Officially released in May, the new commercial/multifamily property inspection form from the Mortgage Bankers Association (MBA) will standardize a sometimes convoluted process – obtaining data on asset performance and providing that information to investors and other involved parties.
Access to property information that is both meaningful and easy to understand has become increasingly important in the current environment of market uncertainty and greater reliance on technology, noted industry executives who spoke at the recent Mortgage Bankers Association Commercial/Multifamily Servicing and Technology Conference in Chicago.
‘The form modification evolved out of a lot of industry players sending inquiries to the MBA for enhancements or changes,’ recalled Clare C. Dooley, senior vice president at Capmark Finance Inc. and a member of the Commercial Real Estate/Multifamily Finance Servicing Committee's Property Inspection Review and Revision Working Group.
In response to these requests, representatives from the government-sponsored enterprises (GSEs), Commercial Mortgage Securities Association (CMSA), servicers and life companies collaborated for over two years to develop the new Excel-based form. Suggestions obtained through requests for feedback from the industry at large also led to numerous revisions, added Dooley.
Perhaps most importantly, the form – whose usage will become mandatory in January 2009, provided that a firm's technology allows for its implementation – is designed to allow for consistent reporting and effective data comparison across an entire portfolio of properties.
Contract-level agreements and other servicing agreements – as well as prevailing requirements from CMSA, the GSEs and others – may mandate the inclusion of certain extra data sets. Certain core elements, however, remain the same across the board, noted Jeff Markey, principal at AMS Real Estate Services. These areas are reflected in the new inspection form's general information tab, physical condition tab, photo tab and deferred maintenance tab.
The theme of user-friendly consistency and efficiency extends to {OPENADS=zone=41&float=right}seemingly minor design details on the new form, the panelists noted. Font styles and sizes, for example, are locked in order to promote MISMO compatibility.
In the old MBA property inspection documents, field inspectors would frequently reduce the font size to fit excessively long comments or enlarge the text to make sparse comments appear longer, remarked Jim W. Evans, chief operating officer at Strategic Property Associates/Strategic Asset. Such modifications might prevent data from fitting properly outside the form's original entry field.
Elsewhere in the form, strategic tabbing, auto-population of duplicate information in separate fields and a reduction in the number of required calculations are all intended to minimize the amount of unnecessary typing and clicking, as well as lower the chances of human error, he added.
After the fields have been filled, the comments have been recorded and the property photos have been attached, inspectors will assign ultimate property ratings based on a numerical scale that was very ‘deliberately’ instituted in response to shortcomings in earlier words-based rating scales, said Katie Schwarting, counsel at Powell Goldstein LLP.
Upon examining old inspection data – covering over 55,000 assets – the inspection form committee discovered that a certain property rating was popular to the point of losing meaning. ‘There was an overabundance of 'good,'’ Schwarting noted. ‘We felt that it was becoming a catch-all.’
Consequently, the committee devoted a great deal of time to deciding on the number of items to be included in the rating scale and whether anything resembling the general 'good' concept should even be included again. The new form features a scale of 1-5, with a rating of 1 generally designated for a Class A trophy property in excellent condition.
‘Essentially, any property with deferred-maintenance items can't get a 1 or 2 rating,’ explained Markey. ‘If you have deferred maintenance, it's a 3 rating or below.’ If action is currently being taken on a serious and potentially life-threatening maintenance issue, a rating of 4 is likely, while a significant safety issue not being addressed will earn a property a 5.
Commercial servicers and their partners are encouraged to further familiarize themselves with the new form before making the switch.
‘It's very important that the industry focuses on review of the new form and the reference guide in conjunction with each other,’ urged Dooley. ‘We ask that you thoroughly review them – and your current processes – and make the necessary adjustments so that you can utilize the recommendations, as well as best practices that we've outlined in the reference guide.’
CA: 225 ARIZONA AVE, SANTA MONICA
WHAT: 225 Arizona Ave. is a 28,000 square-foot office building with ground-floor retail on Third Street Promenade.
WHO: Nebo Capital arranged the loan for the original developer and long-term owner of the property.
$$$: $8.5 million.
TERMS: Financing consists of a seven-year, nonrecourse, fixed-rate refinance loan that will be serviced by the originating lender.
Nebo Capital: (323) 932-8400.
MA: BOSTON HARBOR GARAGE, BOSTON
WHAT: The Boston Harbor Garage is a 1,380-space parking garage with 30,000 square feet of street-level retail. The property is located at 70 East India Rd., adjacent to the New England Aquarium and along the Rose Kennedy Greenway, a recently created boulevard with a series of parks linking several urban neighborhoods.
WHO: The Boston office of Holliday Fenoglio Fowler LP (HFF) arranged the financing on behalf of a joint venture between the Chiofaro Co. and Prudential Real Estate Investors.
$$$: $85 million.
TERMS: The five-year loan carries a fixed rate.
HFF: (617) 338-0990.