Greg Winchester, md at TriMont Real Estate Advisors, answers SCI's questions

Q: How and when did TriMont Real Estate Advisors become involved in the CMBS market?
A: The company began in 1988 as Hatfield Philips, focusing on special servicing predominantly related to the thrift crisis in the US. We'd become the largest Resolution Trust Corporation contractor in the Southeast by the early 1990s. We then developed a large primary servicer and asset management business, with Lehman Brothers as the principal client.

In 2003 my colleagues John Charles and Ernest Davis and I purchased the North American operations of the business and renamed the company TriMont Real Estate Advisors. We've since transformed it into a multi-client company and are now involved with over 90 clients, which tend to be major global banks, insurance firms, private equity funds, real estate investment managers and government-related entities.

The company provides a variety of services, but our core competencies are special servicing, primary servicing, asset management, underwriting and due diligence services, and information management and reporting services. We also provide defeasance services, as well as operating advisory in the public finance, military housing and CMBS sectors.

We're headquartered in Atlanta, but have offices in Irvine, California, New York and the Netherlands. Our coverage extends to the rest of Europe and the UK, as well as Canada, Mexico and the Caribbean.

Q: How do you differentiate yourself from your competitors?
A: TriMont differentiates itself by providing a servicing and asset management platform, yet we think like an investor. We're a high-touch provider of customised services and solutions for complex deals.

The company is also the only true major independent special servicer in the CMBS industry. We're privately owned and don't invest in B-pieces or originate loans, so there is no competition with clients and we're more aligned with bondholders' interests. This absence of conflict will only increase in value to investors over time.

We're rated as a primary servicer, a special servicer and a construction servicer. Our experience in repositioning deals and construction loans is unique.

In addition, none of our peers can handle large, syndicated club deals for agent banks. The Plaza Hotel in New York is one example where we worked with a consortium of 12 lenders to convert the property into a mixed-use portfolio.

Other differentiators include our roots in special servicing, which go back almost 25 years, and the long tenure of senior management. The company has resolved over US$10bn of distressed debt in the last 10 years and has sold over US$4bn in REO.

Finally, we pride ourselves on our leading-edge technology. We provide custom-built portals for clients to access our property database and state-of-the-art reporting on their entire portfolio.

Q: What are your key areas of focus today?
A: TriMont has been involved with 49 CMBS transactions - representing US$54bn across 3700 assets - as a primary servicer, special servicer or operating advisor. The next 3-5 years in North America will be good for special servicers, especially in connection with small balance loans and REO properties, which banks are expected to increasingly begin shedding.

There is also a substantial opportunity to assist new CRE lenders and investors, helping them to get up and running quicker at a variable cost and based on best practices. They could be acquirers of pools of performing, non-performing or REO assets, or a mixture of all three.

The company has so far been mandated by 20 different European financial institutions, for example, to service their commercial real estate debt. UK and Irish banks, in particular, have been unloading their non-core portfolios. These are typically good-earning assets and were able to sell at a decent price, so the loss severities weren't as bad as those seen for Spanish assets say.

I expect a gradual, orderly increase in the number of European institutions unloading European assets this year and next. Whereas there were three major transactions last year, we'll probably see six this year and possibly more in 2013.

Another area of opportunity is construction in the US, for well-conceived projects. Lending remains highly selective: there is plenty of available credit, but not enough of the right projects to invest in.

Q: What major development do you need/expect from the market in the future?
A: The special servicing industry has improved over the last 24 months. Many servicers weren't adequately staffed, but they are now fully ramped up. While lack of experience may have been an issue initially, the volume of loans in special servicing has been so intense that the necessary skills were gained quickly.

Nevertheless, increased reporting and transparency around special servicer fees would be helpful for investors. PSA language could also be improved. 'Double-dipping' of special servicing fees, affiliate transactions and fair value market purchase options are legacy issues mostly confined to the three major special servicers, which need to be addressed.

Another positive development would be for more B-piece buyers to consider using independent special servicers and thus distance themselves from conflicts of interest. Some B-piece buyers aren't rated as special servicers, for example. In addition, independent special servicers who are not master servicers with competing origination platforms should be considered.

In terms of the CMBS new issue market, there needs to be better adoption of reform. GSE issuance is helping to clarify standards and the roll-out of CMBS 2.0 has made a significant difference. Smaller, simpler structures and stronger underwriting are huge pluses for the sector.

Underwriting excellence should be pursued and recognised. I'm not sure if changes related to the selection of rating agencies are sufficient and should continue to be discussed by the industry.

Ultimately, the market has and will continue to diverge into CMBS 2.0 and legacy trades. We're already seeing differentiation in terms of how the market views the credit quality of these two types of bonds.

CS