The Commercial Mortgages Securities Association (CMSA) may grow its presence in Europe as the CMBS market takes shape.
The industry organization began looking into European market practices more than three years ago, but limited supply had circumscribed its operations. Despite a slow start, the CMBS market has seen an increase of more than 200% since 2000, the CMSA reported.
"The CMSA in Europe has had limited impact, in particular, because if you go back, the market was much smaller," said Clive Bull, a vice president at JPMorgan Securities and chairman of CMSA's European chapter. "Essentially what we are experiencing now is an attempt to kick- start operations in Europe, now that we see a substantial number of investors that have significant holdings in CMBS."
Bull noted that there has been interest on the investment banking side and the servicing side as well.
The association's first task is bringing standardization to European investor reporting. The CMSA would like to introduce a standard investor-reporting package that facilitates monitoring a transaction's progress on an ongoing basis. It would be beneficial to the servicer and trustee as well as encourage new issuers by clearly laying out what they are responsible for. Also, standardized reporting would provide market participants with a better notion of how to plan ahead and develop reporting systems.
"On the progress side, we are just beginning," Bull said, adding that the group has only met twice since announcing its plans last month. "But we are looking at the standard reporting package in the U.S. and how to design a similar package that, of course, caters specifically to European market practices."
The biggest concern so far - from the European point of view - is that the CMSA does not literally import U.S. standards and impose them on the European market. The plan, Bull explained, is to start of with the U.S. model and work out modifications for the European market - a process, he says, that occurs continuously anyway, as it's dictated by fluctuating market practices.
Bull does not intend to set the bar so high initially that it discourages potential issuers from accessing the market.
"We have to remember that there is no history [of reporting] on an ongoing basis in Europe and [a standard reporting package] might discourage people," Bull admitted. "It's more important that it starts as a slight improvement from where we are today but that it's workable and something feasibly produced."
The CMSA has invited a committee that represents all aspects of the market to complete the initial standardization document by mid-2004.
Also, the CMSA will introduce a series of seminars dedicated to familiarizing investors with the "ins and outs" of investing in the European CMBS market. The CMSA hosts a series of these instructive gatherings for U.S. market participants. The first gathering in Europe will be held in London on Dec. 4.