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Real Estate

Real Estate. Class 3: Debt, Mortgages, CMBS. Review. Angus Cartwright Elements of the pro-forma Foundations of the recommendation Scenario analysis Dynamics of Real Estate Markets Capture more than scenarios Integrated macro-economic models. Mortgage Debt . Mortgage as a pledge

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Real Estate

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  1. Real Estate Class 3: Debt, Mortgages, CMBS

  2. Review • Angus Cartwright • Elements of the pro-forma • Foundations of the recommendation • Scenario analysis • Dynamics of Real Estate Markets • Capture more than scenarios • Integrated macro-economic models

  3. Mortgage Debt • Mortgage as a pledge • Promissory note admits debt and makes borrower liable. • Mortgage pledges property as security. • Default on note gives an option to lender. • Why is a mortgage a useful tool? • What is security? • What makes a property good security? • Debt effects • Maintenance motivations

  4. Default • Breach of contract • Failure to pay • Failure to comply with contract • Foreclosure • When and why is this attractive? • Reasons for breach: • Macro vs. micro reasons • Liquidity

  5. CMBS • Pooling of commercial mortgages • Senior, subordinated and residual tranches • Baloon payment/refinancing risk

  6. No Default

  7. Default

  8. Chen and Deng • Focus on Workout • Long process from delinquency to foreclosure. • 144 CMBS

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