questions & answers with some of our key...

Q&AQuestions & Answers with Some of Our Key Speakers

Table of Contents

Introduction .....................................................................................................................Page 3

Daniel Rodrigue, EVP, National Head of Sales, Bibby Financial Services, Inc. .......................................................................................Pages 4-5

Doreen L., Hoffman, Partner, Brock & Scott, PLLC ................................................Page 6

Robert Draper, SVP & Manager-Special Credits North, Columbia Bank ............Page 7

Don Shapiro, President/CEO, Foresite Realty Advisors .........................................Page 8

Jeffry Mullins, Managing Director, Stabilis Capital Management, LP .................Pages 9-10

John Tishler, Partner, Waller Lansden Dortch & Davis, LLP .................................Page 11

Event Information ...........................................................................................................Page 12

• What happens to retail when Amazon is building storefronts and Walmart is buying “e-tailers”?

• Will SBA lenders and regional banks have a larger role to play in the commercial space?

• What happens if the wave of CMBS defaults triggers housing defaults?

• How are regulations helping or hurting the banking sector? What regulation do you wish we had? What regulation do you wish we could get rid of?

• What question do you wish you were asked?

Organized by:

IMN’s 7th Annual Bank Special Assets & Credit Officer’s Forum (Midwest) will take place in Chicago on September 7-8, 2017. The forum continues to be the only place where Special Assets, Credit, Loan Review, Risk Management, Special Servicers & C-level executives can meet to discuss the latest credit and workout issues.

In the current economic climate, many are expecting the imminent return of Special Assets desks. Pairing today’s uncertainty with two impending rate hikes and the sound of alarms in the CMBS market, Investors, Asset Owners and Bank Executives have no choice but to put a plan in place.

Being the only conference that brings together local, regional and international banks, as well as a wide array of sector specialists, the Bank Special Assets & Credit Officer’s Forum is the premier venue for education, networking and deal-making in the Special Assets space.

We asked some of our key speakers about their thoughts on the state of the industry and where they expect it to go in the near and not-so-near future.

This is what they had to say…

www.imn.org/chicagobankers | [email protected] | (212) 901-0542

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Aanswer

Qquestion

What happens to retail when Amazon is building storefronts and Walmart is buying “e-tailers”?

For the foreseeable future there seems to be a place for retail due to the consumer landscape. Some consumers prefer the convenience of online/e-commerce shopping, and there are others who value the personal shopping experience so they can see, touch, smell, feel the product. According to the National Retail Federation, 98% of retail companies in the US are small businesses, so it is especially imperative that they work to adapt their business plans for e-commerce. They key is that these retailers can still run a successful business by focusing on their customers’ needs. Consumers drive trends and trendsetters drive business.

Will SBA lenders and regional banks have a larger role to play in the commercial space?

The obvious answer is yes, they should play a larger role by working to provide the right funding or advice to clients about every option available to help these businesses grow and thrive. Our economic growth is dependent upon growing small and medium sized businesses and we all – SBA lenders, bankers, and commercial finance firms – can have a part in that great success which provides jobs to our local economies and supports our communities. Finding ways around obstacles and guiding the client to the right solution for their needs gives the business owner hope and creates a relationship that extends beyond price and product.

What happens if the wave of CMBS defaults triggers housing defaults?

Everyone would definitely hope that CMBS defaults don’t bleed over into another housing default rise. The challenge with CMBS is that they are usually a tie into the business owner’s personal assets and there is likely to be some correlation. When the retail landscape changes, it is possible that there will be too much available commercial real estate and the challenge, amongst others, will be filling those spaces. If that should happen there will need to be a solution to the job loss in the retail sector to help stem the potential housing defaults that could be triggered. The key is adoption to new business trends that may or may not be yet available.

DANIEL RODRIGUE EVP, National Head of Sales Bibby Financial Services, Inc.

Daniel Rodrigue continued onto the next page...

Daniel Rodrigue is the SVP, National Head of Sales at Bibby Financial Services. Rodrigue previously served as BFS’s head of sales for the Southeast region until 2013. He brings nearly two decades of experience driving sales for various financial platforms. Most recently, Rodrigue served as national sales director of TAB Bank where he was responsible for building their national sales team including a focus on transportation companies. Previously, he oversaw sales staff and

deal production for First Growth Capital’s factoring and asset-based lending divisions.


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How are regulations helping or hurting the banking sector? What regulation do you wish we had? What regulation do you wish we could get rid of?

Regulations do serve a purpose in that they ensure the trust of the public with the banking sector. Regulations are usually put into place for a reason and serve a purpose. However, the structure of regulations can make it cumbersome and difficult for companies to find a lending solution. Regulations help to tighten the credit box and that may mean banks should be looking to the commercial lending space for assistance in lending to some of the younger or more challenged clients due to the non-regulated nature of that industry. Regulations need to have the right balance of fair and equitable solutions so they don’t stifle a lender’s ability to help the businesses we are all striving to help, but also protect us all from the risks that lead to detrimental financial crisis. An overhaul of Dodd-Frank could be a good start.

What question do you wish you were asked?

I wish more SBA and Bank lenders would ask how they could partner with commercial finance companies to help clients together. Working on solutions that both parties could provide would allow for healthier businesses whose owners don’t feel left out in the cold when there isn’t a readily available, easy to find solution. Don’t be afraid to ask how we can help each other and improve the type and level of service provided to clients.

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DANIEL RODRIGUE EVP, National Head of Sales Bibby Financial Services, Inc.


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I believe that there will be very little change because online and brick and mortar retail are converging.


Yes, because the current administration has as a goal to promote small business and the free market.


I do not see this as a risk.

How are regulations helping or hurting the banking sector?

Regulations are welcome when they are simply explained such that compliance is efficient.


How would you handle conflict resolution? To mitigate the risk of expensive litigation, I think it very important to have an open mind in the initial communications when discussing with the opposition their version of the facts and the way in which they interpret the law. Equally I think it very important to discuss with the client my opinion and to establish a plan of action based on that and their expectations and ultimate goal.

DOREEN L. HOFFMAN Partner Brock & Scott, PLLCDOREEN L. HOFFMAN is a Partner of Brock & Scott, PLLC. Her primary responsibility is directing the Michigan office that has a focus in collection and litigation matters. She received her undergraduate degree from Michigan State University in 1982 and her Juris Doctor from Detroit College of Law in 1988. She is a licensed member of the Michigan State Bar. Doreen has also been admitted to the Federal Courts in the Eastern and Western Districts of Michigan and the Michigan

Court of Appeals. She is also a member of the National Creditors Bar Association, The Association of Credit and Collection Professionals, and the Michigan Association of Collection Agencies. Doreen has been published twice in Servicing Management for articles related to debt collection in the mortgage serving area and once in Mortgage Banking. She was also named a Top Lawyer in Metro Detroit in 2013.


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Aanswer

Qquestion


Retail itself will survive, but the future delivery channels will continue to evolve. Big box stores and malls will eventually fade away, along with the sales staffs.


Regional banks will become a slightly larger lender in commercial space as they find ways to grow their loan portfolios. However, the growth needs will also result in very thin pricing that does not adequately compensate them for the added risk.


Any large increase in multi-family defaults and subsequent foreclosures could trigger a housing bubble burst as rents will decline below the costs of ownership.


The overreaching effects of Dodd Frank are imposing significant costs to banks. The additional layers of compliance are making it difficult to effectively manage portfolios.


What makes Special Credits work so exciting for you?

ROBERT DRAPER SVP & Manager-Special Credits North Columbia BankMr. Draper is a 34 year veteran in commercial loan workouts and OREO liquidation. Throughout his career he has resolved in excess of $1B in non-performing assets. Presently he manages the Special Credits North Group for Columbia Bank, which is headquartered in Tacoma, Washington. Before joining Columbia Bank Mr. Draper was a Senior Vice President and Team Leader for Citizens Bank of Massachusetts. In this capacity he managed a commercial

real estate lending team in Boston, Massachusetts. Prior to that he was a Vice President and Group Manager with RECOLL Management, a subsidiary of Fleet Bank in Boston. RECOLL Management was charged with liquidated the assets from the failed Bank of New England.


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Aanswer

Qquestion


More and more bankruptcies in retail and more vacant space.


Not without credit enhancement.


First, the wave has not been what was expected to date. If you are speaking of Single family, there is still an issue, if you are talking about MF apartments…..lots of defaults.


This depends on the current administration’s changes to the laws put in place by the last administration. As well as how aggressive lenders get with their LTV’s, term, rate, int only, etc.


How long does the extended good cycle maintain itself and what events can cause it to turn around on the negative side?

DON SHAPIRO President/CEO Foresite Realty AdvisorsDonald A. Shapiro, President/CEO and Managing Member of Foresite Realty Partners, Foresite Realty Management plus its family of affiliated companies as well as its investment arm, Foresite Investment Holdings, has over 27 years of full-service commercial and multi-family residential real estate expertise with the following property types: office, retail, industrial, multi-family residential, hospitality, condominiums, student housing, self-storage, medical office, parking

garage, recreational properties, senior housing/hospitals, gas stations, manufactured housing and vacant land.

Mr. Shapiro’s experience includes the disciplines of court appointed receiverships (federal and state), asset/property management, investment (acquisition/ disposition), brokerage (leasing-both landlord and tenant rep), development, construction management and finance. In addition to leading the company’s strategic initiatives and overseeing all business aspects of the company, Mr. Shapiro spearheads the court appointed receivership, turnaround consulting and bankruptcy trustee practice. Don has overseen the growth of Foresite from 3 employees to over 140 in under 7 years.

Mr. Shapiro is a CPA who began his career in the tax department of Arthur Young. Mr. Shapiro is a 1985 graduate of Indiana University and holds a degree in Accounting/Finance.


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Aanswer

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Retail is going through an incredible transformation as consumers change the way they shop. It is not just millennials that are driving this change as the convenience of having goods delivered to your door quickly has incredible appeal. While many malls across the US have gone dark, the online competition has forced many mall owners to “reinvent” the experience of shopping to be more of a destination, offering food and entertainment as well as traditional stores. Revamping malls to appeal to consumers’ shopping, dining, and entertainment needs all at once appears to be catching on. We believe online retailing will continue its strong growth and there is too much brick and mortar retail that will need to be redeveloped.


They currently have a very large role in the space and we expect that to continue. Some regulators have been concerned about the amount of CRE on regional bank balance sheets but they are still going to be large players in the sector. Since the financial crisis and the shrinking of the CMBS market, many regional banks have filled some of that void. The government agencies have also had a substantial impact in CRE lending. We fully expect the agencies to continue to have a substantial role in lending.


We do not think that CMBS defaults would by themselves trigger housing defaults. There are several things that could cause CMBS defaults to move higher as well as cause housing defaults to move higher. A significant spike in the 10-year Treasury note, recession, increase in unemployment are just a few that could cause defaults to increase. Assuming however that it does cause substantial housing defaults, we expect the Fed to cut rates significantly and engage in substantial Quantitative Easing (QE) through mortgage and Treasury purchases and other measures.

JEFFRY MULLINS Managing Director Stabilis Capital Management, LPMr. Mullins is responsible for originating, analyzing, and monitoring investments in commercial and consumer loans and securities as well as senior secured debt facilities to middle market companies. He also advises on investment and hedging strategy for the $1.4 billion under management. Prior to joining Stabilis in January 2016, he led the sales, trading, and capital markets business for CRT Capital Group which focused on consumer and commercial loans and

securities, CLOs, and financing middle market specialty finance companies. Prior to CRT, he was head of the subprime mortgage and ABS trading desk at Jefferies and started and led the mortgage credit default swap business at RBS Greenwich Capital, where he was also head of the ABS and subprime mortgage trading business. Prior to these roles he was a Director for Banc One Capital Markets in Chicago focusing on structuring and trading of non-agency mortgages and esoteric assets. Mr. Mullins graduated with a BA from The University of Wisconsin-Milwaukee and an MBA from Marquette University.

Jeffry Mullins continued onto the next page…


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Increased regulation was put in place to protect our economy and markets from another 2008 crisis. We believe it has succeeded in curtailing excessive risk taking by major institutions. However, it has also made many of these institutions severely decrease the availability of credit to consumers and businesses. Many of these institutions will only lend to the largest and/or most pristine borrowers. This has led to a substantial increase in the number of firms in private lending, including Stabilis.

We believe the securitization market is an incredibly valuable funding tool. The risk retention rule in theory makes perfect sense as it makes originators and sponsors keep some of their capital in every deal. One of the drawbacks of this rule is that many companies cannot afford to keep capital in deals which slows their lending business, leading to less available credit. We would like to see some reform on the risk retention rule.


What is (are) the catalyst(s) that cause the CRE and C&I markets to correct?

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JEFFRY MULLINS Managing Director Stabilis Capital Management, LP


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Retail will continue its shift away from big box to online; but I do believe mixed use residential and retail will continue to be popular. I believe you will see more insolvencies by big box retailers/department stores.


They will be in control of a good bit of real estate as retailers go under (at least indirectly through their lien rights)


I’m not sure if a specific regulation caused this, or if it was just governmental policy, but I thought it was a mistake in our last recession not to allow some lenders (more than did) go under. I believe, economically, we did not get rid of poor performing/managed lenders and, as a result, whenever there is another downturn, they will be in trouble again. I think there’s a happy medium between “too big to fail” and “let the market take care of it.”

JOHN TISHLER Partner Waller Lansden Dortch & Davis, LLPJohn Tishler is a partner in Waller’s Finance & Restructuring Group. Hospitals, health systems and healthcare companies, along with their financial advisors and lenders, rely on John’s experience and perspective to lead complex strategic transactions. Whether working out financial arrangements made to organizations now facing financial difficulty or representing the boards of buyers or the boards of sellers of healthcare and other organizational assets, John delivers

creative solutions and strategic planning advice that address both immediate challenges and long-term objectives. With more than 25 years of experience and a tenacious commitment to achieving results, John offers clients options and answers that don’t come from a playbook. He served the firm as its chairman from 2008 to 2014.

An insolvency and restructuring attorney by trade, John deals comfortably in both the transactional and litigation arenas. His focus includes corporate insolvency/board advice, creditor’s rights, financial services, defaulted bonds, commercial litigation.

John’s experience handling high-profile, complex cases includes serving as lead counsel for the largest creditors in two of the largest retail bankruptcies filed in the United States (Service Merchandise and Kmart), submitting and confirming a Chapter 11 plan while representing the largest unsecured creditor in one of the largest home health/hospice bankruptcy cases ever filed (Intrepid Health Systems), assisting healthcare companies in buying assets (Sumner Regional Health Systems and Logan Regional Health System, for example), and helping clients through their own workouts and bankruptcies (Church Street Health Management, Crittenden Hospital Association and a large senior living company).


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Find out more...

Conference Venue

For more information, please contact Andy Melvin

at [email protected] or (212) 901-0542 or

visit the event website here.

The speakers featured in this e-Book will be joined by 250+ of their industry peers for 1.5 days of sharing insights, industry education and deal-making. Join senior executives from special assets, banks, turnaround advisories, law firms, loan purchasers/receivers, auctioneers and more as they convene at the JW Marriot Chicago on September 7-8.

Please visit www.imn.org/chicagobankers for more information.

JW Marriott Chicago 151 West Adams Street Chicago, IL 60603 USA

Phone: 312-660-8200

https://www.imn.org/real-estate/conference/Bank-Financial-Institutions-Special-Assets-Executive-Conference-Workouts-Midwest/

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