GRAPEVINE, TX—Whether your CMBS loan is performing or not, you need to understand each of these six truths! Or be ready to play truth or dare later!

Truth #1: There are many possible ways you could lose control of all the cash for your property.

Most CMBS 2.0 or greater loan documents have “springing cash management” provisions, meaning the master servicer can trap all of your cash when certain triggers have been tripped. And many of these traps are not in your control. For instance, the DSCR trigger is often based on the servicer's calculation of DSCR, which can include market vacancy (regardless of the property's actual vacancy); market rents (regardless of actual rents in place); or the lesser of market vacancy, underwriting vacancy or actual occupancy. So, even if the actual DSCR is '”fine,” your cash can be trapped based on the servicer's calculation of the DSCR. To make matters worse, all net cash flow is often used to build up a reserve account or pay down the principal balance; all resulting in zero cash for the actual owner. This is particularly crippling for hotel loans where the borrower loses necessary funds to operate the hotel.