PR Newswire - Press Release
Reliable Defeasance Completes More Than 50 Transactions Valued at Nearly $1 Billion in First Six Months of Operation
09.05.07, 12:56 PM ET
 

LOS ANGELES, Sept. 5 /PRNewswire/ -- Reliable Defeasance LLC, which began servicing the commercial mortgage market earlier this year, has gone from a start-up to a major player in the industry, having completed more than 50 transactions valued at nearly $1 billion in the past six months.

Reliable's fast-track growth can be attributed to the high level of transparency it brings to a process that had previously been opaque. As the company's name suggests, it assists commercial mortgage borrowers with defeasance -- a process that helps mortgagors leverage their holdings by substituting securities for the original real estate collateral.

Defeasance transactions are complex, yet Reliable has been able to close deals in as little as two days, while executing the transaction in the most cost-efficient manner for the client. This is accomplished through a carefully managed bid process and coordination with rating agencies, accountants, custodians, attorneys, trustees, successor borrowers and other parties.

Reliable has further transformed the defeasance market by developing innovative products that unlock value in deals that was previously unrealized by borrowers. One such product offers clients the ability to monetize some of the expected residual float and prepayment values at a predetermined discount rate, which can mitigate the borrower's overall transaction costs.

Reliable also offers a portfolio rate-lock, which offers the same advantage as a loan rate-lock. By locking in a portfolio price 30 to 60 days in advance, at minimum cost and no mark-to-market pricing, the borrower can predict the securities portfolio cost and the defeasance can proceed with no interest rate risk.

Stewart Wolmark, principal of Reliable Defeasance, credits the firm's enhanced disclosure and its ability to orchestrate efficient defeasances as driving the early traction for Reliable. "We have become true advocates for the customer by providing them with timely and economical defeasances. We provide a new level of clarity," he said.

Borrowers with conduit mortgages have responded well to Reliable's product lineup, including individual borrowers as well as large organizations with sizeable holdings, such as REITs. Portfolios have included all types of real estate, from multifamily housing and hotels to shopping centers and commercial office buildings. Among the properties represented in these portfolios is a $400 million Class A office building in New York, for which Reliable's superior securities pricing saved the client $900,000. Other notable real estate assets involved in transactions defeased by Reliable include a premier West Coast hotel property, a luxury boutique hotel in New York, and a major shopping mall in the southern United States.

"Although currently there is volatility in the CMBS market, it remains dynamic. A relatively low interest rate environment presents an opportunity for commercial mortgage borrowers to leverage their existing real estate holdings in order to acquire additional properties or redirect capital via a cash-out refinancing," said Mr. Wolmark.

"But as many commercial loans are packaged within CMBS loan pools, existing loans typically can't be prepaid early. Defeasance enables the borrower to refinance the debt and unlock equity in the property with no adverse effect on securitization because interest and principal payments are made uninterrupted," he added.

In order to ensure full disclosure and to obtain the best value for the customer, Reliable does not have any special arrangements or preferred vendors, rather it works with all major servicers -- including Midland, Capmark, Wells Fargo, Wachovia Bank, Bank of America, and KeyBank. In addition, Reliable has collaborated with the country's top law firms, accounting firms and rating agencies on CMBS defeasance deals.

Reliable is staffed with financial industry veterans whose experience not only ensures that clients receive the greatest value through a smooth and cost-efficient defeasance process, but also provide unparalleled insight into interest rate and swap markets transactions, shadowing and securities pricing. The team has a long history of working with real estate developers and borrowers, corporations, Wall Street firms and other financial institutions.

"Reliable Defeasance also acts as a 'buy-side' trading desk for our clients to ensure best execution and validate market pricing on their securities portfolios," said Eric Ridel, Business Development Manager for Reliable Defeasance.

"While the CMBS market continues to expand, it is underserved in the area of defeasance. We think there is significant value to be added to this process that mortgage borrowers are not capturing," explained Mr. Ridel.

A good reflection of the knowledge and depth of the team at Reliable Defeasance is that it is one of the only firms to have successfully facilitated the closing of a Fannie Mae defeasance -- which like CMBS defeasances are complex, yet governed by even more rigid procedures. "Fannie Mae defeasances are largely an unknown commodity in the industry and we are helping to formulate a blueprint on how to get them done the right way. This is undoubtedly a welcome development for CMBS borrowers," said Mr. Wolmark.

For more information on Reliable Defeasance, call 310-728-1123.