The TreppWire Podcast: A Commercial Real Estate Show

We’re only mid-way into July, but early indications are that delinquency rates are improving. In this week’s episode of The TreppWire Podcast, we examine the factors behind a potentially declining CMBS delinquency rate, noteworthy CRE headlines of the week, the CMBX 10 index, shifts in the office market, and takeaways from bank earnings. Episode Notes: Signs of a tepid recovery (1:10) Improving CMBS delinquency rates? (6:11) Noteworthy CRE loan headlines this week (13:04) Digging into CMBX 10 (18:58) Manus and Joe’s PSA: Wear a mask (22:31) Back to school? (26:07) Shifting trends in the office market (29:22) Takeaways from bank earnings (33:03) “Necessity is the mother of invention” (35:54)

We welcome Rick Jones, Partner and Co-Chair of Dechert’s finance and real estate practice. Under his leadership, the 150 attorney practice focuses on sophisticated capital markets and mortgage finance transactions, providing lenders with innovative deal structuring, creative financing strategies and efficient execution. In this episode, we discuss structural changes that may come out of this crisis, a federal bailout for CRE, the potential impacts of the upcoming U.S. presidential election, and changes to CRE legal work in this environment. Episode Notes: Comparing this crisis to the Great Recession (0:34) Structural changes coming out of this recession? (2:05) How has COVID-19 changed the type of legal work in CRE? (4:02) The equilibrium between borrowers and lenders (5:38) A federal bailout for the lodging industry? (7:30) Lending winners and losers coming out of this environment (12:02) Potential impacts of the upcoming U.S. presidential election (14:48) The shifting needs of office tenants (16:48) Future of CECL? (18:22) Where is the systemic risk? (20:19) Predictions for conferences resuming (23:16) Takeaways from Mr. Jones’ conversation with Sam Zell (25:57) The force majeure battle (27:22)

We are officially past the half year mark, which means the release of our bi-annual report in collaboration with CRE Direct. In this week’s episode of The TreppWire Podcast, we discuss our Mid-Year report and the magnitude of the pandemic’s effects across the hardest hit sectors. We also analyze the recent push for CMBS relief, CRE loan default and loss projections, the European CLO and CMBS markets, and Manus Clancy’s revised bucket list. Episode Notes: Is this week’s glass half empty or half full for the economic recovery? (1:02) Retail headlines and the borrower “ring of honor” (7:30) The push for CMBS relief (14:30) Potential legal and regulatory impacts of COVID-19 (23:47) The Mid-Year report (25:56) Analyzing CRE Loan Defaults & Loss Rates: Serious Challenges Ahead (30:46) An update on the European CLO and CMBS markets (35:51) Manus Clancy’s revised bucket list (38:48)

At one point during the month of June, it appeared that a new all-time high for CMBS delinquencies would be reached. The final numbers posted at the end of the reporting cycle, however, showed that the 2012 high still remains the peak (for the time being). In this week’s episode, we dig into this month’s delinquency report, potential relief options for hotel owners, takeaways from the Fed’s bank stress tests, green shoots for corporate CLO investors, and the Nathan’s Hot Dog Eating Contest. Episode Notes: Is the glass half empty or half full for the economic recovery? (1:10) CMBS delinquency rate nears all-time high (14:00) Reaction to Barry Sternlicht’s “extreme distress” comments (17:57) Relief for hotel owners? (24:28) Retail headlines of the week (31:26) Takeaways from the Fed’s bank stress tests (34:56) Green shoots for corporate CLO investors (39:44) The Fourth of July hot dog eating contest (43:55)

The economic recovery: A glass half full or half empty? We examine the congressional request for CMBS borrower relief, delinquency rates by MSA, retail stories that caught our eye, the future of affordable housing, the increase in “problem banks,” and the importance of CLOs to the broader market. Episode Notes: Is the glass half empty or half full for the economic recovery? (1:03) The congressional request for CMBS borrower relief (6:42) Surprises in delinquency rates by MSA (13:33) Retail stories that caught our eye (23:59) The future of affordable housing (28:48) The FDIC’s reported increase in “problem banks” (32:17) Why CLOs are so crucial to the broader market (38:38) Vegas baby, Vegas? (42:25)

We welcome Brian Stoffers, Global President of Debt and Structured Finance at CBRE and 2020 Chairman of the Mortgage Bankers Association (MBA). In a wide-ranging conversation, Mr. Stoffers discusses trends he’s seeing in the CRE lending space, property type performance, the impact of “forbearageddon,” and how the COVID-19 crisis will change commercial real estate in the long-term. Episode Notes: Outlook for the recovery (1:45) Any notable valuation trends since the onset of COVID? (3:59) What we’re seeing on the lending side (6:20) A new normal in market share? (8:18) Fannie and Freddie reserve requirements (10:30) How has the office underwriting process changed? (12:35) Differences in geographic performance? (15:33) Impact of “forbearageddon” to investors (18:07) Office “hub and spoke“ model (21:53) Future of business travel (or lack thereof) (25:25) The lending slow-down (29:48) What does the deal pipeline look like? (35:50) Investor appetite for ESG reporting (38:49)

We welcome Andrew Jacobs, Head of Structured Finance at Trepp, to examine signs of stress in the corporate CLO market. We also discuss the potential record-breaking CMBS delinquency rates, the appraisal reduction process, this week’s major headlines in lodging and retail, and the migration from big cities. We also make weekend plans for a trip to the drive-in movies. Episode Notes: Record breaking CMBS delinquency rates? (4:04) Spotlight on the CMBX 13 index (9:15) This week’s lodging and retail headlines (11:05) The appraisal reduction process (22:32) Is the appeal of big cities wearing off? (27:15) Signs of stress in the corporate CLO market (35:06) Winners and losers in CLOs (40:24) Drive-in movie theater weekend plans (45:17)

In this special episode, we welcome Tammy and David Goldfisher from The Henley Group, borrower advocates and experts in CMBS loan restructuring. With loan forbearance being top of mind for many in commercial real estate, Tammy and David share their insights into the borrower and special servicer negotiation process and discuss what they are seeing on the ground. Episode Notes: What type of forbearance agreements are happening right now? (5:19) What makes a borrower negotiation successful? (9:53) Negotiation process by property type (13:11) Parallels to the last financial crisis (17:13) Will retail borrowers be able to find relief? (22:44) Predictions on potential structural changes in CMBS (27:56) Challenges for borrowers in the special servicing process (29:55) Macro-economic expectations (38:27)

The wave of bad news in the retail market, what we expect to see in June CMBS remittance data, the CMBX 7 index, credit supply risk in the corporate CLO market and most importantly, our Father’s Day wish lists. Come for the market commentary, stay for the stories of playing Little League Baseball with Kevin James of “The King of Queens.” Episode Notes: Macro market news and our thoughts on the recovery (1:10) More bad retail news (7:13) What to expect in June CMBS delinquency data (12:26) One third of all malls may be done? (13:44) A scary survey on expiring leases (22:24) Drilling down into the CMBX 7 index (26:31) Credit supply risk in the corporate CLO market (29:23) Our Father’s Day wish lists (32:20)

In this special episode, we welcome Principal Dan McNamara and Managing Director Catie McKee (aka the “Queen of Malls”) from MP Securitized Credit Partners. In what was dubbed “the next big short” by some, investors bought credit-default swaps against subordinate bonds in the CMBX 6 index, which has heavy concentrations of shopping mall and retail loans. Catie and Dan are well known for their bet against CMBX 6 and discuss the strategy and execution behind shorting U.S. malls. Episode Notes: The strategy behind shorting U.S. malls and CMBX 6 (2:05) Performance expectations (9:36) Systemic risk in CMBX (13:17) Retailers that may survive the carnage (15:30) The art of visiting malls (19:22) Will more mall owners turn to “jingle mail”? (21:21) Break-even pricing for in-line mall tenants (27:14) Who will play Catie and Dan in a sequel of “The Big Short” (29:29)