Commentary on Real Estate Finance: Special Servicers = special conflcits (click for article)

Monday, April 25, 2011

Special Servicers = special conflcits (click for article)

Although it is old news, the Wall Street Journal has chosen to write today about the inherent conflicts a commercial mortgage backed securities (CMBS) special servicer straddles between his obligation as a fiduciary to bond holders that hire them and their own shareholders that want to buy assets under the special servicer's management.

I have thought from the first special servicer acquisition by Cerberus (LNR) to the most recent one by Fortress (CW Capital) that they were lawsuit magnets if the new owners pursued this self-dealing, asset purchase agenda.

This group of investors, that also include Andrew Farkus (see article) and Berkadia (a JV between Berkshire Hathaway and Leucadia Insurance), are too smart for this litigation risk. They have bought these companies for other reasons, but I will be surprised if they ultimately get what they paid for.

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Rob McSween

Rob is co-founder and Managing Partner of MMI Advisors, LLC. From 2007 - 2008, he was Managing Director at Strategic Value Partners, LLC, a hedge fund based in Greenwich, CT. Based in Tokyo Rob oversaw investment in Asia, with primary focus in Japan and India. From 1993 - 2006, Rob was Sr. Managing Director at ING Group in New York, managing teams dedicated to loan origination, securitization, distressed asset restructure, loan trading, and funds management. At ING he formed and was Managing Partner for two real estate opportunity funds: ING Realty Partners, L.P. and ING Realty Partners II, L.P., which made investments of more than $2.5 billion from 1997 - 2005. Rob also directed acquisitions and asset management for ING's proprietary account of more than $1.4 billion in sub-performing/non-performing loans acquired from the RTC and other financial institutions. Prior to ING, from 1987 - 1992, Rob was Managing Director at Citicorp Investment Bank where he executed more than $6 billion in loan syndications. In 1991 he also formed Citicorp's Commercial Securitization Group, which in its early stages facilitated the distribution of performing and restructured sub-performing loans in rated, privately placed, two and three-tranche structures. Preceding his tenure at Citicorp, Rob was a real estate consultant and appraiser and held the Member Appraisal Institute designation (MAI) for ten years. Rob is a member of the Association of Foreign Investors in Real Estate (AFIRE) and served as its Chairman in 2003. He holds the FINRA Series 7 and 63 securities licenses and is affiliated with Cappello Capital Corp in Santa Monica, California, a registered broker-dealer. Rob received his secondary school education at Groton School and earned B.A. and M.B.A degrees from Tulane University.