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A Guide for CMBS Borrowers Seeking Forbearance

National  + Weekender  | 

CMBS master and special servicers already have started receiving forbearance requests from borrowers whose collateral properties are facing cash flow crunches, reports Trepp. If you’re facing this situation as a borrower, or expect to face it soon, the Commercial Real Estate Finance Council (CREFC) offers some advice. The trade group has gathered it into a quick guide on best practices; it’s available for download on CREFC’s website.

“CREFC’s dialog with constituents within the CMBS community have indicated that the following are best practices when submitting requests for relief due to circumstances brought about by COVID-19 impacts. First, required loan payments should continue to be made to the extent possible.” Second, says CFREC, “requests for relief must be reasonable and fit the circumstances of the property, loan structure, and borrower, as well as meet the credit requirements of the lender (‘servicer’) and the terms of the Pooling and Servicing Agreement for the specific CMBS trust.”

Key to communicating such a request is transparency, CREFC says. For starters, “Communicate directly with your servicer as expeditiously as possible according to the directions provided in the servicer’s communication, web portal, billing statements, payment advice, and/or other communications.” This communication should be done in writing.

Among other elements, the communication should include evidence of your operational capability, and provide a description of what steps you will take during the forbearance to protect and maintain the property, “in particular if you or any tenants are ceasing operations.” It should also disclose any significant issues, such as notice from tenants that they plan to forego rental payments.

“We strongly encourage borrowers to contact their servicer directly to begin a dialogue now,” said Lisa Pendergast, executive director of CREFC. “We are truly in unchartered territory… During this unprecedented global pandemic, CMBS lenders and servicers recognize that property owners may be experiencing major disruptions to cash flow and property operations.

“The good news is appropriate relief is available, as long as the requests are reasonable and meet the credit requirements of the lender,” she added.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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