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"The office and industrial sectors will continue to suffer from extensive overcapacity, and these sectors are unlikely to bottom until late next year or early 2005. The office recovery will likely be particularly protracted because of slow and late job growth and the current suburban overhang." -Brian Lancaster, Davis Cable and Kathy Mixon, analysts at Wachovia Securities who authored its MetroView report

Wachovia: U.S. Commercial Real Estate to Have "Delayed Recovery"
Commercial Real Estate Demonstrates "Increased, But Not Alarming" Volatility

Midyear CMBS Outlook Starts From the Bottom Up
CMBS Servicers Face 'Advanced' Issues on Loan Default

Holliday Arranges Refinance on Kansas "Lifestyle Center" With Archon Financial

MBA Asset Administration and Technology Conference Turns on the Afterburners
MBA Takes Mold, ACORD Form 28 to Task

CampusMBA Wins Commercial Real Estate Academia Award
Conference Attendance Could Lead to a CMB

MISMO Commercial Working Group Holds Spring Meeting

Difference Between Truths and Facts Could Hold Key to Risk

N.J. Companies Create NYC Relocation Plan

Potential Bursting of Housing Bubble to Affect Commercial Real Estate

Wachovia: U.S. Commercial Real Estate to Have "Delayed Recovery"
MBA (6/23/03) Sorohan, Mike

Wachovia Securities said it expects a "delayed recovery" in U.S. commercial real estate, according to its latest quarterly MetroView report ranking the nation's 50 largest real estate markets by property type.

"Since our April 11, 2003 report, the clouds overhanging the property markets have become slightly grayer and more widespread," commercial real estate and CMBS analysts Brian Lancaster, Davis Cable and Kathy Mixon said in the report.

Property revenue levels have declined for all sectors except retail, the authors said. Among the "gloomiest" areas are northern California, Denver, Colo.; Indianapolis, Ind., Atlanta, Ga., and several Texas metropolitan areas.

The apartment sector suffers from oversupply, and it will likely be slow to respond to recovery because of continued strong home ownership trends, lagging job growth and more building, the report said. Capital flows to the apartment sector are slowing.

Meanwhile, retail-most popular among capital investors and the most stable sector-continues to outperform and is poised, along with hotel, to benefit quickest from the economic recovery, the authors said.

"Although we believe hotel has bottomed and we look for a RevPAR recovery later this year and into 2004, event risk persists," the authors said. "The office and industrial sectors will continue to suffer from extensive overcapacity, and these sectors are unlikely to bottom until late next year or early 2005. The office recovery will likely be particularly protracted because of slow and late job growth and the current suburban overhang."

But the news is not all bad, the authors said. "Southern California and southern Florida remain sunny for the most part, along with parts of the greater Washington, D.C., and Baltimore, Md., areas," they said.

Although CMBS loan delinquencies remain low for non-hotel sectors, the authors said the focus appears to be on increasing trends. "While we believe delinquencies and defaults will increase further in coming months, possibly doubling current levels, low interest rates and continued capital flows to the sector will be stabilizing factors, limiting loan deterioration," the authors said. "CMBS property concentrations in outperforming markets in southern California, New York City (office) and the greater Washington, D.C., area are helping overall loan performance measures and benefiting investors. CMBS collateral is concentrated in property types and metros that we forecast will outperform the broad market."

Click here to view the report.
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Commercial Real Estate Demonstrates "Increased, But Not Alarming" Volatility
MBA (6/20/03) Sorohan, Mike

Fitch Ratings, New York City, said that given "continued economic uncertainty and still weakening real estate fundamentals in all sectors," commercial real estate will demonstrate "increased, but not alarming," volatility over the next two years.

According to the latest update of Fitch's Property Market Metric (PMM), volatility in the retail sector continues to decline, particularly in primary markets. Mary O'Rourke, senior director with Fitch Ratings, said one of the more interesting statistics that emerged in evaluating scores that changed since Fitch's previous report, is that not a single retail market recorded an increase in volatility.

"Volatility in the office sector has increased, particularly in secondary markets, with a concentration of the highest scores in the southwest," O'Rourke said. "But, PMM scores in a few major markets, notably New York and Los Angeles, have also risen."

Fitch assigned each property type in each of the 315 markets surveyed to a volatility group based on relevant demographic characteristics, operating income performance, construction history and overall market fluctuations. With the input of year-end 2002 results, the overall changes in PMM scores since year-end 2001 are relatively small, with an overall increase in the percentage of PMM scores in the two highest volatility categories.

The warehouse sector, while continuing to experience moderate volatility, has seen an additional 38 markets move into the more volatile PMM groups, Fitch Ratings said. The apartment sector continues to outperform other sectors, although O'Rourke noted that it is currently experiencing higher vacancies and diminished income in some markets.

O'Rourke said Fitch expects the office and warehouse sectors, along with hotels, to continue to experience performance challenges. But she noted that Fitch anticipates commercial mortgage-backed securities (CMBS) investments will continue to perform well.

"The PMM volatility score is performing as Fitch expected," O'Rourke said. "By managing investment risks through initial ratings actions, and through detailed surveillance of Fitch-rated transactions, Fitch continues to expect CMBS investments to perform well."

Click here to view a copy of the Fitch's Property Market Metric report.
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Midyear CMBS Outlook Starts From the Bottom Up
MBA (6/24/2003) Murray, Michael

After two years, the commercial mortgage backed securities (CMBS) market is at or near a cyclical bottom following a pattern of narrow spreads and improvement in credit performance after weak economic periods or recessions, said a JP Morgan Securities official.

Patrick Corcoran, senior analyst and head of CMBS research at JP Morgan Securities Inc., New York City, said that discipline in construction activity and an outlook for temporary cash flow weakness are two reasons for firm property prices. Although prices have fallen, the report said that cash flows dropped more.

"Relatively firm property prices have helped to curtail CMBS loan defaults, which have remained at very low levels in recession," Corcoran said.

In the years 2000 and 2001, core loan defauts rose from .31 percent up to .68 percent, based on numbers from Fitch Ratings and JP Morgan. The report said that the 2002 default rate in core CMBS loans at .81 percent, not including hotel and health care sectors.

Meanwhile, property price returns dropped by 2.87 percent in 2002 after a 6.36 percent return in 2000 and a 2.1 percent return in 2001, according to statistics from NCREIF and JP Morgan.

The CMBS outlook, however, is for default rates to remain close in 2003 to 2002 levels with a "modest increase in delinquency rates," the report said.

"Beginning next year," Corcoran said, "increasing firmness in property prices should gradually result in a decline in default rates from recession levels."

Click here to view the CMBS 2003 Midyear Outlook from JP Morgan Securities.
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CMBS Servicers Face 'Advanced' Issues on Loan Default
MBA (6/20/03) Murray, Michael

NEW ORLEANS, La.-Many industry analysts in the commercial mortgage backed securities (CMBS) market say that based on a weak economy and more defaults, the CMBS market could its first real test that could increase stress among primary and master servicers and special servicers. As different players in the CMBS market focus on investors and their own interests, recoverable and non-recoverable advances become a major issue for the different parties.

Richard Carlson, director at Fitch Ratings, New York City, said there had been less awareness on over-advancements because they worked in the past, but there is an increasing awareness on them now and that could hinder their use. At the same time, Carlson said Fitch wants to make sure that there are "no surprises" on issues such as advancing in general and interest shortfalls.

"We're finding some triple-A investors are paying attention to workouts," Carlson said at the Mortgage Bankers Association's Commercial Real Estate Finance Asset Administration & Technology Conference here yesterday. "That hadn't happened as much in the past. They're a little bit more concerned about interest shortfalls and the potential to not get their interest payments on time."

"Advancing is hugely important in CMBS because ratings are important," said Dave Forti, partner at the Philadelphia law firm of Dechert, LLP.

For example, in a single asset, triple-A rated deal, advancing could provide liquidity to the bondholder on the interest payment and keep the rating up even though the borrower did make required payments. Additionally, if the property is going to be sold in a tax sale because the borrower did not pay the tax, the servicer could advance that tax to avoid losing the collateral.

But servicers do not make credit enhancements and will only make advancements if there is recoverability, Forti said. The servicer does not need to make advances unless the funds are going to ultimately be recovered through liquidation of the property or other funds that will be repaid to the loan.

"There are a million sub-issues with advancing that are going on right now," Forti said. Some of those issues include the time period for reimbursement of the advance, non-recoverable determinations, the payment of the advance, the circumstances of an over-advance and reimbursement of those funds as well as a shortfall to the certificate holders in disposal of a property, Forti said.

One major issue is how master servicers and special servicers might handle non-recoverable advances based on language in the pooling and servicing agreements (PSAs) with respect to recovering existing cash flows.

Stacey Berger, executive vice president in the Washington, D.C. office of Midland Loan Services, Kansas City, Mo., said that the master servicer has the right to use the recoverable cash flows on the mortgages to repay outstanding fees.

But if money comes out at one time in a non-recoverable advance, it potentially shorts the certificate holders to the triple-A level that could lead to rating agency downgrades, resecuritization of the bonds and a "waterfall of downgrades," said Brian Hanson, senior vice president at CRIIMI MAE Services Limited Partners, a special servicer in Rockville, Md.

In some instances, servicers will stagger their recovery of the advances over a period of time to "try to cushion the blow to the higher rated certificates," but "it is a little bit difficult because there's a bunch of people who pay the price for this," Hanson said.

The master servicer is entitled to interest on the advance for an outstanding loan debt but would also have to wait a longer time but it could become an issue as the pool winds down.

Berger said that the ability to take principal paydowns or payoffs on maturing loans to paydown the advance and mitigate the impact but it remains a significant issue, Berger said.

The question still remains as to how the excess advancement might be repaid through the credit structure of the deal. Many CMBS deal structures now include more than a single asset class but a number of asset classes in one pool to add diversity for investors.

"We want to create value, but when that asset is ultimately disposed, there could be significant issues in terms of how that excess advance is recovered up through the credit structure of the deal," Hanson said. "We're monitoring much more than we ever did."

Meanwhile, some industry participants believe that B-piece buyers holding part of the structure might need to pay for special servicing fees and should have a part in the workout of a loan.

Most industry analysts, however, agree that communication between the parties is essential to workout the advancement issues. "We have a very open and ongoing dialogue with [Midland Loan Services] and the other Master servicers that we have loans with large [principal and interest base]," Hanson said.

That communication includes explaining the Criimi Mae disposition strategies and providing information on the properties.

At Midland, an advance committee meets on a monthly basis and bases its decisions on "tiers" of loans, Berger said.

The first delinquent payment is paid automatically but after the second payment, Midland begins to monitor the loan closely. It looks at the net present value analysis on special serviced loans, the expected value of the recovery, the landlord payoff rate, and the advancement for property protection on a net basis.

"Presumably, you're taking cash or some cash flow off of the property," Berger said. "In some cases, there is no cash flow off the property."

Berger also said that real estate taxes, insurance, legal fees, servicing, special servicing and advanced interest payments all need to be paid. "You're stretching out payments into the future," he said. "We apply more and more scrutiny to the more dollars and higher percentage of the outstanding principal balance for the valuation that is outstanding."

Berger said that appraisals are not as available or reliable as Midland's own assessment value that includes looking at operating statements.
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Holliday Arranges Refinance on Kansas "Lifestyle Center" With Archon Financial
MBA (6/25/2003) Sorohan, Mike

Archon Financial, Dallas, Texas, recently provided $34,000,000 for the refinance of Bradley Fair Shopping Center, a project of Laham Development Company, a Wichita, Kan.-based real estate investment and development company.

The loan has a 10-year fixed rate with the first year interest-only on a 360-month amortization. Holliday Fenoglio Fowler, L.P., arranged the transaction. Trey Morsbach, drector in Holliday Fenoglio Fowler's Dallas office, brokered the deal. "Bradley Fair is an excellent project backed by top-notch sponsorship," said Will Flaa, loan officer with Archon Financial.

The 250,000 square-foot Class A lifestyle center was built in several phases on a 40 acre-site. The center is 97 percent occupied and consists of 13 buildings. Bradley Fair is strategically located at the corner of 21st and Rock Road in the heart of the Wilson Estates development, a 320-acre master planned community that includes 300,000 square feet of office space, 200 residential home sites, a 110-room Hilton Garden Inn, and a 160,000 square-foot. medical office park. The development of Wilson Estates began in 1995 and will be complete in 2004.

Flaa said the area is an affluent sub-market with high income levels in the MSA. The average household income within a one-mile radius is $103,817 and $89,392 within a three-mile radius. National specialty retailers make up approximately 70% of the center including Ann Taylor, Banana Republic, Bed Bath & Beyond, Gap, Pier 1 Imports, Talbots, Ultimate Electronics, Victoria's Secret, Williams-Sonoma, Eddie Bauer, Restoration Hardware, On The Border and Romano's Macaroni Grill. Bradley Fair is also home to local and regional specialty retailers and restaurants.
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MBA Asset Administration and Technology Conference Turns on the Afterburners
MBA (6/25/03) Schwarting, Katie

MBA hosted its Asset Administration and Technology Conference in New Orleans, La. last week to record-breaking attendance of more than 600 conferees. The event included a one-day workshop on June 18 and the conference on June 19 and 20.

"In keeping with an upward trend established over the last several years, this conference just keeps on getting better and better," said Jim Hebert, principal at CapMark Services L.P., and chair of MBA's Asset Administration Committee. "The sessions were very focused and represented most of the leading-edge issues within our industry. The keynote speakers provided a great high-energy addition."

The workshop offered participants detailed information on current insurance issues, strategies for improving customer service, requirements for a HUD audit, third party reports, fiscal filings, HUD post-claim procedures and portfolio review practices.

David Wyss, chief economist at Standard and Poor's, New York City, spoke at the workshop luncheon. Wyss described the current state of the economic market and the future outlook, emphasizing that while the recession is over, there is still not an overwhelming recovery to date.

A key component to any economic recovery, Wyss said, is consumer confidence and the consumers' ability to spend. The current market consists of consumers with little savings, record high debt and default, and slow recovering confidence, which was low after September 11. However, he noted that consumer confidence has been improving since the war ended.

Wyss added that to stimulate the fiscal market, the government has implemented the tax cuts and will continue to maintain low mortgage rates. The end result, Wyss said, will be a slowdown, but not a complete halt, of spending that will allow the economy to recover, but at a slower pace.

The conference also featured panel sessions on loan default, legal compliance, technology initiatives, closing issues, MISMO, automated valuation models, special property types and insurance issues.

Recurring themes included increasing customer service while decreasing costs and error ratios. Servicers expressed the importance of communication with all parties, especially between borrowers and special servicers to expedite the processes.

As a new addition to the conference this year, the technology track consisted of six user-friendly panels focused less on "bells and whistles" and more on practical technology solutions to business problems.

For instance, the "Managing Operational Risks Through Technology" panel dealt with innovations in risk management capabilities provided by sophisticated analysis of data.

The integration of the technology track reflects the evolving transition of the conference to a joint event, and the Asset Administration Committee and the Technology Initiatives Committee will work to further leverage common themes for next year's meetings.

"Combining the MBA's technology efforts with the traditional June Asset Administration program was a real nice fit, as most of us in the asset administration community rely heavily on technology to solve problems and increase efficiency," Hebert said.

Next year's conference will be held a month earlier in Nashville, Tennessee on May 12-14, 2004.

MBA will continue to hold regional forums in the upcoming months, which serve as additional training opportunities.

The next regional forum is scheduled for September in San Francisco, Calif. For additional information, please contact Katie Schwarting at katie_schwarting@mbaa.org.
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MBA Takes Mold, ACORD Form 28 to Task
MBA (6/25/2003) Murray, Michael

NEW ORLEANS, La.--The Mortgage Bankers Association's Commerical/Multifamily Insurance Task Force remains focused on improving the transparenncy of insurance information provided by agents and brokers to lenders and servicers, said Robert Vestewig, chief operations officer of GEMSA Loan Services, LP, Houston, Texas, and task force chair.

The task force continued to monitor the emerging mold issue, Vestewig said at MBA's Commercial Real Estate Finance/Multifamily Asset Administration & Technology Conference here. Scientists continue to study the effects of mold on buildings and multifamily housing. Vestewig said that mold has become an issue through litigation rather than science. In his home state, a $32 million judgement in Ballard, Texas led to insurance companies either no longer providing homeowners insurance or making exclusions against mold.

"We can't put a finger on this fungus," Vestewig said half-jokingly.

By late summer or early fall, the Centers for Disease Control should release a report on mold and the effect of the report could guide the task force going forward. The task force is coordinating actions with other industry and trade groups with an emphasis on providing educational information to its members.

Kathleen Dufraine, vice president of insurance at CapMark Services, LP, Atlanta, Ga., and a member of the task force, explained ACORD Form 28, which provides evidence of commercial property insurance. Revisions have been made to ACORD Form 27 by ACORD, working in conjunction with the task force.

Changes to ACORD Form 27, making it ACORD Form 28, include specific details to check off coverage information rather than a blank box to take the "guesswork" out of a free form box. The coverage information section includes yes and no questions about terrorism insurance coverage, mold coverage, limits and deductions (if coverages are there), number of months and amounts for business interruption insurance and loss of rents coverage, as well as earthquake, flood and wind/hail coverage, if applicable. The form also asks if there is 100 percent replacement cost.

"It's very detailed," Dufraine said. "With ACORD Form 28, insurance agents or carriers will not need to provide numerous forms to servicers because of errors or missing information on the ACORD Form 27. The result is less time and costs. Insurance carriers developed ACORD Form 27 in 1974 for the lending community, but insurance was not a major topic like it is today,"

The non-profit insurance association called ACORD is an organization that sets standards for insurance and has nearly 15,000 insurance brokers that work on more than 1,000 insurance type of mortgage-backed securities (MBS). Dufraine said ACORD Form 28 has been well received by the National Association of Insurance Commissioners (NAIC), the Council of Insurance Agents and Brokers (CIAB), the ratings agencies and ACORD itself.

The deadline for comments and suggestions on the new ACORD form is July 7, before the task force sends the final product to ACORD for its review. The task force is "guardedly optimistic" that a new form will be in place between 4 to 6 months and "hopefully by the end of the year," Dufraine said.
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CampusMBA Wins Commercial Real Estate Academia Award
MBA (6/26/03) Sabol, Krista

CampusMBA, the educational arm of the Mortgage Bankers Association, is the recipient of the fifth annual Realcomm 2003 Digie Award for Best Use of the Internet - Academia.

Each year, Realcomm recognizes the leaders and innovators in the Commercial Real Estate industry who are maximizing the use of technology and automation in their businesses. In the Best Use of the Internet category, Realcomm awards for each respective sector of the commercial real estate industry for demonstrating a desire to utilize the Internet in both front-end (website) and back-end (Intranet) applications.

In many cases the commercial sectors restructure numerous aspects of their business to take advantage of the efficiencies that the communications infrastructure of the Internet offers.

CampusMBA offers an extensive commercial real estate finance curriculum that includes Web-based and print-based distance learning courses, classroom-based programs, and audio programs. Web-based course titles include Multifamily Underwriting, Introduction to Commercial Mortgage Backed Securities, and Environmental Building Inspections.

The online training center has incorporated a blended learning experience for its students, making use of the Internet to provide supplemental activities and assessment completion for print-based distance learning courses and classroom-based programs.

"CampusMBA's impressive array of online courses takes advantage of Internet capabilities to provide learning opportunities to its members," said Lorie Damon, director of education at the Building Owners and Managers Association (BOMA). "Their success--in terms of number of courses and especially in terms of the numbers of students who are electing to learn online--demonstrate how Web technologies can enhance learning."

Students can seek recognition for their academic achievements by acquiring a Professional Certificate in Commercial Real Estate Finance or by becoming a Certified Mortgage Banker (CMB) designee, specializing in the field of commercial real estate finance [see article below]. Acquired through a combination of experience, education, and formal testing, the CMB recognizes a professional's commitment and excellence to the industry.

"It is an honor to be recognized for MBA's commitment to offering members relevant education resources provided in an innovative but convenient format," said Dan Thoms, vice president of education and business development at MBA.
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Conference Attendance Could Lead to a CMB
MBA (6/26/03) CampusMBA Staff

A CampusMBA transcript can let any conference attendees know if they have met a majority of the requirements for an MBA professional designation, including the CMB.

The new CampusMBA transcript feature brings together all industry experience, education and participation in MBA events. The CampusMBA transcript is now available to all active MBA members and course takers. The transcript lists all conferences and courses attended since MBA records were kept.

Users can review the transcript for accuracy, update the transcript with non-MBA educational events, and add work history. To access the CampusMBA transcript, users simply log into CampusMBA and click on the Transcript tab.

To view an animated simulation about transcript access click here.

For more information about the transcript or to discuss your career development opportunities, call the CampusMBA registrar at (202) 557-2764.
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MISMO Commercial Working Group Holds Spring Meeting
MBA (6/26/03) Szparaga, Daniel

The Mortgage Industry Standards Maintenance Organization (MISMO) Commercial Working Group held its Spring Meeting on June 18, in conjunction with the MBA Commercial Real Estate Finance/Multifamily Asset Administration & Technology Conference in New Orleans. While MISMO finalizes its Intellectual Property Rights Policy, the Commercial Working Group continues to make progress in the effort to develop data standards for the commercial mortgage industry.

On the administrative front, the Commercial Group determined a master calendar for its data standards effort through February, 2004. Upon completion of the MISMO IPR Policy later this summer, the Originations, Servicing and Core Data Groups will return to a regular conference call schedule later this summer.

The Commercial Group and Subgroups also plan to join the next September all-MISMO Trimester meeting (planned for the week of September 8-12 in Troy, Mich.). During that meeting, the subgroups will set out schedules for release of their initial specifications with the intention to issue several candidate specifications for the next Commercial Meeting, (planned to coincide concurrent with the MBA CREF Convention in Orlando in February 2004).

The ability of the Subgroups to meet this schedule is dependent upon the finalization of the MISMO IPR Policy. As detailed in last week's MISMO Corner, implementation of an IPR Policy is necessary to maintain MISMO's openly developed, freely available industry standards. This Policy should roll out to MISMO participants later this summer.

The Architecture Subgroup, chaired by John McCarthy of Deutsche Bank, approved the draft format of the Commercial Architecture Best Practices Guide. The Guide is a technical document that provides detailed instructions to XML developers and implementers on the structure of the commercial subgroup's use of XML (eXtensible Markup Language). XML provides a broad range of features.

One benefit that MISMO provides is a forum that ultimately agrees to use one feature of XML over another. The use of that selected feature then drives subsequent decisions in the creation of various schemas and specifications.

The Best Practices Guide meticulously documents the group's decisions to remove ambiguity and provide a clear path for those who write the XML specifications.

The process subgroups in MISMO's organization (including Servicing and Origination) write the XML. Since they are not necessarily as technical as the Architecture Subgroup, the Guide becomes a valuable resource. While it is a living document, the first complete version will be released later this summer.

The eMortgage Subgroup reported on the finalized White Paper on Commercial eMortgages, released earlier in June. The next steps for this group include working with the larger eMortgage Group in development of the SMART Doc I-Guide (Implementation Guide) and ensuring that commercial document types are supported by the next upcoming major release in Version 2.0 of the SMART Doc specification. Additionally, the Core Data, Originations and Servicing Subgroups held discussions on the scope and status of their specifications.

Click here to find out more about MISMO's commercial data standards effort or contact MBA's Dan Szparaga at daniel_szparaga@mbaa.org.
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Difference Between Truths and Facts Could Hold Key to Risk
MBA (6/23/03) Murray, Michael

NEW ORLEANS, La.--To describe the importance of reliable data on internal and external risk factors, one might recall a saying of Frank Lloyd Wright: "There is a difference between truths and facts." Some analysts say that reliability and time are two major components toward the production of data.

The Sarbanes-Oxley Act has made corporations more accountable up and down the organization, said Angela Benton, vice president of multifamily operations at Fannie Mae, speaking at MBA's Commercial Real Estate Finance/Multifamily Asset Administration & Technology Conference here last week. Benton said that insurance is a "huge challenge" to commercial servicers, but it is important to turn data into information that the human element is able to interpret.

As financial structures become more complex, and audit and control measures tighten, there is a greater need for more accurate and timely data to reduce risk. "That focus isn't going away anytime soon," Benton said.

But another old phrase, "time is money," could also describe the use of data on operational risk.

Maurice Walker, senior vice president at Green Park Financial, Bethesda, Md., said he finds the more frequent and better quality of data helps the company make faster decisions.

Standard & Poor's Liquid system provides interest rate information on a 15-minute delayed basis so that users can look at their risk and exposure to the interest market every 15 minutes, said Kevin Porter, director of global real estate risk servicers at S&P. However, in contrast to interest rates, Porter said that borrowers pay the loans each month but provide financial statements annually and possibly later than that.

"There's a huge gap there," Porter said.

Walker said waiting for end-of-year financials from borrowers could take as long as 18 months at Green Park Financial.

One solution might be to go to third parties and then determine trends in a market and that property information, Porter said.

"When we look across the breadth of that type of client, and you start analyzing the various markets, you get a big jump on what is happening versus waiting for the end of year financials," Walker said.

But in the CMBS market, technology helps speed servicers to pull out abstract pieces of data from specific loans in pooling and servicing agreements (PSAs) and on loan documents so that a servicer could "cut and paste" the responsibilities of the various parties in a CMBS pool.

Michael Matheson, senior vice president of technology product services at Midland Loan Services, Inc., Kansas City, Mo., said systems can manage the receipt of information with policy and procedures so that Midland can "live up to the agreements" that include the PSAs and loan documents.

"Our risk is associated with the operation and hedging of those assets," Matheson said.

Other analysts, however, said that servicers take an inordinate amount of risk based on the lack of quality data they receive from deals in the commercial mortgage backed securities (CMBS) market. Some missing data involves escrow and reserves.

But Porter said that CMBS has moved forward since the early 1990s with "meaningful standardization" of submission templates to rating agencies and servicing teams also started to emerge in securitizations. He said that a standard must come first but that the industry must put the burden of high quality data on the providers of the loan since a substantial financial contribution is made based on that information.

"It's going to get there over time," Porter said. "It's not there now."
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N.J. Companies Create NYC Relocation Plan
MBA (6/24/2003) Sorohan, Mike

Five New Jersey companies from the public and private sectors formed "The White Paper Consortium" designed to help companies facing sudden relocation from the New York City area to effectively find temporary space.

The goal of the New Jersey White Paper Consortium is to provide companies needing to create disaster recovery and operations facilities with a "one-stop shop" solution for evaluating, locating and/or constructing a facility to meet the federal mandate. The consortium is currently assisting numerous firms in taking advantage of New Jersey's strengths while minimizing the impact of recovery facilities on New York City's economy.

The five companies are The Gale Co., Cushman & Wakefield of New Jersey, the New Jersey Commerce & Economic Growth Commission, Verizon and PSE&G Co.

Mark Yeager, president and chief investment officer of The Gale Co., said in the aftermath of September 11, securities industry regulators released a "White Paper" outlining new contingency planning guidelines for finance firms, requiring them to have sufficient back-up facilities located outside of New York to continue critical activities in the case of a major emergency.

"The consortium partners will provide 'one-stop shopping' for firms seeking back-up sites by assisting in the location, construction or modification of quality facilities in prime areas, evaluating infrastructure necessary to support these emergency recovery facilities, and identifying available business incentives," Yeager said. "This alliance brings together partners that each add a unique dimension to the spectrum of support services necessary to assist companies with their back-up site selection decisions."

The consortium plan addresses four goals: to support firms that need disaster recovery facilities or need to enhance operations facilities that they may already have in New Jersey; to allow for less stringent statutes in meeting White Paper requirements; to prevent erosion of the financial services sector in the Metro area; and to bring key stakeholders together to provide development, construction, economic, facility selection, communications and utility expertise in order to develop appropriate plans for contingency facilities in New Jersey.

"New Jersey is an ideal location for disaster recovery facilities because it allows firms to strike a balance between these competing objectives. Back-up sites in New Jersey are sufficiently close to New York to allow companies to realize economies of agglomeration, while creating enough logistical separation to allow them to continue to function in times of crisis," said Gil Medina, Director, Technology Enterprise Group, Cushman & Wakefield of New Jersey.

New Jersey's water, power and telecommunication supplies operate independently of the infrastructure in New York State. New Jersey also has efficient intermodal transportation systems that allow workers to commute from all points in the region. "Yet even as they operate independently, the telecommunications and transportation systems are integrated with New York's," explained Christopher Kinum, Senior Managing Director and Branch Manager, Cushman & Wakefield of New Jersey. "Therefore, it is possible to establish a network of satellite centers all linked together-and to the core. This will allow firms to efficiently continue operations in a seamless manner, and to deal with almost any eventuality."
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Potential Bursting of Housing Bubble to Affect Commercial Real Estate
MBA (6/24/03) ResearchWorldwide.com

This report from ResearchWorldwide.com does not necessarily reflect the opinions or viewpoint of MBA Commercial/Multifamily NewsLink.

"Many local economies are being propped up by the housing boom, however the anticipated bursting of the housing bubble could throw low growth economies into recession. Consequently, the already slowing demand for commercial real estate may then worsen," according to ResearchWorldwide.com, a commercial real estate information Web site.

Two organizations, the International Monetary Fund (IMF) and The Economist, have recently issued reports bearing strong warning signs that the housing boom in certain countries is overheating, Research Worldwide.com officials said.

The Economist predicts that within the next year or so certain housing bubbles are likely to burst. They argue that buying a house in the expectation of capital appreciation rather than underlying fundamentals is the definition of a bubble. Reasons for bursting bubbles given by The Economist include the p/e ratio - the widening gap between rentals achieved and booming house prices, as well as the house-price-to-income ratio.

All that is required for a bubble to burst is a change in sentiment.

The RICS (Royal Institution of Chartered Surveyors) said that in the United Kingdom, for the 3 months to May this year, 25% more surveyors reported a fall in house prices than those who reported a rise. Overall sales are down 21% in May compared to twelve months ago and unsold property on the market is at the highest level since September 2000.

Dropping house prices are already being recorded in New York, the Netherlands and London, according to The Economist. Countries in danger of falling house prices include Australia, Britain, Ireland, Netherlands, Spain and the United States, where falls are expected anywhere between 10% and 30% over the next four years.

Utilizing the IMF's housing price cycle statistics, which have been completed to the third quarter of 2002, the six affected countries have seen an average upswing in housing prices for almost 7 years, compared to the 3 year average historical upswings recorded from 1970 to the early 1990's.

In keeping with this, The Economist's house price index confirms that these same six countries have recorded an average increase in real terms of 11% per annum from 1995 to 2002, compared to a global figure of 2,5% per annum during the same period. Over the past 7 years, Dublin has outraced the pack with an annual real increase of 28%, followed by London with 19%, Stockholm's 14% and Sydney and Amsterdam recording increases of 10% respectively.

The table below has been constructed by ResearchWorldwide.com, using the IMF's housing price cycle turning point statistics and a forecast table from The Economist's recent survey of property "Close to Bursting".

Previous lengthy upswings have traditionally been followed by a 3-4 year downswing. For example, the UK experienced a 5,5 year upswing in 1984 - 1989, followed by a 4 year downswing thereafter. The US had a sizeable 7-year upswing in late 1982 - 1989, which was followed by a 3-year downswing.

The Economist estimates that the construction and real estate industry combined accounts for approximately 15% of rich countries' GDP and is probably the biggest business in the world. Real estate is by far the world's largest single asset class, with investors having more money tied-up in real estate than in shares or bonds.

"With the housing market bubble expected to burst in certain countries within the foreseeable future, a protracted downswing in house prices appears inevitable according to the IMF and The Economist's research. There could be serious implications in certain countries which have low economic growth rates and who have been using the housing boom to prop up their economies. Existing low growth economic conditions, coupled with threatening deflation exacerbated by falling house prices, could lead to spreading recessionary conditions. Ultimately, this could affect the commercial real estate industry in certain countries, as their already slowing demand for commercial space continues to worsen," said ResearchWorldwide.com

"The United States could forestall this potential widespread recessionary scenario. With a relatively small drop of 10% in house prices anticipated over the next four years in the best managed economy in the world, this super-power could potentially retard a widespread recession from occurring in many parts of the world. However, should the US look for support it could see economic giants like Japan and Germany, as well as other parts of Europe and Asia unable to avert deflation, let alone participate in the global battle for meaningful economic growth," predicts ResearchWorldwide.com officials.

"We first alluded to this looming problem in our media release of February 12, 2003 - Real Estate to the Rescue - For Now, and our recent media release of June 11, 2003 - Real Estate Deflation Looms in 10 More Countries. The size of the commercial real estate cake could shrink in the next few years. The survivors and 'thrivers' in the commercial real estate industry worldwide will be those who are knowledgeable, skilled, well connected and who market themselves correctly," said ResearchWorldwide.com officials.

Research Worldwide Limited. is a wholly owned subsidiary of a European-based investment holding company. It is asset-managed from Jersey in the Channel Islands. The investment holding company has been a client of the Neville Berkowitz Global Associates real estate advisory network since the mid-1990s. It has benefitted from the research services in various countries offered by this Global Associates network.
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