First American Corporation (new) · NYSE:FAF
First American Corporation (new) — First American — Buyer Beware or Full Steam Ahead webinar hosted by 1st Service Solutions (May 2016)
22 slides from First American Corporation (new)'s conference presentation, May 17, 2016
Slide 1: Buyer Beware or Full Steam Ahead
BUYER BEWARE OR FULL STEAM AHEAD WEBINAR HOSTED BY 1ST SERVICE SOLUTIONS
Slide 2: Agenda
AGENDA CMBS Structure Overview 5 minutes CMBS Maturities & Borrower Options 20 minutes CMBS 2.0 Loan Document Terms 15 minutes CMBS Trends 15 minutes ▸ Oil affected properties ▸ Assumption conditions on newly originated loans ▸ Dodd Frank risk retention 2
Slide 3: CMBS Structure
CMBS STRUCTURE
Slide 4: Parties in a CMBS Structure
Loan Funded Borrower Lender Investment Banking Firm Creates Pool Loan contributed to Pool Rating Agencies Bonds are rated: AAA AA A Rated Master Servicer is assigned to Pool Bonds are Sold Bonds are sold: Investment Grade “B pieces” Special Servicer is Assigned B piece owner becomes Controlling Clas
Slide 5: Effect of Losses on Special Servicers
EFFECT OF LOSSES ON SPECIAL SERVICERS Current CCR appoints special servicer Losses hit lowest tranches of bonds first As losses wipe out a class of bondholder, CCR changes Original Face Current Amount of Losses Amount of Bond Bond Example AAA 50 — 50 $100 pool AA 20 — 20 A 10 5 5 (CCR) BBB 10 10 0 B
Slide 6: CMBS Maturities
. CMBS ~~ MATURITIES
Slide 7: Maturities
MATURITIES 2015 maturity payoff rate = 85% ▸ Higher than expected ▸ Low interest rate environment ▸ Abundance of high leverage capital 2016 maturity volume = $80 billion ▸ Morningstar anticipates a payoff rate of 65 – 70% 2017 maturity volume = $103 billion ▸ Morningstar anticipates a payoff rate of
Slide 8: Loan-to-Value Ratios: 2016 and 2017
LOAN-TO-VALUE RATIOS: 2016 AND 2017 8
Slide 9: Current Debt Yield: 2016 and 2017
CURRENT DEBT YIELD: 2016 AND 2017 9
Slide 10: Borrower Options
BORROWER OPTIONS Payoff ▸ Refinance ▸ Sell Extend ▸ Cost ▸ No pretending ▸ Length of time ▸ LTVs that qualify Negative Equity ▸ Discounted payoff ▸ Short sale Hand Property Back 10
Slide 11: Maturity Date Extension
MATURITY DATE EXTENSION Performing loans only Borrower must make pay down at time of extension (Typically 10%) Cost = 1% per 12 month extension All PSA’s have outside date for extensions (Typically 2 - 3 years) 11
Slide 12: Maturity Date = Payoff Date
MATURITY DATE = PAYOFF DATE Defeasance Open Period Forbearance Extension 30 - 90 Days 60 Days 12
Slide 13: CMBS 2.0/3.0 Loan Documents
sf _CMBS 2.0/3.0 — LOAN DOCUMENTS
Slide 14: CMBS 2.0 Loan Documents
CMBS 2.0 LOAN DOCUMENTS Calculation of DSCR ▸ Springing cash management if DSCR drops below 1.5 for 2 consecutive quarters - BUT DSCR calculation is made by servicer and they can normalize rental income, management fees, etc. Material Lease Definition ▸ Flexibility only Late Fee ▸ Applies to balloon
Slide 15: CMBS 2.0 Loan Documents (Continued)
CMBS 2.0 LOAN DOCUMENTS (Continued…) Environmental Issues ▸ Upon lender’s request and for no reason, borrower has to get a phase I Modifications at Securitization ▸ Borrower is agreeing to modify its loan at securitization so the lender can get the highest proceeds at securitization and they are agr
Slide 16: Trends
———e- eee TRENDS
Slide 17: Impact of the Decrease in Oil Prices
IMPACT OF THE DECREASE IN OIL PRICES The closer you are to the drill, the more sensitive your job is to the price of oil To date, the majority of job losses have occurred closest to the oil fields ▸ By November 2015, 250,000 jobs were lost globally in the energy sector ▸ Over 45,000 jobs lost in the
Slide 18: Energy Market Exposure
ENERGY MARKET EXPOSURE Houston: 1,280 loans, $17.4bil | Oklahoma City: 117 loans, $1.2bil | Tulsa: 81 loans, $734m ▸ Exposure in these markets ranges from 40% to 50% multifamily and 15% to 25% office North Dakota has $698.6 million in CMBS exposure with 19% of those loans either delinquent or specia
Slide 19: Assumption Conditions / Reserves
ASSUMPTION CONDITIONS / RESERVES TI-LC Needs Through Maturity ▸ Assume 60% renewal rate ▸ Market TI-LC costs DSCR ▸ 6-12 months ▸ Based on trailing 12 month NOI Cash Management ▸ In place today ▸ Sprung ▸ Buyer past credit history 19
Slide 20: Example
EXAMPLE Retail deal originated 11/2015 Maturity date 11/2025 Minimum TI, LC reserves required at origination due to low LTV Borrower is selling his property and buyer is assuming existing loan Servicers will re-look at reserves accordingly ▸ Total square feet rolling between now and 11/2025 ▸ Assume
Slide 21: Dodd Frank Risk Retention
DODD FRANK RISK RETENTION The new risk retention rules mandated by Dodd-Frank will require issuers to retain a 5% slice of a CMBS transaction ▸ If the risk retention is sold to a third-party investor ▸ The buyer must hold that piece for five years ▸ The buyer must finance the risk retention with cas
Slide 22: Contact Us
CONTACT US 1stsss.com Ann Hambly Founder & CEO Phone: (817) 756-7220 [email protected] 22