RCA in the commercial property press:

'Sickly' Market Sparks Commercial Mortgage Feud

Forest Grove News-Times reports: In the CMBS dispute, middle ground has been elusive. Investors harbor suspicions of servicers' agendas since many hold the riskiest portion of bonds that could lose big in liquidations but retain some value under their proposal.

Servicers must show that loan extensions or the proposed mortgage assumptions will leave bondholders better off than a foreclosure and distressed sale. Total losses on liquidated loans have surged to 73 percent this year from 34 percent in 2008, according to Credit Suisse.

Investors contend servicers cherry pick data to make their case for a solution that is best for all parties.

"It's a serious conflict," said Precilla Torres, a managing director at NewOak Capital LLC in New York. "But at same time, the special servicers take very, very seriously their fiduciary responsibility of maximizing present value."

What's more, the rout in mortgage debt has already pummeled the holdings, known as B-pieces, of these servicers, she said.

Servicers "know that their analysis has the potential to be scrutinized during a lawsuit," Torres said. "They are not going to risk (lawsuits) for a B-piece that is already toast."

One of the largest servicers, Midland Loan Services, is not an investor but still sides with its industry, an investor said. Midland declined to comment.

The urgency of a solution is palpable. Commercial property sales totaled $9.2 billion last quarter, compared with $47.8 billion a year earlier and $133.4 billion for the same period in 2007, according to Real Capital Analytics.

"The market is looking very sickly," said Peter Slatin, editorial director at Real Capital Analytics.