonged low interest rates. This was the case at the conclusion of the low-rate periods of the early 1990s and mid 2000’s. Read more

Massive tech disruption aims at commercial real estate

virtual_reality_photoThere can be no more excuses for falling behind the curve in adopting technology in commercial real estate. Ready or not, a major disruption is unfolding in our industry.

It’s no secret CRE professionals have been lukewarm to new technologies. Meanwhile, the rest of the world is accelerating adoption quickly, which is why CRE is now playing catch-up. Read more

Why are newer multi-family loans defeasing ahead of schedule?

14425526680_d34d3b66e6An interesting trend is developing in the multi-family CMBS space: Newer vintage loans are defeasing much earlier in their terms than older 2005- to 2007-vintage loans.

Why? Defeasance economics are turning in their favor. Let me explain. Read more

Newer multi-family defeasances increase as Wall of Maturities nears

14425526680_d34d3b66e6Over the past several years, multi-family loans have consistently defeased in greater volume than any other property type.

Due to sustained low rates and continued strength in the sector, owners of multi-family properties are moving at a quickening pace to defease loans against their properties. The intent is to maximize proceeds from disposition or refinance loan proceeds as the Wall of Maturities inches closer. Read more

3 Reasons to Give the Office a Second Chance

commercial2Last week, we looked at some numbers showing the difficult prospects in front of office properties approaching the Wall of Maturities.

Enough gloom and doom.  There are plenty of reasons to look at the office sector with optimism. While some assets will surely reach maturity in need of additional capital, the majority find themselves in improving conditions. Read more

Maturing CMBS faces tough day at the office

2015OfficeAbout 40% of office properties approaching the Wall of Maturities could face difficult conditions when their loans mature.

A Fairview Real Estate Solutions analysis of all 10-year commercial mortgage backed securities maturing from 2015 to 2017 shows less than 60 percent of all office CMBS is expected to payoff at par value. The remaining loans involve office properties that could be worth less than the original loan value and require additional capital. Others are expected to be in worse condition, having already been classified severely delinquent or in default. Read more

Don’t Discount Retail: 4 Reasons Bricks-and-Mortar Remains Strong

escalator-711793_640It’s easy to write-off the future of retail properties based on a few headlines spelling out the demise of some major U.S. retailers. The closing of big-box stores such as Sears or the bankruptcies of major brands such as Radio Shack get plenty of attention.

The truth, however, shows bricks-and-mortar retail shopping centers, mixed-use developments and stand-alone out parcels in many cases to be in fine condition. Lenders and investors are eager to finance and own these properties as consumers return to shopping, fueled by job and wage growth. Read more