WASHINGTON, DC-One doesn’t have had to attend the annual gathering of the CRE Finance Council, being held in Washington, DC this week at the JW Marriott Hotel, to understand there has been a sea change in the real estate capital markets. Conference attendees, though, are getting a glimpse into exactly how nuanced those changes have been.

On one hand, many lenders are still risk-adverse. “We would be hesitant to do anything below investment-grade for single-tenant properties,” said Paul T. Vanderslice, managing director, Citigroup Global Markets, “even though I think there are some good opportunities among the below investment-grade single-tenant properties.” On the other, it is surprising the range of deals that are getting done, said Jonathan Strain, managing director at JP Morgan Chase. “Deals in tertiary markets for example are not what I would have thought at this point in the cycle.”

Perhaps the area with the most varying shades of grey, however, is on the servicer side of the spectrum. Special and master services have been grappling with a range of issues--the result of upheaval in the capital stack among bondholders to a significant reengineering of new deals to the use of appraisals to affect change in control.

The end result of this mishmash of issues is a new class of CMBS, but perhaps not as advanced as the industry had been expecting, especially from the servicer perspective. “I think we are seeing CMBS 1.2 or 1.3--not 2.0,” said Stacey Berger, executive vice president with Midland Loan Services. “Really, the changes have been incremental and there have been some developments or features that are adverse for services such as excess fee reserves. These only serve to reduce servicer compensation at a time when there is additional pressure for higher performance.” And while most borrowers are not too concerned about servicer issues, bondholders clearly are, as ultimately servicers’ pressures filter down to the investors.

There have been positive advances, though, Mark Warner, managing director, co-head of investment grade CMBS trading for BlackRock, said. “The biggest change we have is the ability to vote for a change in control. It used to be that there would automatically be a sequential change in control. But now the most senior investors can and do call for a vote to change control.”

Senior bondholders have more tools at their disposal, Rick Schlenger with Citigroup Global Markets noted. It has been established that appraisal reductions, for example, can affect change in control. Also, the introduction of operating advisors have added some comfort level to the senior investors, he added.