More Commercial Real Estate Owners See Value in Special Servicing Platforms
The approach has its critics, who say the setup creates the potential for conflicts of interest
“The relationship between borrowers and special servicers has largely been adversarial in the three-decade history of the CMBS market, but some of New York’s best-known landlords are finding opportunity in adding special servicing to their offerings.
[…] Shlomo Chopp, a commercial real estate restructuring veteran who is managing partner of Case Equity Partners, said that owner-operators entering special servicing is a “net positive” for achieving maximum recovery since they understand the properties and tenants enough to make real-time decisions rather than relying on appraisals. He noted that having a special servicer with “operational expertise” is especially critical in today’s market, where CMBS leverage has become higher with little margin for error.
Chopp stressed that the power of special servicers is often “overstated” given structural changes to PSAs that limit “actual” control with bondholders having far more influence. He said while there are opportunities for firms to attract fee revenue from special servicing, the market opportunities are largely limited and won’t likely lead to many others copying RXR.
“It takes a long time to go through the ratings agency process to launch a special servicing platform, but I do think you’ll see some acquisitions,” Chopp said. “There are so many better ways to make money in the CMBS space, but this is a good fee generator.”