Mortgage Observer

Hotel Giraffe Refinanced With CCRE

Hotel Giraffe

Boutique lodge The Hotel Giraffe refinanced with a $39 million CMBS loan from CCRE negotiated by HKS Capital, Mortgage Observer has learned.

The 39-key hotel is owned by self-described “indie hotelier” Henry Kallan, who has been a client of HKS’ Jerry Swartz’s for more than a decade. Read More

Mortgage Observer

Hotel REIT Takes $150M Unsecured Term Loan Facility

Publicly traded REIT RLJ Lodging refinanced outstanding CMBS debt to the tune of $150 million, the firm announced yesterday. The new unsecured term loan facility allows RLJ to resolve any questions about refinancing next year, when interest rates will likely be higher and a slew of loans will be due, potentially stretching lenders’ limits—the anticipated so-called “wall of maturities.” Read More

Mortgage Observer

Q&A: Tim Koltermann, CEO of Walker & Dunlop Commercial Property Funding

Tim Koltermann.

Mortgage Observer recently spoke to Mr. Koltermann, who helped establish Walker & Dunlop’s new CMBS and high-yield lending arm, with Fortress Investment Group, as part of an effort to grow Walker & Dunlop’s lending presence around the country. The companies formed their joint venture in 2013 and launched the specialty finance platform in April 2014, with Mr. Koltermann, a nearly 20-year Wall Street veteran, at the helm.
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Mortgage Observer

CMBS 3.5?

Smaller lenders take a larger piece of the pie.

When Robert Verrone was head of Wachovia Bank’s large loan group, he closed and securitized huge deals—on 650 Madison Avenue, Donald Trump’s office tower at 40 Wall Street and Blackstone’s Boca Raton Resort & Club in Florida, to name a few.

After the government-forced sale of Wachovia to Wells Fargo to avoid the bank’s bankruptcy in 2008, Mr. Verrone started his own advisory company, Iron Hound Management Company LLC. This past January, the firm announced a new partnership with Bank of New York Mellon Corporation to form a conduit operation called IH Capital; BNY Mellon allocated $500 million of its balance sheet to the new venture. Read More

Mortgage Observer

Two Men and a Heyday

Michael Lehrman.

As a kid, Michael Lehrman used to play a game with his grandfather, the late Bronx landlord and developer David Buntzman. They would walk into a restaurant when they knew it would not be that busy—say, between lunch and dinner—and count the chairs and the tables.

“I realized later in life,” Mr. Lehrman said during a recent interview with Mortgage Observer, “that he would slip the guy some money. We’d go into the kitchen, and then we’d talk to the people working there; and find out what works and what doesn’t—how do you make a small business work, how do you make a business that focuses on making its customers happy every day or they won’t come back.” Read More

Mortgage Observer

Risk Retention Rules Approved, Will Increase Cost of CMBS Transactions

Send in the clowns...

Six federal agencies voted this week to approve new risk retention rules that could foul up the finally recovered CMBS issuance pipeline, even though the new rules won’t be enacted until 2016. However, the sentiment from some industry observers was relief—earlier proposed regulations were even more strict.

As part of the Dodd-Frank Act’s implementation, rules were passed last month that require managers of collateralized loan obligations, including CMBS, to hold a larger portion of deals on their books—a move that is expected to increase costs but one that won’t scare away investors, according to industry sources. Read More

Mortgage Observer

Hakim Seals the Deal Sans Mezz in LA Buy

6100 Wilshire Boulevard

Los Angeles-based investor Citi Real Estate, headed by Sam Hakim, took a $57.5 million CMBS loan from UBS to buy a Los Angeles office property at 6100 Wilshire Boulevard last month. But prior to the purchase, the borrower, the scion of an established Los Angeles real estate family, had actually arranged for $65 million in funds for the $76 million buy, with a portion of the financing in a mezzanine loan, a source close to the deal told Mortgage Observer.

Alas, when the rates were set to lock this summer, the mezz turned out far pricier than expected, the source said. The borrower opted instead to fill that portion of the capital stack with equity—a move highlighting the potential effect of a tumultuous CMBS market, the source said. Read More

Mortgage Observer

New Brooklyn Medical Center Refis With $49M CMBS Loan

Meridian Capital Group arranged a $49 million CMBS loan for the refinance of the newly built Calko Medical Center in Brooklyn, Mortgage Observer has first learned.

Calko was built last year and holds 125,000 square feet of office and retail space. The medical center holds an ambulatory surgery center, medical offices and a pharmacy and is located at 6002 Bay Parkway in Brooklyn’s Bensonhurst neighborhood. It cost about $60 million to develop, according to published reports. Read More

Mortgage Observer

Hotel Financing Frenzy


When you’ve been in this business long enough to see a few investment cycles, the ubiquity of the herd mentality never ceases to amaze. When the market is crashing, many perfectly good assets cannot be financed. And when the market is hot, lenders will trip over each other with bids. The lender that wins usually borders on the irrational. Such is the case in the hotel finance market today.

The recent anniversary of the 9/11 terrorist attacks reminded me how hotels suffered after the disaster, as people feared flying and stopped booking hotel reservations. Cash flows dropped, cap rates increased, and it took the market a couple of years to recover. More recently, the financial crisis of 2008/2009 had a similar impact on hotels, as folks drastically cut back on consumer spending and cash flows on many hotels were halved, with countless assets either in foreclosure or workout. Read More

Mortgage Observer

Carve-outs: Bad-boy Guarantees Have Borrowers Getting Spanked

Jonathan Mechanic

So-called bad-boy guarantees have recently created headaches for borrowers when CMBS loans go bad, industry experts told Mortgage Observer. A number of recent cases across the nation have interpreted the guarantees, which prohibit certain borrower activity, like “indebtedness,” and “insolvency,” to mean that the principals of a borrowing entity are personally liable for losses in the event of default—a shocking development for CMBS borrowers and lenders alike.

It began with a 2011 case, Wells Fargo vs. Cherryland Mall, which rose to the highest court in Michigan. A provision that the borrower would “not become insolvent” was found to constitute a personal guarantee by the principal of the development company, which had defaulted on a CMBS loan, said Sam Lee of Duval & Stachenfeld. “It created a ripple effect,” in the industry, he said, because that “innocuous phrase,” one type of bad-boy clause, was boilerplate in many CMBS loan documents at the time. (The ruling by the Michigan court was actually later overturned by the state legislature, in an unprecedented move). Read More

Mortgage Observer

CMBS: Is Underwriting for CMBS Back to Pre-Crisis Levels?


With the country’s CMBS market bouncing back to pre-crisis levels, industry observers are voicing growing concerns about a deterioration in underwriting on securitized commercial debt deals.

The CMBS underwriting environment has substantially declined over the past three years and is now akin to where it was in late 2005 and early 2006, according to several rating agencies, including Fitch Ratings and Moody’s Investors Service. Underwriting on such deals continues to weaken, in large part, due to rising competition between lenders to issue securitized debt, a Fitch report published this summer said. Read More

Mortgage Observer

High Spreads in $1B Atlantis CMBS Issuance


The $1 billion Atlantis CMBS offering, collateralized by a single, 245-acre, 2,917-room resort property located in Paradise Island, Bahamas, exhibits higher than normal spreads for its fixed-rate AAA-class certificates, due in part to corresponding risk, Mortgage Observer Weekly has learned.

BREF ONE LLC’s Series A, a fund affiliated with a subsidiary of Brookfield Asset Management, sponsored the $1 billion mortgage for the resort, according to a Standard & Poor’s pre-sales report, released Aug. 4. The loan, divided into a $650 million fixed-rate and $350 million floating-rate component, was provided by Deutsche BankMorgan Stanley and Citigroup. Read More