In yesterday’s JPMorgan Securities CMBS conference call, analysts said that the CMBS market has progressively become more about loan and property specific stories as well as decision making in special servicing.
Josh Younger, a CMBS analyst at the firm, said that the balance of loans in special servicing has been declining for most of the past 18 months. The inflows remain elevated, but have usually been offset by the increased number of outflows. Younger noted that there has been a relatively drastic decline in modifications as an outflow strategy.
The CRE market has improved and servicers become more comfortable with disposing nonperforming loans through either asset or note sales, Younger said. “As a result, modifications have made up a smaller representation of [special servicing] outflows.”
In terms of loan-specific cases, another JPMorgan’s CMBS analyst Meghan Kelleher discussed how MPG, which was previously known as Maguire Properties, has employed a strategy of shedding assets at a pretty steady and fast rate since 2008.
Many recent and upcoming dispositions have been using “cooperative foreclosure,” such as those for Two California Plaza, Glendale Center, and 3800 Chapman.
In addition, MPG currently holds seven non-defaulted assets in their portfolio, four of which have been securitized in CMBS. These include 777 Tower, The Gas Co. Tower, U.S. Bank Tower, and Wells Fargo Tower.
More recently, tax indemnification agreements with Maguire Properties founder Robert Maguire have been permanently set for June 2013, which gives MPG more freedom to dispose of the affected assets.
Kelleher said that upcoming loan maturities — 777 Tower and U.S. Bank Tower — are two of MPG's weakest and are unlikely to retain control through modification. Therefore, she said that they are probably MPG’s next targets for disposition.
In response to a participant’s question during the Q&A session at the end of the call, Kelleher commented on MPG’s expected approach.
“We think this is advantageous for them to quickly relieve their financial liability and dispose of their assets,” she said. “This mechanism [of shedding] allows them to do this in a fairly clean way.”