The MBA does a great job in planning sessions, and in selecting a location where lenders and their mortgage bankers can meet.

The convention takes place at the beginning of the year, so that the lenders can articulate their goals, which allows immediate feedback from the mortgage bankers; and gives the mortgage bankers direction in their match-making between the lenders and the borrower.

It also allows me to test drive my earlier 2012 forecast for the commercial real estate finance market.

The mood at the MBA-CREF convention this year is very workmanlike. This is not the “we’re back” chant of prior years. For positive lending, the view is that

  • new commercial mortgage lending in ’12 will mirror ’11

This mirrors the same message I heard last week in Dallas from several commercial mortgage workout managers.  Like the loan producers here at the MBA-CREF convention, the distressed mortgage servicers know they’ve resolve a lot of loans, but they’re not finished.  For distressed mortgage debt, the view is that

  • the inventory of distressed commercial real estate in ’12 will mirror ’11
My forecast was spot on.
Let’s get back to work.
Post your comments below.

Yesterday (Sunday) was the first day of the 2012 MBA-CREF Convention.  The theme or tag-line is “Where Market Makers Meet.”

The formal sessions start today, which cover content planned by the various councils comprising the MBA.

Some times the “off the record” content is just as interesting as the planned presentations.  (Or maybe they just reflect the most current focus, since the planned presentations were planned several months ago.)  Here are some observations and comments collected by me during the parties and gatherings before and after the Super Bowl game.

  • Co-lender structures:  this meeting, and the tag-line, does NOT signal a return of loan structures where multiple lenders share or co-own the loan. In other words (the “so what?”): don’t expect a quick return of the large loan market
  • Sticks’n Bricks Retailed  Whittled Down to “Necessities“: Lenders understand the on-line retail trend.  Lessons learned at home by lenders (i.e., shopping on-line), translate to work into a focus on retail centers and uses featuring “necessities” such as perishable food (grocery stores); and in affluent communities, this concept will expand to speciality stores.  In other words (the “so what?”):  if the property is not in this favored category, then the property just dropped a notch (or two) in the underwriting grading, so it looks to the following for financing . . .
  • Sustainable CMBS Market: One thought is that CMBS loan production eventually should settle into the $50Bill to $70Bill range.  Given the push to NOT include risk retention in the CMBS structure, investor appetite will be tepid, which will allow portfolio lenders the opportunity to capture the best properties – which in turn will drive lower quality properties as the primary collateral for CMBS loans.  In other words (the “so what?”): the markets will “self regulate” or differentiate capital sources.
  • Technology Needs to Be Understood:  The impact of technology on the physical aspects of commercial real property, on the operations of the property and on the tenants (or the tenant “community”) needs to be understood, with appropriate changes in the underwriting, documentation and servicing of the loan.  In other words (the “so what?:):  this could be very, very interesting.
Today the planned content starts.
Please add your comments below.


If you’d like to step out of this web stuff and actually meet, I’ll be at both of these events in the next few days:

  • the mid-year meeting of the Law Practice Management Section of the American Bar Ass’n (I’m the liaison to this section from the group of lawyers in the ABA who focus on real property law and trustsestates law [i.e., the Real Property Trust & Estates section, or “RPTE”])
  • the Mortgage Bankers Association – Commercial Real Estate Finance (or “MBA-CREF”) convention early next week (I’ll be there with a large group of Winstead lawyers)
Please reach out to me via e-mail at; or during either event on my cell at 214.538.6813.
As I’ve done in the past, I’ll blog during or after both events, so that you’ll hear my perspective on each.
I’ve enjoy meeting with you.


Perhaps the most important “message” from this year’s MBA-CREF convention is this question: 

  • Will we (finally) see increased liquidity in the commercial real estate finance sector in ’11? 

The convention placed a unanimous “yes” to the question, based upon the “return” of the CMBS lending product – as evidenced by recent securitizations, the large number of CMBS lenders, and predictions that total CMBS securitizations will range from $40Billion to $90Billion during ’11.  And those numbers exceed predictions that life company (portfolio) lending will range from $30Billion to $45Billion in ’11.

While I agree as to increased liquidity in ’11,  my perspective and experience is that CMBS will NOT quickly push aside the life company (portfolio) lenders as the favored lender group – as it did from ’04 to ’07.  in other works, CMBS loans probably will exceed life company loans in ’11, but the life companies generally will capture the best product.

Here are several reasons behind my perspective:

  • CMBS lendingg: basically, the product has too many points of pain on some very fundamental topics to quickly return to dominance over the portfolio lenders, such as:
    • The CMBS closing process is in its infancy, as the lenders struggle with the need to simplify loan documents for smaller loans, more complicated SPE requirements (due to the GGP case), and heightened loan level review at pooling.  The deals are tough to close – and questions and work on loans are not “over” until the securitization occurs. This points to my second point  . . .
    • This is “CMBS 2.0” and not merely a tweaking of CMBS 1.0. In other words, this is NOT “CMBS 1.1.” Sure, there is the concern that underwriting and pricing standards might quickly erode given the large number of CMBS lending platforms (such that any changes will make the return of CMBS merely "CMBS 1.1"). However,
      • Investors are focused on loan level information – just look at the “discussions” on the proposed pooling warranties and representations as a pathway for addressing risk retention. In these meeting, the investors are very vocal in their desire to significantly change or strengthen these provisions (when compared to CMBS 1.0). The topics of risk retention and transparency are very basic, and unresolved, issues. (And not the only unresolved issues.)
      • I really doubt that the investor market is anywhere near as large as it was during ’04 through ’07. In that time period, the investor appetite for CMBS bonds literally sucked loans into CMBS debt – and one consequence was the erosion of basic commercial real estate underwriting standards.  Investors now know this, which takes me back to  . . . transparency.
  • Life company (portfolio) lending: simply stated, there is more of it (more $$ allocated) and the life company lenders are willing to price it attractively (but without eroding underwriting standards). These lenders are focusing on  recapturing market share for top-quality product, and they are moving to do so in ’11.

If If you have a different view, or merely want to comment, please do so below.

At the start of Day #3 of the ’11 MBA-CREF Convention (link to day #2 [which links to related posts]):

In situations where –

  • sponsorship of a distressed property has reasons to keep the property
  • sponsorship has liquidity
  • the mortgage loan is a CMBS loan
  • a large pre-payment penalty make paying-off the loan unrealistic
  • defeasance is permitted under the terms of the CMBS loan 

then defeasance as an exit strategy can be an option.

In a defeasance, the property is released as collateral for the CMBS loan, and in its place, US Treasuries (or other permitted bonds) are pleaded as replacement collateral.

Actually, it is much more complicated that this.

At one point there were 10+ companies who assisted borrowers in navigating a defeasance transaction.  The list now is down to @ 3 companies.

This morning I meet with Buddy Cramer and Joe Tillotson of Defeasit.

If this situation sounds like it could describe your distressed CMBS loan, consider contacting Buddy or Joe.

If you have used a defeasance as part of your workout strategy, please comment below.


Below are some observations and comments collected by me from formal and informal meetings, and random conversations though lunch on this second day of the 2011MBA-CREF Convention.

They do reflect my "coming up roses" word picture for ’11: we’ll have more roses blooming in the commercial real estate finance garden, but in ’11 we’ll still be dealing with the continuing bad or under performing product as well.

  • Technology: more signs that technology is changing commercial real estate –
    • Loan Servicing: Investment made by portfolio lenders and loan servicers in databases have been a huge help in assessing tenant-mix risk and in responding to tenant defaults.  This has been money well spent.
    • Loan Production and Underwriting: a next step in the use of technology will be the utilization, by commercial real estate lenders and servicers, of databases used by commercial lease brokers, who have built databases showing entire lease stacking plans (showing full lease terms) and debt payment terms covering buildings in specified markets; these tools will assist commercial lenders and investors in differentiating assets – and in making better investment decisions ("private is the new public").  
    • REO Management: increasingly, apartment rental rates and terms will use database-driven yield management tools, which allow apartment owners (and foreclosing lenders) to set apartment terms based upon "real time" market terms.  (One comment: 30-40% of all first-class apartment operators use this type of too.)
  • Market Share: CMBS – How deep is the CMBS investor market?
    • Life companies and hedge funds will only support annual new issuance of CMBS of no more than $100Billion
      Investors will fight for loan level information (at the time of securitization and during the entire term of the pool) ("private is the new public")
  • Market Share: Life Insurance Companies continue to "take back" market share "lost" to the CMBS loan market – How?
    • better pricing
    • better closing process (shorter loan documents, less structure, etc.)
    • focusing on "best" properties, in the "best" markets
    • let the 25+ CMBS lenders fight over the secondary properties

That’s it for now.  Off to lunch.

Please post your comments or questions below.

No doubt (thankfully), the ’11 MBA-CREF convention will be much, much more enjoyable than the ’10 convention, which had this theme: special servicing is busy and getting busier; and credit crunch marches on.

My bet is that 12 months later, at this ’11 convention, the message will be: Everything’s Coming Up Roses:

I’m a junkyard full of false starts
And I don’t need your permission
To bury my love under this bare light bulb
The moon is a sickle cell
It’ll kill you in time
You cold white brother riding your blood
Like spun glass in sore eyes
While the moon does its division, you’re buried below
And you’re coming up roses everywhere you go
Red roses follow
The things that you tell yourself
They’ll kill you in time
You cold white brother alive in your blood
Spinning in the night sky
While the moon does its division, you’re buried below
And you’re coming up roses everywhere you go
Red roses
So you got in a kind of trouble that nobody knows
And you’re coming up roses everywhere you go
Red roses

Stay tuned in as I give you comments and information during the next few days.

I hope that you’ll find (some of) it interesting.

My pick in Super Bowl XLV: the Green Bay Packers.

After all of the ice and snow in Dallas this week, I’m over the Ice Bowl.


I’ll be attending the ’11 MBA-CREF Convention next week in San Diego.

If you’d like to meet with me at the convention, please contact me (so that we can arrange a time and place to meet):

  • phone: 214.745.5839
  • e-mail:

If you’re not attending, I’ll be blogging daily (like I’ve done in the past at industry meetings) – and if time permits, I’ll be on twitter at

This should be a very interesting convention.

I look forward to meeting with you.

Significant industry organizations and participants all agree that commercial real estate is heading into a very, very rough time period – and it will be lengthy.

In the past month I have blogged from the Commercial Mortgage Securities Association (CMSA) January Conference [link includes links to prior entries] and the Mortgage Bankers Association’s Commercial Real Estate Finance (MBA-CREF) Convention [link includes link to prior entry].

  • My blog entries from the CMSA conference summarize the meeting content and the market perspectives of the capital market lenders (and the speakers selected by the CMSA).
  • My blog entries from the MBA-CREF convention do the same, but with a focus on life insurance companies and their mortgage bankers.

While the perspectives from these major commercial mortgage lending organizations are interesting, they are one-sided: they focus on the credit side of commercial real estate.

it is interesting to contrast and compare them to a summary of the 2009 annual meeting of the Urban Land Institute [link to ULI home page].  The meeting was this past November in San Francisco.

In contrast to the CMSA and the MBA, the ULI has an owner, developer and user focus on commercial real estate – what I call the equity side of commercial real estate.

When we combine the credit-side perspective (from the CMSA & MBA-CREF meeting) with the equity-side perspective (from the ULI meeting), we get a much more complete picture.

The ULI summary (below) is part of an e-mail received by a friend, who forwarded it to me.

  • Was the general tone, tenor or perspective of the ULI meeting different from the CMSA conference or the MBA-CREF convention?

The short answer: Yes and no.

  • “Yes” in the sense that the ULI attendees and speakers agree on the major challenges in the commercial real estate market.
  • “No” in the sense that the ULI meeting (based upon this summary) had a much, much tougher view on the future of the commercial real estate market.

Why the difference in their views?

  • The equity side of commercial real estate (the ULI) lives on the development of commercial estate.  In contrast, the credit side of commercial real estate (the CMSA and the MBA) lives on stabilized, income producing properties.  While they both agree that development of new commercial real estate will be slow (or even non-existent) over the next 3-5 years, the fundamental focus of each side takes them onto two different paths from this common perspective: the credit side still has opportunity in financing the existing stock of commercial real estate; in contrast, the developer is forced to the side line with no work (other than perhaps finding opportunity in asset management. work).
  • I know that this is not a popular idea, but I’ll say it anyway: just like the residential sector, commercial real estate operated under the mantra of "other people’s money" for the last 15 years.  The result was what I call "subprime commercial."  Now we’re in the de-leveraging portion of the cycle.  Consequently, the equity side of commercial real estate goes on a severe diet (read: no development and a focus on asset management); and the credit side focuses on "real people with real money" and tends its distressed portfolio.

Here is the ULI meeting summary (emphasis added by me), which includes wonderful detail on specific CRE niches and challenges.  Click on the "continue reading" link below . . . .

It is very, very interesting.

If you have any comments, questions or observations, please add them below.


Continue Reading Shared Message From The CMSA, MBA-CREF & ULI Meetings: Rough Times Ahead for Commercial Real Estate

(This is the last in a series covering the MBA-CREF convention.  In contrast to the first two days [link Day 1] [link Day 2] and our convention "preview" [link], this last posting focuses on the two polar extremes of the convention, and the industry.)

For Chris Nixon [link to bio] and myself, day 3 of the MBA-CREF convention (yesterday, Weds.) was filled with meetings with significant industry players from two distinct groups: special servicing and life insurance companies.

We listened for the answer to one specific question from each group, which for us (and perhaps for you) is “the” question.

  • Special servicing: what tips or advice can you give a borrower in 2010?
  • Life insurance company: will your loan allocations differ from your 2009 performance? (Read: will we see any “improvement” over 2009?)

Here is our summary of the answers given to us.

Special Servicing Tips

Not surprisingly, the tips were very similar to those articulated at the recent CMSA January Conference [link to 2nd day posting].    However, we heard enough “new” or different answers to craft an expanded list of tips.

True, the answers vary depending upon the particular servicer, the project, the carveout sponsor, the tenants, etc.

But putting it all together, here are the tips:

Do This:

  • be nice
  • send all information in; be open and transparent
  • sign a pre-negotiations agreement
  • keep paying cash flow
  • have a reasonable, cogent plan BEFORE you contact the lender or servicer (show us that you are in a good citymarket, with good tenants, good DSC, etc.) 
  • show up with $ (to right size the loan) when you ask for a debt restructure
  • default with dignity (i.e., have a "real" default and then be truthful)

Do NOT Do This:

  • tell lender or servicer that you’re "partners"
  • show up with a sham balance sheet
  • stiff or abuse your other lenders and the expect us to expect otherwise
  • tell lender or servicer that you’re a good borrower
  • "fish" for information or for terms of a plan that will be acceptable
  • cry
  • hold lender or servicer hostage
  • ask for any of the cash flow (nor a cash flow mortgage)
  • fly in on a private jet
  • offer a bribe
  • rob Peter to pay Paul
  • launch off on a religious sermon (caveat: "the special servicer knows that it is going to Hell – every day is Hell")
  • ask for any return on the new equity infusion made in borrower 

(For our other postings on CMBS special servicing, use the “search” function on the right side – and search terms such as “special servicing.’)

Life Company Loan Allocations for 2010 (& comparison to 2009)

The message generally was consistent from all our life insurance company contacts:

  • in 2009, roughly 30%-45% of the allocation was utilized to refinance the “best” loansrelationships in the portfolio
  • in 2009, not all of the allocation was utilized . . .
  • but since corporate spread have dramatically dropped in the last 6 months, mortgages are a relative good investment; so . . . 
  • there is hope that the mortgage allocation will be fully funded in 2010 . . .
  • however, probably the same percentage of the allocation (30%-45%) will be utilized to refinance the “best” loansrelationships in the portfolio . . .
  • and, the allocation amount is not near the level seen during recent years
  • the limited funds available for new loans will target the narrow bandwidth of the best projects and sponsors (high Debt Service Coverage or DSC; good Loan to Value or LTV; good balance sheet of the sponsor; good tenants; good market position; etc.)
  • since large loans to single-sponsor borrowers (and not multiple loans to different sponsors) typically fit this narrow bandwidth, 2010 could be the year of the large loan for many life insurance companies

Add all of this up, and it is clear that with a muted allocation amount and the commitment to utilize a significant part of it to refinance the current portfolio, the total amount of credit available for 2010 from life companies is small (relative to demand). 

The story here reminds me of the message from the CMSA January Conference: the recent CMBS issuances are good news for Wall Street but “no” news (i.e., no help) for Main Street.

The same should be said of the Life Insurance Company mortgage loan allocations: it sounds good, but really?

So, the message from both the CMBS Conference and the MBA-CREF Convention sync very nicely. (As predicted in my earlier posting?) [link]

If the mantra during the ‘90s and ‘00s was “other people’s money” (or “commercial subprime”), the mantra for the new economy is “show me the hard equity” (or “real money for real people”).

Yes, we’re returning to real estate fundamentals.

And since a large percentage of CRE is over-leveraged (a condition that I call "subprime commercial"), we circle back to the tips on special servicing . . .

If you see it differently, or have something to add, please post a comment below.