Tanya Little

Recently, The Wall Street Journal was on fire about CMBS and special servicing. In addition to the CMBS delinquency rate hitting an all-time high of 10.04 percent for May, the May 30th article blasted the special servicers by saying, “the fixers of the commercial real-estate world need some repairs themselves.”

So what does that all mean?

Well, for those of us dealing with special servicers it’s a bit of a Catch 22. The recovery has not occurred as fast as we were hoping, investors are still uncertain, borrowers and servicers are more educated, capital is abundant, and the process is proving to have some advantages and disadvantages for all.

The servicers had an opportunity to defend themselves last week at a CRE Finance Council seminar that I attended. For the most part, they did well. They act as an “Oreo” of sorts, caught between the bondholders/investors/trust and the borrowers. Their job is to maximize value for the trust.

Sounds like if you apply real estate 101, that should be simple. But with values unreliable, the lack of sales comps in the market, investor pressures and perceptions, and an arguably still sluggish market, it’s a no-win situation.

On the bright side, reporting is improving, sales are happening, and for borrowers, we are seeing more resolutions and better timing. Servicers are opting for some local market loan sales versus bulk sales, and I was glad to hear they recognize that loan time in special servicing is costly for all.

The key to working with special servicers is creating a win-win for the borrower and the trust, which takes some give and take on both sides. Special servicers aren’t all bad; they’re just stuck in the middle.

Tanya Little is CEO of Hart Advisors Group. Contact her at tlittle@hartadvisorsgroup.com.