Diana Reid is in the thick of things when it comes to the quagmire of commercial real estate financing. Reid is executive vice president of PNC Real Estate, a division of Pittsburgh-based PNCServices Group.
She heads up commercial real estate for the $271 billion bank, including the lending portfolio; specialty programs such as agency financing and low-income housing tax credits; and Midland LoanInc., which is PNC's loan servicing and technology company.
These days Reid and her management team have their hands full helping clients deleverage and find better servicing solutions, as well as creating new financing products. “While there are many challenges today, PNC Real Estate's value is to understand the changing marketplace, anticipate our clients' needs and find new solutions and opportunities,” says Reid.
One big issue for Reid and the commercial real estate industry is the continued turmoil in commercial mortgage-backed securities (). The capital source remains virtually frozen, while delinquencies on existing CMBS loans hit a high of 5.42% in February, according to Moody's Investors Service.
Reid keeps close tabs on events unfolding in the CMBS market due to Midland's role in that niche. Midland is one of the top loan and special servicers for the commercial real estateindustry and CMBS accounts for half of its volume. At the end of 2009, Midland was servicing 14,916 CMBS loans with an outstanding principal balance of $145.5 billion. Reid also serves on the board of governors for the Commercial Mortgage Securities Association.
Reid and her peers are grappling with what the “new” CMBS will look like once the sector rebounds. She says the key lesson is to use less leverage. She predicts that the CMBS model that ultimately emerges will include the best practices of the past and adopt new accounting rules and greater regulatory oversight.
“Both the ratings agencies and investors will require less leverage and look to cash flow in place to support the securities,” Reid says. “I would also expect there to be changes in the control over modifications and workouts to loans held in the securities trusts.”