Every year on September 11, I join most people in the nation and reflect on the terror attacks of that day. I was in New York Tuesday, Sept. 11, 2011 — and I witnessed the destruction firsthand. I was blessed that the meeting I had scheduled for 8:30 a.m. in Tower One at the Windows on the World restaurant, where no one survived, was changed to a 10:30 a.m. meeting in Suite 2243. Of course, that meeting never happened.
Never forget.
This year, I spent 9/11 at home with my family, and we spent most of the day watching all the remembrance shows. The 10th anniversary coverage was nonstop. I let my two kids (12 and 10) watch as much as they wanted, and they took me up on it.
We shared the day asking some pretty deep questions and talking about the important things in life. The stories that I most related to were the ones where the person survived through random luck.
There was the Boston flight attendant who was left off one of the hijacked planes because of a last minute scheduling mix up. A group of fire fighters was in a tower when it collapsed but survived because the stairwell they were in somehow didn’t get crushed. And countless random people like me who contemplated meetings or trips that would have put them directly in harm’s way and for whatever reason the plans changed. Why?
One World Trade Center
The new New York skyline.
I traveled to New York on Monday the 12th and had a chance to check on the construction progress of One World Trade Center. I couldn’t get close to the memorial because reservations are booked months ahead. But, the office building is huge and is already starting to dominate the skyline. It will be nice having the tallest building in the United States back in New York.
Rockin’
Wednesday night the 14th, Metallica played at Yankee Stadium as part of a heavy metal show featuring the “Big 4” — An all day festival with sets by Slayer, Mega Death and Anthrax. with Metallica headlining the last set.
Sold out Yankee Stadium.
Lars Ulrich (the drummer who was great on Howard Stern this week if you heard it) is a friend from Marin, and he set me up with the whole VIP package (as usual – thanks Lars!).
We watched the show from all sorts of different angles: from Luxury Suite 1, from front row seats in section 29, and from the front of the floor next to the stage. They were all great, but my favorite place was the sound booth. It was set about 150 feet back from the center of the stage in an elevated, tented, fenced off area. They set up some seats behind the technicians where the friends of the band could hang and watch the show. The computers and screens looked like a space ship and it was cool to hear, feel and “see” the music.
As always, an epic show with an unbelievable set list and a crowd full of energy. One of the lessons of 9/11 was you only go around once, and the trip may be shorter than you like, so you better rock!
— — —
Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.
https://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.png00jimflahertyhttps://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.pngjimflaherty2011-09-17 19:11:582020-09-16 19:15:2110 Years On and Rocking
The CMBS deal recently priced by Deutsche Bank and UBS was the first deal since the market crash to include publicly registered bonds (all other post crash securitizations issued private bonds using the 144A Rule).
This is a big deal. Most people agree that for the CMBS market to truly recover, we have to issue public bonds — because so many potential investors are limited to only buying publically registered bonds.
The Deutsche-UBS deal issued public bonds for the top 70% of the deal and private 144A bonds for the bottom 30%. While the deal reportedly found good demand for both the public and private bonds, the structure of the deal highlighted the fact asset-level disclosures were different for the public bonds versus the private bonds.
Since the crash and because all deals were 144A, the investors have been allowed to see and review sufficient asset level data to re-underwrite the underlying loans. This data has included appraisals, rent rolls, historical financial information, and issuers’ underwriting models. However, since the investors were typically operating under a confidentiality provision that is typical in private deals, the issuers were not worried about disclosing the information and conducting specific Q&A sessions with potential investors to answer asset-specific questions.
Issuing public bonds carries a much higher liability standard for issuers when it comes to disclosures. Information must be disclosed uniformly to all investors at the same time, and there is no ability for one investor to learn more about the assets than other investors. Also, if any information the issuer supplies to investors in a public deal turns out to be wrong or misleading, even if the information came from sources other than the issuer, the issuer can be held liable.
Since the Deutsche–UBS deal had both public and private bonds, the question came up whether an investor could buy both the public and private bonds. The answer was no. The reason is the investor who bought the 144A private bonds would have had more access to deal information than the public bond buyers. The concern is they could “use” that private 144A information to make a better decision on the public bonds. Since other investors who were buying only public bonds could not see the 144A information, that information advantage is illegal and is effectively insider trading.
Presumably this did not occur on the subject deal, and it is up to the investors and the issuers to police themselves to make sure the rules are followed. However, with this potentially serious conflict relating to disclosures, it seems like the structure used in the Deutsche–UBS should be improved on. Since at least some investors are demanding full disclosure, and we need the investor depth that the public markets can provide, something has to give.
Hopefully, the new Reg AB II rules that the SEC is working on will require the right disclosures for investors of all bonds but also protect the issuers against lawsuits regarding unreasonable disclosure liability. Also, there should be a few more public deals this year, so it will be interesting to see how other issuers address this potential conflict.
— — —
Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.
The SEC recently “re-proposed” for public comment proposed new rules for asset backed securitization eligibility that has come to be known as Reg AB II. These proposed rules suggest changes to the current securitization regulations and cover multiple reforms on everything from asset-level disclosures on both public and private deals, to the role of the rating agencies, to adding a risk retention requirement, and several other steps that would be required for issuers to sell asset backed securities (including CMBS).
The SEC initially proposed these changes back in April 2010. The two major trade groups (the MBA and CREFC) spent the summer of 2010 preparing a regulatory response that was submitted on August 2, 2010.
Since that time, the SEC has stayed basically silent on this issue. The only reports I heard were they wanted to wait until after the risk retention rules are finalized to implement the rest of the securitization changes. In the “re-proposal” the SEC made it clear it was sticking with asset-level disclosures, but they also stated no final decision has been made regarding the specific data elements that will be disclosed.
Responses to the “re-proposed” rules are due to the SEC by October 4, 2011. Both the MBA and CREFC plan to submit responses. However, since the “re-proposal” does not specifically ask many new questions regarding CMBS, both trade groups are basically just re-submitting what they stated last August.
It looks like the risk retention issues will be finalized this fall, and the SEC wants to be ready to release the remaining securitization changes shortly thereafter. The fact that they have “re-proposed” their rules suggests that we may finally get clarity on the SEC’s vision of CMBS 2.0.
— — —
Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.
https://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.png00jimflahertyhttps://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.pngjimflaherty2011-08-29 19:17:282020-09-16 19:18:40Reg AB II Movement
10 Years On and Rocking
/0 Comments/in What's going on /by jimflahertyEvery year on September 11, I join most people in the nation and reflect on the terror attacks of that day. I was in New York Tuesday, Sept. 11, 2011 — and I witnessed the destruction firsthand. I was blessed that the meeting I had scheduled for 8:30 a.m. in Tower One at the Windows on the World restaurant, where no one survived, was changed to a 10:30 a.m. meeting in Suite 2243. Of course, that meeting never happened.
Never forget.
This year, I spent 9/11 at home with my family, and we spent most of the day watching all the remembrance shows. The 10th anniversary coverage was nonstop. I let my two kids (12 and 10) watch as much as they wanted, and they took me up on it.
We shared the day asking some pretty deep questions and talking about the important things in life. The stories that I most related to were the ones where the person survived through random luck.
There was the Boston flight attendant who was left off one of the hijacked planes because of a last minute scheduling mix up. A group of fire fighters was in a tower when it collapsed but survived because the stairwell they were in somehow didn’t get crushed. And countless random people like me who contemplated meetings or trips that would have put them directly in harm’s way and for whatever reason the plans changed. Why?
One World Trade Center
The new New York skyline.
I traveled to New York on Monday the 12th and had a chance to check on the construction progress of One World Trade Center. I couldn’t get close to the memorial because reservations are booked months ahead. But, the office building is huge and is already starting to dominate the skyline. It will be nice having the tallest building in the United States back in New York.
Rockin’
Wednesday night the 14th, Metallica played at Yankee Stadium as part of a heavy metal show featuring the “Big 4” — An all day festival with sets by Slayer, Mega Death and Anthrax. with Metallica headlining the last set.
Sold out Yankee Stadium.
Lars Ulrich (the drummer who was great on Howard Stern this week if you heard it) is a friend from Marin, and he set me up with the whole VIP package (as usual – thanks Lars!).
We watched the show from all sorts of different angles: from Luxury Suite 1, from front row seats in section 29, and from the front of the floor next to the stage. They were all great, but my favorite place was the sound booth. It was set about 150 feet back from the center of the stage in an elevated, tented, fenced off area. They set up some seats behind the technicians where the friends of the band could hang and watch the show. The computers and screens looked like a space ship and it was cool to hear, feel and “see” the music.
As always, an epic show with an unbelievable set list and a crowd full of energy. One of the lessons of 9/11 was you only go around once, and the trip may be shorter than you like, so you better rock!
— — —
Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.
www.cmbs.com
First Public Deal of CMBS 2.0 Highlights Disclosure Issues
/0 Comments/in Industry news /by jimflahertyThe CMBS deal recently priced by Deutsche Bank and UBS was the first deal since the market crash to include publicly registered bonds (all other post crash securitizations issued private bonds using the 144A Rule).
This is a big deal. Most people agree that for the CMBS market to truly recover, we have to issue public bonds — because so many potential investors are limited to only buying publically registered bonds.
The Deutsche-UBS deal issued public bonds for the top 70% of the deal and private 144A bonds for the bottom 30%. While the deal reportedly found good demand for both the public and private bonds, the structure of the deal highlighted the fact asset-level disclosures were different for the public bonds versus the private bonds.
Since the crash and because all deals were 144A, the investors have been allowed to see and review sufficient asset level data to re-underwrite the underlying loans. This data has included appraisals, rent rolls, historical financial information, and issuers’ underwriting models. However, since the investors were typically operating under a confidentiality provision that is typical in private deals, the issuers were not worried about disclosing the information and conducting specific Q&A sessions with potential investors to answer asset-specific questions.
Issuing public bonds carries a much higher liability standard for issuers when it comes to disclosures. Information must be disclosed uniformly to all investors at the same time, and there is no ability for one investor to learn more about the assets than other investors. Also, if any information the issuer supplies to investors in a public deal turns out to be wrong or misleading, even if the information came from sources other than the issuer, the issuer can be held liable.
Since the Deutsche–UBS deal had both public and private bonds, the question came up whether an investor could buy both the public and private bonds. The answer was no. The reason is the investor who bought the 144A private bonds would have had more access to deal information than the public bond buyers. The concern is they could “use” that private 144A information to make a better decision on the public bonds. Since other investors who were buying only public bonds could not see the 144A information, that information advantage is illegal and is effectively insider trading.
Presumably this did not occur on the subject deal, and it is up to the investors and the issuers to police themselves to make sure the rules are followed. However, with this potentially serious conflict relating to disclosures, it seems like the structure used in the Deutsche–UBS should be improved on. Since at least some investors are demanding full disclosure, and we need the investor depth that the public markets can provide, something has to give.
Hopefully, the new Reg AB II rules that the SEC is working on will require the right disclosures for investors of all bonds but also protect the issuers against lawsuits regarding unreasonable disclosure liability. Also, there should be a few more public deals this year, so it will be interesting to see how other issuers address this potential conflict.
— — —
Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.
www.cmbs.com
Reg AB II Movement
/0 Comments/in Industry news, Industry standards /by jimflahertyThe SEC recently “re-proposed” for public comment proposed new rules for asset backed securitization eligibility that has come to be known as Reg AB II. These proposed rules suggest changes to the current securitization regulations and cover multiple reforms on everything from asset-level disclosures on both public and private deals, to the role of the rating agencies, to adding a risk retention requirement, and several other steps that would be required for issuers to sell asset backed securities (including CMBS).
The SEC initially proposed these changes back in April 2010. The two major trade groups (the MBA and CREFC) spent the summer of 2010 preparing a regulatory response that was submitted on August 2, 2010.
Since that time, the SEC has stayed basically silent on this issue. The only reports I heard were they wanted to wait until after the risk retention rules are finalized to implement the rest of the securitization changes. In the “re-proposal” the SEC made it clear it was sticking with asset-level disclosures, but they also stated no final decision has been made regarding the specific data elements that will be disclosed.
Responses to the “re-proposed” rules are due to the SEC by October 4, 2011. Both the MBA and CREFC plan to submit responses. However, since the “re-proposal” does not specifically ask many new questions regarding CMBS, both trade groups are basically just re-submitting what they stated last August.
It looks like the risk retention issues will be finalized this fall, and the SEC wants to be ready to release the remaining securitization changes shortly thereafter. The fact that they have “re-proposed” their rules suggests that we may finally get clarity on the SEC’s vision of CMBS 2.0.
— — —
Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.
www.cmbs.com