Mastering Commercial Real Estate: Borrower Advocacy and Market Trends | Podcast

Location Cubed

Commercial real estate distress is complex, but borrower advocacy can turn confusion into clarity. With interest rates rising and property values shifting, many real estate owners are facing difficult decisions about their loans. In this episode of Weaver: Beyond the Numbers, Location Cubed, hosts Howard Altshuler and Aaron Grisz welcome Ann Hambly, founder and chief executive officer (CEO) of 1st Service Solutions, to discuss the borrower’s side of commercial real estate lending. Ann shares how her firm has supported borrowers through $38 billion in loan workouts and acts as the “patient advocate” of the real estate finance world.

Key Points:

• The role of the borrower advocate serves as a middleman for borrowers and lenders.
• It’s important to reevaluate property worth and loan structures to reflect current market conditions, anticipating shifts rather than reacting to them.
• Ann provides her perspective on the current interest rate environment, forecasting a predominantly flat rate landscape in the near future.

Ann discusses her journey, the evolution of her firm and how 1st Service Solutions provides creative, customized options for borrowers navigating distressed loans. From office buildings with underwater valuations to multifamily projects burdened by rate hikes, Ann helps borrowers and lenders reach practical resolutions, including extensions, rate modifications and in rare cases, discounted payoffs.

She explains how commercial mortgage-backed securities (CMBS) loans differ from traditional lending relationships and why special servicers often operate with limited flexibility. Ann sheds light on the complex role of controlling class representatives (CCRs) and the realities of negotiating behind the scenes. Though the structures may vary, she emphasizes that most stakeholders today prefer to “ride it out” rather than accept steep losses, at least until market clarity improves. “Navigating the intricate world of commercial real estate lending demands a nuanced approach and one that treats each case with the meticulous care it deserves,” explains Ann.

Also, Ann offers insights into today’s interest rate environment, relaying perspectives from the Commercial Board of Governors at the Mortgage Bankers Association. She anticipates a mostly flat rate landscape in the near term, which could influence refinancing decisions across asset classes.

While borrowers often avoid CMBS after a difficult experience, Ann notes that when offered more proceeds and lower payments, many ultimately return to the same tools and sometimes forget the lessons of the past.

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