http://www.staging.realert.com Commercial Mortgage Alert en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Wed, 22 Feb 2012 04:02:31 -0700 60 http://www.staging.realert.com/headlines.php?hid=155981 When developer Sheldon Solow began his search for a $625 million mortgage on his office building at Nine West 57th Street in Midtown Manhattan, the assignment seemed tailor-made for an insurance company: Extremely low leverage on a trophy property in a premier city. Yet Deutsche Bank ended up the winner, providing a rare example of a commercial MBS shop walking away with the type of loan that has been the domain of portfolio lenders since the market crash. How did Deutsche pull it off A confluence of events worked in its favor, according to people familiar with the matter. Among them: an aggressive loan quote; an ability to fund the mortgage in time to meet the approaching maturity date of the existing loan; and wariness among insurance companies about Solows combative reputation, leasing strategy and insistence on the option to put mezzanine debt on the property down the road. The bottom line: That unusual combination of factors suggests that Deutsches victory doesnt mean CMBS shops have suddenly become competitive with insurers for loans on trophy properties. But its good for CMBS to show that they can win one, anyway, said one securitization lender. Its an upbeat sign for the market. For his part, Solow ended up with a rock-bottom 3.787 rate on his five-year loan, which enabled him to take $125 million of cash out of the building after paying off the existing $500 million of debt. And Deutsche this week successfully executed the securitization, structured as a single class of triple-A bonds. The... http://www.staging.realert.com/headlines.php?hid=155890 As vulture investors circle, a Rockpoint Group partnership is negotiating with Wells Fargo, Blackstone and other players to line up enough capital to refinance an overleveraged hotel near Union Square in San Francisco. The 1,013-room property, called Parc 55 Wyndham, has $211.5 million of outstanding debt that matured yesterday. The Rockpoint team is trying to pay it off by lining up a $90 million senior mortgage, $60 million of mezzanine debt and $50 million of preferred equity. It would also kick in about $10 million of fresh equity itself. Wells appeared to have the inside track on the senior mortgage this week, although a final agreement hadnt been reached. Blackstone has tentatively committed to fund the mezzanine loan, contingent on the rest of the package being completed. The preferred equity evidently still hasnt been placed. The senior and mezzanine debt would likely have floating rates and three-year terms. Eastdil Secured is advising the Rockpoint team. As Rockpoint scrambles to arrange fresh financing, high-yield investors are jockeying to buy the existing junior mezzanine debt on the hotel, in order to position themselves to take a run at the property if the refinancing fails. Market pros value the hotel at $210 million to $220 million, meaning that the Rockpoint team has little or no equity remaining in the property. Rockpoint, a Boston fund operator, teamed up with Highgate Holdings of Dallas in December 2006 to buy the hotel, then called the Renaissance Parc 55, for $220 million,... http://www.staging.realert.com/headlines.php?hid=155733 Samp;P has relieved managing director Barbara Duka of her duties as commercial MBS chief, continuing an overhaul of senior management that the rating agency kicked off several months ago. It hasnt been determined whether the Samp;P veteran will leave the company or shift to another role. No replacement has been named so far. As lead analytical manager for CMBS, Duka was responsible for new-issue ratings and surveillance. She reported to managing director Grace Osborne, who continues to oversee the commercial and residential MBS rating groups as business leader for U.S. mortgage activity. The change in Dukas status came about six weeks after Samp;P removed David Jacob as structured-finance head and reassigned chief credit officer Mark Adelson to a senior research role. Industry professionals, including some at rival rating agencies, interpreted Samp;Ps latest move as another sign that its trying to repair its battered image in the CMBS sector. Once the perennial market leader, Samp;P has seen its share of new-issue assignments drop sharply since a controversial decision to overhaul its CMBS ratings criteria in 2009. The intent was to appeal to investors by taking a tougher stance on credit quality. But many buysiders were upset by the resulting swath of downgrades of legacy CMBS and how they were handled by Samp;P. Adelson and Jacob took much of the blame for the fallout from the criteria changes. But Duka also found herself in the crosshairs last July, when Samp;P abruptly withdrew its ratings on a $1.5 bill... http://www.staging.realert.com/headlines.php?hid=155573 Hamp;R REIT has tapped Pacific Life for a low-leverage $250 million mortgage on a Houston office tower that it bought for a record price. The Canadian REIT paid $445 million last month for the 845,000-square-foot Hess Tower. The $527/sf price shattered the previous Houston office record of $306/sf, and the overall value eclipsed the previous mark of $367 million. The eight-year loan has a fixed coupon of 4.5. The loan-to-value ratio is 56. Hamp;R, which paid cash for the building, closed on the mortgage this week. CBRE brokered the sale for a partnership between Trammell Crow of Dallas and Principal Real Estate Investors of Des Moines, Iowa, and arranged the loan from PacLife, of Newport Beach, Calif. The 29-story building, at 1501 McKinney Street, was completed in June 2011 and is fully leased to energy giant Hess Corp. until 2026. The combination of low leverage, a new trophy building and a marquee tenant made the lending assignment an ideal fit for an insurance company. PacLife, along with other insurers, has stepped up its commercial mortgage origination in the past year or so, taking advantage of relatively attractive yields and lagging origination activity by banks and securitization shops. Hess Tower is among only seven Class-A towers built in Houstons downtown since 2000. The property includes a 10-level garage with 1,500 spaces. Standing in the heart of the citys entertainment district, it overlooks Discovery Green, a $122 million, 12-acre park completed in 2008. Roughly 1,200 Hess employees work in the... http://www.staging.realert.com/headlines.php?hid=155398 Samp;P faces a long slog as it tries to rebuild its commercial MBS rating business, after falling to last place among agencies that rated the most common type of offerings last year. Once the perennial market leader, Samp;P is widely expected to win back the support of issuers and investors eventually. But its slide allowed Moodys and Fitch to cement their dominant positions in CMBS ratings last year, according to Commercial Mortgage Alerts CMBS Database (see ranking on Page 10). Meanwhile, upstarts Morningstar, DBRS and Kroll made inroads that could prove long-lasting. What this shows is the receptivity in the market to other voices, said Eric Thompson, CMBS chief for Kroll, the markets newest player. A year ago, we were hopeful of that. But these figures are proof. Before the market collapsed, Samp;P routinely rated the largest annual volume of conduit/fusion offerings, which make up the lions share of issuance. But after slipping to third place in 2010, Samp;P tumbled to fifth last year. It graded just $4.5 billion of conduit deals for an 18 market share, down from 82-88 in the pre-crash years. That effectively resulted in a last-place finish. (Kroll technically placed last in that league table because it rated $249.3 million of rake classes tied to one loan in a multi-borrower deal.) Moodys jumped ahead of Fitch in the conduit ranking, after the two finished 2010 in a virtual tie amid much-lower volume. Moodys rated $20.3 billion, or 82, of multi-borrower transactions in 2011, while Fitch racked up $18.8 billion of... http://www.staging.realert.com/headlines.php?hid=155421 A Prudential Real Estate Investors partnership is preparing to start negotiations with its lending syndicate about a maturing $714 million construction loan on the overleveraged office building at 11 Times Square in Midtown Manhattan. The 1 million-square-foot tower, which opened a year ago, is less than 60 occupied and cant support a new loan of the same size, according to lenders. A meeting with the bank syndicate, led by Bank of America and PNC, is scheduled this month. In return for extending the loans term or originating a new mortgage, the lenders would likely require the Pru team to pay down a significant amount of the debt as much as $100 million, by some estimates. Pru and its partner, SJP Properties of Parsippany, N.J., could seek to sell all or part of the building to retire debt. The duo has filed an application with the New York City Department of Buildings to divide the building into two office condominiums, according to The Real Deal, possibly presaging a sale of either or both. The syndicate, which also includes Helaba Bank, MetLife, Wells Fargo and WestImmo, originated the loan in 2007 for the speculative office building. The Pru team exercised the one-year extension option on the four-year loan, putting the final maturity date in March. The cost of developing the tower has been put at $1.2 billion. The propertys value is currently lower, because of the high vacancy level, but lenders described the building as overleveraged rather than underwater, meaning that the... http://www.staging.realert.com/headlines.php?hid=155209 General Growth Properties is shopping for a massive $1.3 billion mortgage on one of the countrys top-performing malls: Ala Moana Center in Honolulu. The assignment will most likely go to a commercial MBS shop, with the winner securitizing it via a stand-alone offering. But portfolio lenders are also kicking the tires. While the loan is too big for any single balance-sheet lender to take down, a few might try to team up on a club deal. General Growth has hired Eastdil Secured to market the assignment. Thats a break from the Chicago REITs customary tactic of approaching lenders directly. The company frequently tapped the CMBS market for financing during the sectors go-go years. It lined up 99 CMBS mortgages totaling $9 billion from 2004 to 2007 including Ala Moana Centers existing fixed-rate loan, which has a current balance of $1.3 billion. That mortgage was originally slated to expire four months ago, but the maturity date was extended to 2018 as part of General Growths emergence from bankruptcy two years ago. The rate on the existing debt is 5.6. General Growth presumably is moving to refinance now because it can get a lower rate. General Growth has reported that in-line sales at Ala Moana Center average a sky-high $1,100 per square foot. The 2.1 million-sf property produced $91.5 million of net operating income last year. Based on a 5 capitalization rate, the mall would be worth about $1.8 billion at that income level. The occupancy rate is 98. Macys, Neiman Marcus, Nordstrom and... http://www.staging.realert.com/headlines.php?hid=155122 A Calpers partnership is trying to line up about $400 million of financing on Woodfield Shopping Center, a high-end mall in the Chicago suburb of Schaumburg. Calpers and its partner, General Motors Pension Trust, would use the proceeds to retire roughly $265 million of debt that matures in April. Woodfield is billed as a fortress mall, a label applied to top-tier retail properties with the strongest sales. Market pros estimate that it is worth more than $650 million. The 2.2 million-square-foot center produced $45.3 million of net operating income last year. In-line sales are about $525/sf. Calpers and GM Pension each own a 50 stake in the mall, which is managed by Taubman Centers of Bloomfield Hills, Mich. The pension funds obtained a $300 million mortgage in 2002 from Morgan Stanley. Amortization has reduced the balance by about $35 million. Morgan Stanley securitized the $257 million senior portion of its loan via three pooled offerings (Morgan Stanley Dean Witter Capital Trust, 2002-HQ, 2002-IQ2 and 2002-TOP7). Woodfield was the largest U.S. mall when it opened in 1971 in an area that had previously been farmland. It has five department-store anchors: Nordstrom, Lord amp; Taylor, Macys, JC Penney and Sears. Slightly less than half the total space 900,000 sf is leased to in-line tenants. The mall is near three major roadways Route 53 and Interstates 90 and 290 and about 25 miles from downtown Chicago. The property was built by Taubman Centers founder, Alfred Taubman, and Sears u... http://www.staging.realert.com/headlines.php?hid=154983 Clarion Partners is weighing bids on a $325 million debt package that would refinance 50 Courtyard by Marriott hotels. The investment manager is seeking roughly $275 million of senior debt and $50 million of mezzanine financing. The debt package would have a three-year term, with two one-year extension options. The assignment has been shopped to a mix of balance-sheet, conduit and mezzanine lenders via Cushman amp;amp; Wakefield Sonnenblick Goldman, which has already taken at least some bids. Clarion is expected to make a decision within a few weeks. The New York firm bought the 7,220-room portfolio in 2005 via a separate account that it manages. The properties, managed by Marriott International, are concentrated in the Midwest, Northeast, Southeast and Southwest. The portfolio is valued at roughly $540 million, so the loan-to-value ratio on a $325 million debt package would be about 60. Clarion would use the proceeds to retire an unspecified amount of debt that matures next year. Many of the hotels were among the first developed under the Courtyard by Marriott brand in the 1980s. Clarion has spent $140 million on renovations, including upgrades to lobbies, bathrooms and fitness rooms. Some of the properties still need work, and Clarion plans to spend up to $40 million more on renovations over the next two years, according to market players. The hotels averaged about $50 million of net operating income between 2004... http://www.staging.realert.com/headlines.php?hid=154958 Despite the second-half swoon that crushed profits and sapped the morale of commercial MBS pros, turnout at the CRE Finance Councils 13th annual January conference is on track to slightly exceed the level at last winters event. The projected increase reflects the desire of industry players to gauge the tone of the real estate finance market and to compare notes on the state of the CMBS sector and where it is headed, said Stephen Renna, the trade groups chief executive. It also helps that the gathering one of the CMBS industrys two big annual events is returning to its longtime home in the upscale South Beach section of Miami Beach, after being held in Washington the past two years. The mood will be less buoyant than a year ago, when optimism prevailed amid rising lender activity and improving market conditions. That optimism was dashed by the summer blowout in CMBS spreads, an event attributable more to fallout from global economic volatility than to any direct weakening in real estate fundamentals. But spreads have since receded somewhat, and the first-quarter issuance calendar has started to fill, providing hope that the market is getting back on track (see article on Page 1). Attendance at the conference is a rough barometer of the sectors health. Registrations peaked at 1,550 in 2007, when the real estate bubble was near its height. They slipped to 1,403 the following year and then plummeted to 706 in 2009, when the credit crunch was in full swing. Attendance rebounded to 1,120 in 2010 and to 1,215... http://www.staging.realert.com/headlines.php?hid=154798 Vornado Realty is shopping for a mortgage of up to $350 million on the mixed-use Manhattan Mall. The New York REIT is seeking a floating-rate loan that could be fully prepaid at any time. The three-year assignment is being pitched to banks and insurance companies. Vornado, which isnt using a broker, tends to ask lenders for quotes based on varying levels of leverage. In this case, $350 million is evidently the upper end of the amount under consideration. But even at that threshold, the leverage would be low. The propertys value is roughly $650 million at a 6 capitalization rate, based on annualized net income of $38.8 million in the first half of this year. Despite its name, Manhattan Mall consists mostly of office and showroom space. The 1.1 million-square-foot building is at 100 West 33rd Street, on the site of the former Gimbels department store, near Herald Square. Vornado acquired the property in January 2007 for $688.8 million from HRO Asset Management of New York. It financed the purchase with a $232 million floating-rate loan from Credit Suisse, for a loan-to-value ratio well below 40. Credit Suisse securitized the loan in 2007 via a $1.3 billion pooled offering (Credit Suisse Mortgage Capital, 2007-TFL1). Vornado has exercised all three one-year extension options since the original two-year term expired, and the loan is now scheduled to mature in February. The interest-only mortgage is pegged to 55 bp over one-month Libor. That means the current interest rate is a microscopic 0.74.... http://www.staging.realert.com/headlines.php?hid=154555 Eurohypo is marketing $358 million of mixed-quality loans that it wrote during the real estate boom on hotel, office and retail properties in the U.S. The German lender is shopping $297 million of the loans via Eastdil Secured. Separately, Eurohypo and another German bank, Deutsche Hypothekenbank, have tapped Jones Lang LaSalle to find a buyer for a $61 million loan they jointly originated on a suburban Seattle office complex. The offerings have evidently been in the planning stages for a while, but they gained momentum last week when Eurohypos parent, Commerzbank, announced it would unload assets and curb lending to comply with demands from the European Banking Authority. The loans being shopped make up about 6 of Eurohypos $5.5 billion portfolio of U.S. commercial real estate loans. Last year, Eurohypo wrote about $703 million of U.S. commercial-property loans, some of which were syndicated. Eurohypo prefers to sell the $297 million portfolio, backed primarily by hotels, to a single buyer. It has set a Nov. 17 bidding deadline, with an eye toward closing a sale by Dec. 15. The portfolio contains nine assets a senior mortgage, a participation interest, an A-note, three B-notes, two mezzanine loans and a repurchase facility. The collateral types, by balance, are hotel (31), condo-hotel (30), retail (21), mixed-use (12) and office (7) properties. Seven of the loans, or 81 of the total balance, are performing. But the underlying properties struggled during the downturn, and the cashflow and d... http://www.staging.realert.com/headlines.php?hid=154464 Some property owners have been seeking to negotiate lower spreads on their credit facilities to take advantage of declining borrowing costs, but their success rate is mixed. For example, Glimcher Realty this month persuaded a KeyBank syndicate to cut the spread on a $250 million secured facility by 112 bp, to 237.5 bp over one-month Libor. But a Bank of America syndicate balked at Phillips Edisons request to shave 100 bp from its spread of about 300 bp on a $289 million secured credit line. The borrowers, often REITs, contend they should benefit from a drop in bank markups on credit facilities. Lending spreads have come in dramatically over the past year, said Steven Marks, managing director and head of the U.S. REITs group at Fitch. In 2009, spreads on new or renewed credit lines for investment-grade REITs rated by Fitch were roughly 250-325 bp. The typical range in recent months has been 105-160 bp. When seeking a spread reduction during the term of a credit line, borrowers generally offer something in return. For example, Glimcher, a Columbus, Ohio, mall REIT, agreed to extend the maturity date of its facility by one year, to October 2015. The lead banks in syndicates are usually willing to go along in order to maintain good relationships with clients that can provide additional business via other loans or underwriting assignments on stock and bond offerings. But all syndicate members must sign off on the change, and sometimes small or foreign banks object, especially if the facility is fairly... http://www.staging.realert.com/headlines.php?hid=154440 Citibank is shopping $460.8 million of high-quality seasoned mortgages, one of the largest performing-loan portfolios to hit the market this year. The 41 loans have a mix of fixed and floating rates, with a current weighted average coupon of almost 4. They are backed by office, retail and other commercial properties in multiple states. The notes are nearly six years old on average and have a weighted average maturity date of 2015. Most are recourse loans guaranteed by the borrowers, many of whom are wealthy individuals or institutions. The weighted average loan-to-value ratio is below 55, and the average debt-service-coverage ratio is greater than 2 to 1. The offering is expected to draw interest from life insurers, mortgage REITs and other conservative investors looking to hold the loans. Bids are expected to come in at 94-97 cents on the dollar. The offering appears to be part of an effort by Citi to reduce its exposure to commercial real estate. The banks advisor, CBRE, has divided the portfolio into four pools based on geography and property type. Bids on the entire package, individual pools or combinations of pools are due Nov. 17. The largest pool has $221 million of loans on office, mixed-use, retail and other properties on the East Coast. It includes a $57.5 million loan on 79 Fifth Avenue in Manhattan, a roughly 300,000-square-foot building at East 16th Street. The propertys major tenants include Foundation Center and the New School university. A West Coast pool contains 15 notes totaling $125 million,... http://www.staging.realert.com/headlines.php?hid=154349 Vornado Realty is shopping for a $300 million mortgage on a premier Manhattan office building for a refinancing that will require it to put up a substantial chunk of equity. The 583,000-square-foot building, at 350 Park Avenue, currently has a $430 million interest-only loan that Wachovia originated near the top of the market. Vornado presumably will have to make up the $130 million shortfall out of pocket. The New York REIT is pursuing a fixed-rate mortgage with a term of 5-10 years. The company, which isnt using a broker, is sifting through proposals from foreign banks and insurance companies. Vornado bought the 30-story Midtown tower from the government of Kuwait for $541.5 million, or a whopping $929/sf, in December 2006. It financed the purchase with the five-year mortgage, which Wachovia securitized via a $7.9 billion pooled offering (Wachovia Bank Commercial Mortgage Trust, 2007-C30). The purchase price translated into a skimpy 3.3 capitalization rate, reflecting the prevailing optimism that the bull market for real estate would continue. Likewise, the size of Wachovias loan was based on the lax pro-forma underwriting standards in vogue at the time. Moodys estimated that the loan balance was 1.45 times more than the buildings valuation under the average historical cap rate. The fully leased propertys in-place net operating income was $17.9 million. But below-market leases on 40 of the space were scheduled to mature within three years. Based on the expectation that the sp... http://www.staging.realert.com/headlines.php?hid=154094 Goldman Sachs is looking to syndicate a $180 million floating-rate loan on a new hotel in Midtown Manhattan. A group of Kuwaiti investors acquired the 669-room Yotel New York at Times Square West in June for $315 million from the developer, Related Cos. of New York. The buyers funded part of the purchase price with a $240 million financing package from Atrium Holding of Scottsdale, Ariz., and Centerbridge Partners of New York. The package included a $180 million senior loan. There was also $60 million of subordinate financing, divided roughly evenly between mezzanine debt and preferred equity. Last month, the Atrium-Centerbridge team sold the $180 million senior loan and part of the subordinate debt to Goldman. Now Goldman is shopping the entire senior loan, which has a two-year term and three one-year extension options. Goldman has structured the debt as a $140 million senior component and two $20 million pieces of junior debt. The hotel, which opened in June, is at the base of a 60-story building at West 42nd Street and 10th Avenue, three blocks west of Times Square. The tower, at 440 West 42nd Street, has more than 800 residential units. The ownership group of the hotel includes two public Kuwaiti companies IFA Hotels amp; Resorts and Kuwait Real Estate. The majority shareholder of IFA Hotels is International Financial Advisors, an investment company that is owned by the Kuwaiti government. http://www.staging.realert.com/headlines.php?hid=153961 Deutsche Bank struggled this week to drum up enough buyers for the first multi-borrower securitization backed by floating-rate loans in almost four years, amid a weakening market and concerns about the deals heavy concentration of hotel loans. Investors said that Deutsche had lined up buyers for less than half of the senior notes from its $619 million offering yesterday, more than a week after marketing began. Buysiders speculated that the soft demand would prompt Deutsche to boost the asking spreads on all six classes. But there was no official word yesterday on any change in the initial price guidance, which was released Tuesday. The offerings $356.3 million of triple-A notes, with a 1.5-year weighted average life excluding extensions, were being marketed with a spread of 250 bp over one-month Libor. Price talk on the remaining bonds, with a 1.7-year initial term, ranged from 400 bp at the double-A level to 900 bp for the double-Bs. The collateral consists of seven large loans. Four are backed by single hotels and a fifth by a 46-hotel portfolio. The other two are on mixed-used properties. Investors have been growing concerned that the hotel industry could take another beating as the economy falters. In addition, potential buyers of the most-junior bonds had concerns about the shadow ratings that Moodys, Fitch and Kroll assigned to the underlying loans. Every mortgage in the collateral pool received a junk rating from at least one of the agencies. Its hard enough to sell [the jun... http://www.staging.realert.com/headlines.php?hid=154073 Allstate is seeking to originate $500 million of low-leverage commercial mortgages by yearend. The insurer is offering rock-bottom rates 3.11 for five-year loans and 3.87 for 10-year mortgages of $10 million to $50 million on a variety of property types in major markets across the U.S. But the loan-to-value ratios have to be in the neighborhood of 55, significantly limiting the pool of qualified borrowers. Allstate would also write loans with slightly higher leverage, at higher rates. The insurer began informing brokers of the allocation within the past couple of weeks. While insurers routinely earmark funds for mortgages, Allstate is somewhat unusual in that it tends to do so in spurts, rather than in a steady flow. Life companies invest some proceeds from their insurance products in commercial mortgages with an eye toward match-funding the mortgage maturities with the products expected payout dates. Market pros said Allstates business mix often results in sporadic bursts of available capital that needs to be invested relatively quickly. When that occurs, Allstate tends to aggressively pursue low-leverage loans. Thats clearly an Allstate phenomenon, when they go out and do stuff at very low coupons, said an executive at a rival life company. For five-year loans with low leverage, most insurers currently are unwilling to go much below 3.5. Many life companies now have floor rates of 3.5 for five-year loans and insist that coupons exceed 4 for 10-year loans. By that yardstick,... http://www.staging.realert.com/headlines.php?hid=153667 Wells Fargos planned contribution of loans to an upcoming securitization with RBS and GE Capital has shrunk by about $600 million, reducing the deals size to some $1 billion. Wells was originally expected to supply roughly $800 million of fixed-rate commercial mortgages to the collateral pool. But now it is likely to kick in only about $200 million, according to market pros. The bank was mum about the change in plans, but the move was evidently prompted by the recent blowout in commercial MBS spreads. In some cases, borrowers decided not to close loans because the market volatility resulted in rates that were less favorable than had been anticipated, according to people familiar with the matter. In other cases, borrowers switched to balance-sheet loans from Wells, a move that enabled them to get lower rates. Sometimes the borrowers themselves pushed for the switch, and sometimes Wells encouraged them, so it could avoid securitizing loans at unfavorable prices. I think Wells needed assets for its balance sheet, so the move made sense on different fronts, said one longtime lender. RBS is now expected to be the largest contributor of loans to the deal, with Wells and GE rounding out the pool. The transaction is on track to hit the market next month. The trio teamed up on a $1.5 billion offering that priced in July. Wells supplied 78.9 of the collateral pool balance. RBS kicked in 14.3, and GE provided the remaining 6.8. Wells has the largest portfolio of commercial real estate loans in the country, giving... http://www.staging.realert.com/headlines.php?hid=153641 Cyril Courbage, head of European real estate for Deutsche Bank, is departing, the second London-based securitization pro to exit within a few weeks. The moves are the latest in a series of personnel changes at the bank following the departure of global real estate chief John Nacos in late March. Courbage, a managing director who has been with Deutsche for 10 years, will leave in a few weeks. Theres no word on what his next move will be. The bank has yet to name a replacement. His resignation comes on the heels of the departure of director Heath Forusz, who headed commercial real estate capital markets for Europe, the Middle East and Africa. Forusz, who reported to Courbage, has been replaced by director Bhavesh Patel. Foruszs plans are also unknown. The shuffling in the senior real estate ranks at Deutsche has come as the bank moves to integrate operations within its global structured credit products group, which is headed by managing director Elad Shraga. Following the departure of Nacos in March, Deutsche didnt name a new global real estate chief. Courbage remained head of European real estate, and managing director Jonathan Pollack was promoted to head of real estate in the Americas, assuming duties previously held by Nacos. In May, Deutsche hired Don Belanger to head up commercial real estate financing activities in Europe, reporting to Courbage. Belanger, who is based in London, was previously head of UBS real estate capital-markets activity in Europe, the Middle East and Africa. He... http://www.staging.realert.com/headlines.php?hid=153420 Morgan Stanley and Bank of America rolled out their latest commercial MBS offering this week in an uncertain market, where it may set pricing benchmarks for the years last flurry of issues. The $1.5 billion multi-borrower offering is expected to price next week. Its only the second CMBS transaction to feature SEC-registered bonds and a super-senior structure since the market collapsed in 2008. Most, if not all, of the issuers with multi-borrower deals in the near-term pipeline are likely to follow suit as they try to reach the widest possible investor base in a volatile market. A lot of folks like the new-school structure, with 30 of credit enhancement on the triple-As, said one CMBS trader. You will continue to see those types of deals in this environment, because that makes it more likely they will get enough investors to step up. The Morgan-BofA offering is backed by 63 loans on 76 properties, with heavy concentrations in the retail (46.3) and office (29.7) sectors. The public portion of the deal, encompassing $1.04 billion of bonds with triple-A ratings from Moodys and DBRS, has 30 of subordination. The only other triple-A tranche, totaling $162.3 million, has 19.13 subordination and a weighted average life of 9.8 years. That class and the rest of the subordinate bonds are being offered privately under SEC Rule 144A. Until Deutsche Bank and UBS included public bonds in a $1.7 billion conduit issue that priced a month ago, all post-crash CMBS paper had been issued under Rule 144A. Other issuers... http://www.staging.realert.com/headlines.php?hid=153398 CIT Group has tapped Matthew Galligan and several other Bank of Ireland executives to relaunch its commercial real estate lending operation. Galligan, head of Bank of Irelands U.S. real estate unit, will move over to CIT along with three or four other executives, including senior advisor Meggan Walsh. While the timing and final agreements were still being nailed down this week, both sides have agreed in principle, according to market pros. Word of the move comes about a week after Bank of Ireland agreed to sell a $1.4 billion portfolio of high-quality U.S. commercial mortgages to Wells Fargo as part of an effort to raise capital and wind down its U.S. activities. Bank of Ireland offered the commercial mortgage operation intact including Galligan and his roughly seven-member team. But Wells decided it didnt need them. CIT pulled out of the commercial real estate financing business in January 2008, paring its lending operations after suffering steep losses in its residential-mortgage and student-loan businesses. The New York finance company laid off the bulk of its 27-member commercial real estate team, including managing director Tim Zietara, who oversaw the group. Galligan has become well-known in lending circles during a lengthy career in originations and syndications. Bank of Ireland hired him in 2007 as a managing director to set up a commercial mortgage platform. Galligan spent the previous two years as an executive vice president at DebtX, the Boston loan-sale advisory firm. From 1996 to 2002, he... http://www.staging.realert.com/headlines.php?hid=153162 Life companies have turned more cautious about lending over the past few weeks, taking steps to protect themselves from growing market volatility. Insurers have widened loan spreads across the board. Most that werent already setting minimum coupon levels have started to do so. And some have taken the unusual step of using an artificially high Treasury yield as the benchmark for loan rates. At the same time, insurers have slowed the pace of originations, wary of locking into loans amid wild market turbulence. Only a month ago, life companies generally were running well ahead of this years plans for originations and were expected to keep up the accelerated pace over the rest of 2011. But now, the yellow flag is out. There is a slowdown as folks become more selective, said one lender. Added an executive at a large life company: I think everybodys going to be a little more cautious now because of the uncertainty. Its not only the downgrade of Treasurys by Samp;P, but youve got the overall slowing of the U.S. economy, the European economies its just a very uncertain period of time right now. After loading up on loans since January, insurers generally feel they can afford to stay cautious until the market settles down. Life companies had a great first half of the year and are able to take a wait-and-see attitude a little bit here, said one lender. You dont want to lock up a $100 million deal in a volatile week, said another lender. You dont want to be sitting there with a 5 coupon if we... http://www.staging.realert.com/headlines.php?hid=153070 Bank of America is poised to put $1.3 billion of mixed-quality loans on the block next week adding a third massive portfolio to the secondary market. With the timing of the move, BofA appears to be seeking to tap into investor interest generated by the two other offerings: a $9.7 billion portfolio owned by Anglo Irish Bank and $1.4 billion of loans being shopped by Bank of Ireland. Many of the major high-yield investors have been amassing capital and teaming up to bid on the two portfolios, especially the Anglo Irish mortgages, which are backed by trophy commercial properties in New York, Boston and Washington. But market players expect a single bidder to land the entire Anglo Irish portfolio. Should that happen, the rest of the investors will be looking to deploy their capital elsewhere. The 41 loans in BofAs portfolio have an average size of roughly $31 million. Most have floating rates and terms of 3-5 years. On average, they have about 12 months remaining until maturity. By and large, the mortgages are up-to-date on their payments. But many of the underlying properties have declined in value, which will make it challenging for the borrowers to refinance at maturity. The loans are backed by office, retail, hotel, industrial and apartment properties, many of which are in California. BofAs advisor, Jones Lang LaSalle, has divided the portfolio into 6-8 pools, based on property type. Investors can bid on individual pools, combinations of pools or the entire portfolio. Offers will not be accepted on... http://www.staging.realert.com/headlines.php?hid=152926 Samp;P wasnt the only one hurt by its unprecedented decision to pull its ratings from a virtually completed securitization. The rating agencys abrupt move is likely to result in large losses for the blindsided bookrunners, Goldman Sachs and Citigroup, which were forced to scuttle the $1.5 billion offering. It also created a logistical and public-relations disaster for the dealers one that some rivals assert was partially self-inflicted. Goldman and Citi now have to decide what to do with the giant loan pool. And a host of their customers ended up not getting bonds they had expected and incurred unnecessary hedging costs. Citing a discrepancy in its ratings methodology, Samp;P withdrew its ratings late Wednesday, five days after Goldman and Citi placed the bonds and on the eve of the scheduled settlement. Its the only thing that anyone is talking about, said one sellsider yesterday. In my 25 years in this market, Ive never seen anything like it. Sellsiders said Samp;Ps decision will cost Goldman and Citi millions of dollars in additional hedging expenses, wasted legal fees and compensation to investors. For example, according to one analyst, the dealers might have to pay hundreds of thousands of dollars to cover due-diligence expenses incurred by Torchlight Investors, which had committed to buy the transactions B-piece. Likewise, the snafu caused havoc with hedges for the transaction. Goldman had priced all their bonds, so they would have taken their hedges off, said one veteran issuer. They had $1.5... http://www.staging.realert.com/headlines.php?hid=152833 The commercial MBS market was dealt another body blow this week when bond spreads widened sharply again. Dealers struggled to price separate $1.5 billion multi-borrower offerings as investor demand evaporated. The spread on the benchmark triple-A class of an offering led by Wells Fargo and RBS priced yesterday at 170 bp over swaps. That was 35 bp wider than initial price talk and 40 bp wider than the comparable class of the previous transaction. The market was further roiled by investor unease with the subordination levels on the other deal, led by Goldman Sachs and Citigroup (see story above and Initial Pricing on Page 14). The sharp drop in bond prices further complicates the outlook for CMBS lending. After standing at 105 bp over swaps in early June, triple-A spreads have now widened by 65 bp. That has driven down the value of loans being warehoused by CMBS shops. It has also sharply increased the cost of capital, causing the operations to pull back on lending until conditions become less choppy. Many lenders had been waiting for the two deals this week to assess where things stand, only to find out that the situation has worsened. CMBS traders said that spooked investors were demanding higher spreads to compensate for the ongoing volatility. They reiterated the usual laundry list of worries that have concerned bond buyers in recent weeks the European debt crisis, the battle over the U.S. debt ceiling and concerns about a double-dip recession. Its eerily quiet, said one CMBS trader. Its one of the... http://www.staging.realert.com/headlines.php?hid=152704 Investors planning to bid on all or part of the $9.7 billion loan portfolio being shopped by Anglo Irish Bank were actively trying to line up financing commitments from lenders this week. Few solid pledges have been made so far, but market players said Deutsche Bank has tentatively agreed to back the team of Blackstone and Goldman Sachs. Meanwhile, investors said Wells Fargo and J.P. Morgan were separately telling prospective bidders that as part of a financing commitment, they want the first crack at acquiring some Anglo Irish loans that the buyers plan to flip. The banks are interested in some of the performing loans, which make up almost half of the portfolio. One investor said that a number of bidders were pursuing a commitment from Wells, which has been one of the most-aggressive lenders since the lending markets revived. Anglo Irish and its broker, Eastdil Secured, have carved the 248-loan portfolio into eight pools ranging in size from $540 million to $2.3 billion. Some investors want to bid on the entire portfolio. That has encouraged the formation of bidding teams in order to create enough firepower. But Anglo Irish is under orders from the Irish government to maximize its returns, so it would sell the pools individually if that provided the best execution. In addition to Blackstone and Goldman, several other investment groups have been formed to bid on the portfolio. Among them: Lone Star Funds and fund operator Artemis Real Estate. Oaktree Capital, Vornado Realty, Cerberus Capital and LNR... http://www.staging.realert.com/headlines.php?hid=152598 Despite the recent plunge in bond prices, commercial MBS professionals expect a long-running rally to resume in the second half for high-grade paper from both new issues and legacy deals. Bond pros are also optimistic that the prices of new-issue bonds rated triple-B will rise by yearend. But their outlook is bearish for triple-B paper from deals floated in 2006 and 2007. The spread on long-term, triple-A bonds from new issues will tighten to 111 bp over swaps by yearend, from 130 bp on June 30, according to the average prediction of 16 respondents to a Commercial Mortgage Alert survey (see list of forecasts on Page 10). If so, that would be good news for CMBS lenders, which were battered by the sudden widening of spreads last month. After a huge rally had driven down the average spread on long-term, triple-A bonds to a range of 100-105 bp from early April to early June, the level suddenly blew out to 140 bp. That forced CMBS lenders to increase loan spreads, further weakening their position relative to portfolio lenders. Some of that damage was offset by the end of last month, when the average spread backtracked to 130 bp. Only two of the prognosticators expect spreads on senior new-issue bonds to widen during the second half. Traders David Cook of Barclays and Tim Gallagher of Morgan Stanley think the level will finish at yearend slightly higher, at 135 bp. The biggest bull is Credit Suisse trader Chris Callahan, who believes the average will contract to 80 bp at yearend. Also bullish is Darrell Wheeler,... http://www.staging.realert.com/headlines.php?hid=152555 Markit, which runs the CMBX index of credit-default swaps tied to commercial MBS, is close to rolling out a new index that could address a big problem for securitization shops: the difficulty of hedging warehoused commercial mortgages. The need for better hedging techniques was acutely highlighted last month when spreads on new-issue CMBS abruptly blew out. That drove down the value of loans awaiting securitization, cutting into profit margins or causing outright losses. Everyone is down and has taken a hit, said Rob Cestari, who runs CMBS trading at Cohen amp; Co. Anyone who tells you they are fully hedged against market movements is lying. In simplest terms, securitization shops seek to originate loans at one rate and then securitize them at a lower yield, pocketing the difference. Loan coupons are based on prevailing yields in the CMBS market. The risk is that the two components of CMBS yields Treasury rates and credit spreads will rise before loans can be securitized, eating into or even wiping out profits. Effective and cost-efficient hedges on Treasury rates are well-established. And before the market crash, securitization shops could also effectively hedge against shifts in CMBS spreads via total-return swaps based on the Lehman Brothers U.S. Aggregate Index. But that index, now run by Barclays, is no longer effective for hedging CMBS. The reason: It is restricted to publicly offered bonds, and all of the CMBS deals floated since the market revived have been issued... http://www.staging.realert.com/headlines.php?hid=152264 Deutsche Bank is winding down a troubled $1.25 billion CDO that it set up with two partners in 2006 to invest in commercial real estate debt. The transaction was unusual for real estate CDOs because it involved only three players Deutsche, Norinchukin Bank of Tokyo and Otera Capital of Montreal. They divvied up the $144 million equity position and all $1.1 billion of bonds floated by the CDO, called Spring Asset Funding, 2006-1. The investment vehicle primarily acquired B-notes and mezzanine loans, as well as some senior debt. Among its purchases: $75 million of mezzanine debt on the 1,332-unit Independence Plaza apartment complex in Manhattan and rake bonds backed by a $37.8 million B-note on the 2.3 million-square-foot Palisades Center mall in West Nyack, N.Y. But the investments were made as the real estate market was peaking, and many of the assets subsequently declined in value. That left the collateral pool with large potential losses, even though the payments on the CDO bonds continued as scheduled. Commercial real estate CDOs have generally performed better than their counterparts in the residential and asset-backed markets, incurring significantly lower default rates. But the Spring Asset deal reflects the fact that some real estate CDOs that are technically performing are saddled with underwater collateral loans that will eventually lead to bond defaults. A change in accounting rules appears to have forced the hand of Deutsche, which underwrote the CDO and served as collateral manager. The ru... http://www.staging.realert.com/headlines.php?hid=151982 Amid weakening conditions in the financial markets, new-issue spreads blew out to the highest level of the year yesterday as Morgan Stanley and Bank of America priced a $1.2 billion multi-borrower offering. The dealers were forced to boost the spreads on most of the deals triple-A bonds by 22-28 bp from initial price guidance. And the final spreads on the subordinate bonds exceeded original price talk by 40-135 bp (see Initial Pricings on Page 28). Meanwhile, UBS, Deutsche Bank and Ladder Capital began marketing a $2.1 billion offering Tuesday. That transaction, backed by 67 loans on 132 properties, is expected to price next week. On Wednesday, Morgan Stanley and BofA boosted spread guidance from initial levels on most of the classes. But spreads on two triple-A classes ended up widening slightly more. For example, a $439.5 million class of long-term senior bonds went out the door at 148 bp over swaps up from initial price talk in the 120-bp area and updated guidance of 135-145 bp. A $363.5 million tranche of triple-A bonds with a 4.9-year average life weighed in at 147 bp up from the 125-bp area originally and 130-140 bp on Wednesday. At the other end of the capital stack, triple-B-minus paper priced at a whopping spread of 400 bp, exceeding initial talk by 135 bp and the wider end of revised guidance by 100 bp. With the exception of Cantor Fitzgeralds debut offering in April, spreads on the benchmark triple-A classes of new issues hadnt topped 125 bp since December. That portion of Cantors... http://www.staging.realert.com/headlines.php?hid=151888 Lone Star Funds plans to securitize about $400 million of seasoned floating-rate commercial mortgages this summer via J.P. Morgan. The Dallas fund shop actively buys whole loans in the secondary market at a discount. Market pros said the loans backing the commercial MBS deal are performing, but may have some hair on them meaning that the loan-to-value ratios could be higher than usual, and debt-service-coverage ratios could be lower. Most of the mortgages were originated three to four years ago, and the majority have relatively small balances, according to market players, who added that Lone Star is likely using the CMBS transaction to finance its investment in the loans. Lone Star and J.P. Morgan declined to comment. Lone Star is one of the nations biggest fund operators. It is currently investing its second distressed-debt fund, Lone Star Real Estate Fund 2. The company has raised at least $1.7 billion of equity for the vehicle. The buzz is that other loan investors are also mulling securitizations because tighter spreads in the reviving sector are making such transactions economically feasible. J.P. Morgan itself might consider such a strategy for a $3.5 billion portfolio that it acquired from Citigroup last August. http://www.staging.realert.com/headlines.php?hid=151864 MetLife, New York Life and Singapores sovereign wealth fund have the inside track on a $1.3 billion loan on a West Coast office portfolio owned by Blackstone. While a final agreement evidently hasnt been reached, rival lenders said that Blackstone was moving ahead on the loan with the trio. Under the plan, MetLife and New York Life would fund the senior portion of the mortgage. The wealth fund, GIC, would take down the subordinate part, which would exceed $400 million. The floating-rate loan would have a two-year term, with three one-year extension options. The assignment was originally expected to go to a securitization shop, both because it was too large for a single insurer and because insurers primarily originate fixed-rate loans. But MetLife and New York Life joined forces on a bid and further reduced their exposure by bringing GIC into the transaction. MetLife and New York Life were attracted by the quality of the collateral, according to a person briefed on the negotiations. The insurance companies theyre looking to lend against high-quality assets, he said. While insurers arent active originators of floating-rate loans, they will pursue such assignments on top-notch properties, especially if the leverage is low. For example, MetLife recently originated a $180 million floater for Blackstone on the 823,000-square-foot office building at 60 State Street in Boston. Blackstone usually seeks floating-rate debt when it wants to maintain flexibility to sell or refinance properties in the... http://www.staging.realert.com/headlines.php?hid=151620 Deutsche Bank has hired a top real estate executive away from UBS to bolster its London operation. Don Belanger, head of UBS real estate capital-markets activity in Europe, the Middle East and Africa, will start at Deutsche within a few weeks his second stint at the bank. Belanger will be responsible for commercial real estate financing activities in Europe, reporting to Cyril Courbage, head of the banks commercial real estate business in Europe, according to people familiar with the matter. Deutsche declined to comment. Word of the high-profile hiring came as Deutsche prepared to market Europes first commercial MBS offering since late 2007, excluding a handful of lease-backed and add-on offerings. The amp;163;302.2 million ($490 million) issue is backed by the senior portion of a amp;163;360 million loan on the Chiswick Park office complex in West London. Deutsche wrote the five-year loan in March to finance Blackstones amp;163;480 million acquisition of the property. Deutsche has already sold the amp;163;57.8 million junior piece of the loan to a sovereign wealth fund, according to the market buzz. The floating-rate offering consists of amp;163;235 million of triple-A bonds, amp;163;30 million of double-A paper and amp;163;37.2 million of single-A-minus notes. Deutsche is expected to begin meeting with investors next week. Belanger, a managing director at UBS, is a veteran of commercial real estate finance. In the 1990s, he had stints as an analyst at Fitch and as a staffer at Nomura lending unit... http://www.staging.realert.com/headlines.php?hid=151487 A changing of the guard is taking place among foreign banks that lend on U.S. commercial real estate. Many institutions active during the boom, especially Irish and German lenders, have pulled out of the U.S. market or significantly scaled back their activity. Meanwhile, a new cast of players is starting to fill the void, including a half-dozen Chinese banks and even lenders from Singapore and Russia. While many of the exiting banks took heavy hits on U.S. loans during the downturn, that hasnt discouraged the new entrants. Some foreign lenders may feel there is a stigma attached to U.S. investments to some degree, but there are always institutions that will step in, said Edward Mermelstein, whose New York law firm, Edward Mermelstein amp; Associates, advises foreign banks looking to do business in the U.S. Bad timing and greed have a short memory once lenders see a great opportunity open up. Some foreign bankers are eager to take advantage of what they view as a short-lived chance to capture business before large U.S. institutions clean up their balance sheets and get fully back in the game. The weak dollar is adding to their lending capacity. As for the Chinese banks, the motive is simple: They have vast reserves that need to be put to work. At least seven Chinese banks have bid or considered bids on U.S. loans in recent months. Four are state-owned: Bank of China; Industrial and Commercial Bank of China; Agricultural Bank of China; and China Construction Bank. The others are China Everbright Bank, Ch... http://www.staging.realert.com/headlines.php?hid=151471 Vornado Realty has acquired a $19.5 million junior mezzanine loan on two Midtown Manhattan office buildings owned by developer Joseph Moinian. Vornado paid par to buy the fixed-rate loan from another New York REIT, Resource Capital. The note is backed by the 499,000 square feet in the adjoining buildings at 535-545 Fifth Avenue, spanning the block between East 44th and East 45th Streets. Slate Realty Capital of New York advised Resource on the deal, which closed Tuesday. The loan is performing, but Moinian has struggled at times with the buildings debt service. Payments on the senior mortgage have been late, but within the grace period, in seven of the past 18 months, according to servicer reports. Occupancy was 86 as of November, but leases for roughly 93,000 sf, or 19 of the space, are scheduled to expire this year and next. The propertys reserve fund is nearly empty. Market players said Moinian might be reluctant to put in more capital, and Vornado may be hoping for a chance to foreclose. Meanwhile, SL Green bought the $19.5 million senior mezzanine loan on the buildings for roughly 94 cents on the dollar in February. The buzz is SL Green may be interested in helping Moinian recapitalize the property. Both mezzanine loans mature in 2016, along with the $177 million senior mortgage, which was securitized via a $1.9 billion offering (Credit Suisse Commercial Mortgage Trust, 2006-C3). Moinian bought 535-545 Fifth Avenue and the 60,000-sf building at 509 Fifth Avenue from Emmes Asset... http://www.staging.realert.com/headlines.php?hid=151252 A joint venture headed by Starwood Capital is seeking about $230 million of financing to buy and finish a failed mixed-use redevelopment in California's Silicon Valley. The Starwood partnership has agreed to pay roughly $180 million to purchase Sunnyvale Town Center out of bankruptcy. It plans to spend another $180 million to finish construction of a mix of condominium, office and retail buildings on the 34-acre site. The Greenwich, Conn., firm is teaming up with Houston developer Hines and retail specialist Madison Marquette of Washington to revive the project, intended to create a traditional-style downtown in the heart of Sunnyvale, 10 miles northwest of San Jose. The sale by court-appointed receiver Quattro Realty is scheduled to close next month. Market players said Starwood and its partners may be unable to lock up financing that quickly, but could complete the purchase with cash while negotiating with lenders. The joint venture is considering financing the project as a whole, or securing separate loans for the office, retail and condominium components. Eastdil Secured is advising Starwood and its partners on the purchase and financing. Plans to build Sunnyvale Town Center on the site of a former mall date back more than a decade. Three different developers have tried, but failed, to complete the project. The most recent effort began in late 2006. RREEF teamed up with Sand Hill Property of San Mateo, Calif., on a plan to build 1 million square feet of retail space, two office buildings... http://www.staging.realert.com/headlines.php?hid=151093 Allied Irish Bank took a second round of bids on Wednesday for a $950 million portfolio of performing U.S. commercial mortgages that it wrote during the economic boom. The portfolio contains roughly 45 loans, many of which are syndicated portions of first mortgages, B-notes and mezzanine loans. Because the beleaguered Dublin bank has minority interests in many of the loans, the assets are viewed as passive investments suitable for portfolio lenders or investors that would hold them to maturity. The bidders include CIBC and Wells Fargo, according to market players. Bank of America and Deutsche Bank also kicked the tires, although it's unknown if they made offers. The loans are divided into two pools based on leverage, leading market players to speculate that Allied Irish hopes one or two buyers would take down the entire portfolio. The offering includes a $30 million senior portion of a $450 million debt package on the 1.2 million-square-foot KPMG Tower at 355 South Grand Avenue in Los Angeles, a $25 million slice of a debt package on the 398-room Sofitel Hotel in Midtown Manhattan and a $15 million slice of mezzanine debt on the 2.8 million-sf MetLife Building at 200 Park Avenue, also in Midtown. The offering is being overseen by Varadero Capital, a New York investment firm headed by Fernando Guerrero. Loan-sale advisors were surprised by the selection of Varadero, which operates a hedge fund that invests in distressed residential and commercial MBS, but apparently hadn't previously... http://www.staging.realert.com/headlines.php?hid=151070 Deutsche Bank has originated a $125 million floating-rate loan on the unsold units at the Sheffield, the ill-fated Manhattan condominium-conversion property that Fortress Investment bought out of foreclosure in 2009. The three-year loan, with two one-year extension options, is backed by the 244 units that Fortress owns in the Midtown building, which has nearly 600 units. When the mortgage closed last month, there was no existing debt on the property. The Sheffield, built as a rental high-rise in 1978, became one of New York's highest-profile condo-conversion flops of the economic downturn. An investment group led by Kent Swig bought the building in 2005 from Rose Associates of New York for $418 million, a near-record price for a single apartment tower at the time. The partnership lined up roughly $640 million of senior and mezzanine debt from Credit Suisse to finance the acquisition, as well as the conversion of the 845 apartments into 597 luxury condos. But the project was hammered by the recession and became mired in lawsuits filed by tenants. With fewer than half of the units sold, the Swig team defaulted on its debt. Meanwhile, New York-based Fortress swooped in, acquiring the controlling tranche of mezzanine debt and then foreclosing. It invested less than $120 million. Fortress installed Rose which had sold the Sheffield to the Swig team as the property manager and continued to renovate and sell units. Asking prices range from $700,000 for studios to $7.5 million for four-bedroom apartments. About... http://www.staging.realert.com/headlines.php?hid=150838 The proposed risk-retention rules that federal regulators unveiled this week include a surprise provision that market pros fear could derail the commercial MBS market. The provision would effectively prevent CMBS lenders from capturing profits up front on transactions via the issuance of interest-only strips, which are funded with excess interest payments from the collateral pool. Under the proposal, excess interest couldn't be disbursed until all other bonds are paid off. This would materially change the current business model for CMBS, said Rick Jones, co-head of Dechert's finance and real estate practice. If you eliminate their profits, then bankers will not securitize loans, and a critical supply of capital for the commercial real estate industry will have been eliminated. CMBS specialists this week were poring over the 376-page regulatory proposal, which would implement a portion of the Dodd-Frank Act that requires securitization lenders to keep skin in the game. While the provision on interest-only strips attracted most of the initial attention, concerns were raised about some other guidelines and about unclear wording. The CMBS industry will now mount a lobbying campaign during the comment period to persuade regulators to amend and clarify the proposal. We need to go back to the regulators, and we need to ask questions, said Lisa Pendergast, president of the CRE Finance Council, the CMBS industry's trade group. Dodd-Frank, which became law last July, generally requires lenders to... http://www.staging.realert.com/headlines.php?hid=150694 MetLife, Prudential Mortgage and New York Life have won a $700 million financing assignment from Boston Properties on the office building at 601 Lexington Avenue in Midtown Manhattan. Under the club deal, the insurers will co-originate the loan. MetLife's share will be somewhat larger than the other two. This is the second insurer team-up this month on a big New York office loan. MetLife and Pacific Life have agreed to write a $500 million fixed-rate loan for an SL Green partnership on the building at 919 Third Avenue. Boston Properties' 10-year loan will enable the REIT to take a huge chunk of cash out of 601 Lexington, since it will be retiring $450 million of existing debt scheduled to mature in May. Some observers thought securitization programs stood a good chance of winning the coveted assignment, because insurers usually restrict their bidding to loans of about $250 million in order to limit exposure to risks associated with any one property. But MetLife, Pru and New York Life got around that restriction by joining forces. Club deals are rare, because they can be complicated to arrange and can take longer to close. If they increase in frequency, that would be bad news for CMBS lenders, which are depending on winning giant refinancing assignments to bulk up their activity this year. The loan on 601 Lexington was attractive to insurers because of the property's solid fundamentals and the relatively low leverage. The 1.6 million-square-foot building is virtually fully occupied. Boston... http://www.staging.realert.com/headlines.php?hid=150718 Several conduit shops are exploring whether to resume securitizing floating-rate loans. At least a half-dozen lenders have begun to quote floating-rate mortgages to prospective borrowers. A few have already closed floaters and parked them on their balance sheets, leaving open the possibility of eventual securitization. Deutsche Bank appears to be the furthest along in pursuing a floating-rate securitization. The buzz is that it might launch a deal as soon as this summer. J.P. Morgan and Morgan Stanley are also taking a close look at the idea. Other lenders quoting spreads for floating-rate loans that could be securitized include Cantor Fitzgerald, Citigroup, FundCore and LoanCore. Deutsche wrote a $425 million floater in January as part of a debt restructuring for Blackstone on the 700-room Hotel del Coronado near San Diego. And earlier this month, Morgan Stanley wrote a $300 million floater on the 1.5 million-square-foot office condominium at 666 Fifth Avenue in Midtown Manhattan. Each bank is thinking about including its loan in a pooled, floating-rate deal. While floating-rate transactions traditionally accounted for about 15 of CMBS volume in the U.S., there have been no such offerings since issuance resumed in November 2009 following a 17-month lull. Since then, all 16 U.S. transactions, totaling $11.4 billion, have been backed by fixed-rate mortgages. Several factors have conspired against the resumption of floating-rate deals. For one thing, floating-rate loans are usually sought... http://www.staging.realert.com/headlines.php?hid=150405 General Growth Properties has awarded $1.1 billion of fixed-rate mall mortgages to five securitization shops. The move is reminiscent of pre-crash days, when General Growth, the nation's second-biggest owner and operator of malls, was a mainstay borrower in the commercial MBS market. The Chicago REIT obtained 99 CMBS loans totaling more than $9 billion from 2004 to 2007, according to Realpoint. The new assignments were won by UBS, Goldman Sachs, Morgan Stanley, Wells Fargo and Deutsche Bank. Separately, General Growth is close to awarding a mortgage of about $250 million on a Texas mall to an insurance company. Market players said General Growth likely chose to divvy up the assignments among so many lenders, instead of awarding them to one or two, to help rebuild good working relationships with multiple active lenders a strategy the REIT used in earlier days to good effect. General Growth always chose to spread the money around, said one observer. It gives them added clout in the market. The REIT, which emerged from bankruptcy late last year, began to hunt for the mortgages in recent weeks. It will use the proceeds to refinance existing debt on six malls scattered from California to Rhode Island. All six were leveraged up with CMBS debt before the downturn. Lenders said the amount of some of the assignments may change because lenders had proposed varying options on size, rate and other terms to General Growth. The five securitization assignments went to: UBS, which will provide a $375 million... http://www.staging.realert.com/headlines.php?hid=149998 Cantor Fitzgerald plans to move forward with a solo commercial MBS offering following its split with Wells Fargo. Cantor, which originally planned to make its CMBS debut next month in a joint $1 billion transaction with Wells, will instead be the sole lead manager and loan contributor for a deal expected to hit the market in April. The transaction would be backed by 40-50 loans with a total balance of $600 million to $700 million, market players said. A Cantor spokeswoman declined to comment. The plan for a Cantor-Wells collaboration went awry a few weeks ago after comments that a Cantor executive made about the transaction at an industry conference were deemed to run afoul of disclosure regulations for securities deals. Cantor and Wells could have delayed the deal, but decided to scrap it. Since then, the two banks have regrouped: Cantor will move forward on its own, while Wells is expected to seek out an alternative lending partner. Wells can make an arrangement with any one of several groups, said one industry veteran. Some investors said Cantor, as a new player in the CMBS market, might run a risk by serving as sole lead manager of its transaction, because it will be the only dealer committed to making a market in the bonds. The investors are going to wonder if Cantor has enough balance sheet to last through the cycle, said one buysider. Will Cantor make a market in this paper three or four years from now That's the question. Cantor is expected to bring in co-managers for the transaction. Cantor... http://www.staging.realert.com/headlines.php?hid=149777 The management rights to a struggling $1.1 billion debt fund operated by bankrupt Capmark Investments are back on the market. Capmark's advisor, Lazard Freres, contacted investment managers in the past two weeks to gauge their interest. Last spring, Lazard shopped the management rights and Capmark's limited-partner interest in the fund, Capmark Structured Real Estate Partners. At the time, investors estimated that the management rights might command $5 million and that the limited-partner stake would sell at a deep discount. Lazard narrowed down the bidders to a few finalists, including AREA Property of New York and Invesco Real Estate of Dallas. But no deal was struck. This time around, the offering doesn't include the limited-partner interest, which Capmark acquired for $120 million. It's unclear if AREA and Invesco are interested in taking another look. Other potential suitors for the management rights include fund shops Normandy Real Estate of Morristown, N.J., Square Mile Capital of New York and PCCP of El Segundo, Calif. The fund's sub-advisor, Urdang Capital Management of Plymouth Meeting, Pa., has the right to match any winning bid. Urdang is a unit of Bank of New York. A sale would have to be approved by the court overseeing Capmark's bankruptcy. The fund, which was launched in 2006 and finished investing in 2009, had suffered a nearly 50 decline in net asset value through June, according to the latest return figures available. The fund's woes stemmed in part from two... http://www.staging.realert.com/headlines.php?hid=149977 In a move to generate mezzanine loans for its high-yield debt fund, RCG Longview has rolled out a securitization program. RCG is aiming to originate at least $500 million of commercial mortgages this year under the effort. It plans to securitize the senior portions about two-thirds of each loan and retain the subordinate interests, which will be structured as mezzanine debt. RCG will park the mezz loans in its $602 million RCG Longview Debt Fund 4. The New York company decided on the approach after finding it hard to line up suitable high-yield investments. This was another way for us to get mezz loans, said president Chris LaBianca. We wanted to build a mezz portfolio, but this way we have control over the collateral. RCG will lend on office, retail, industrial and multi-family properties across the nation. The loan-to-value ratio will typically be 80. The fund shop began closing commercial MBS loans in December. Its inventory includes a $23.6 million loan on four multi-family properties in Ohio and a $17.2 million mortgage on the 260-unit Brownstones Apartments in Novi, Mich. It also has a $37 million retail loan in the works. The buzz is that RCG has struck an agreement with an unidentified issuer to contribute loans to a securitization that could come as soon as the second quarter. The company declined to comment. The program is an extension of RCG's more-established lending business, which provides mezzanine loans, preferred equity, short-term bridge loans and Fannie Mae mezzanine loans.... http://www.staging.realert.com/headlines.php?hid=149950 Guggenheim Partners has hired veteran lender Kieran Quinn as it prepares to expand its fledgling loan platform beyond agency product to securitized mortgages. The move reunites Quinn with Robert Brennan, who was recruited by Guggenheim last May to oversee its new commercial real estate finance group. Brennan and Quinn both had long stints at Credit Suisse Brennan headed the bank's CMBS group, and Quinn oversaw the Column Financial conduit unit. Quinn left Column in early 2009 and joined multi-family lender Walker amp; Dunlop of Bethesda, Md., as vice chairman. Quinn, who started at Guggenheim this week as a managing director, will help the Chicago firm make a push beyond an initial focus on multi-family loans. Last year, Guggenheim bought a Fannie Mae-approved lender, helping to jump-start its real estate finance group. Now the operation is preparing to move into lending on other property types, via both portfolio and CMBS loans. The company is shooting to originate about $500 million of CMBS mortgages this year, joining a long list of lenders entering the sector. It plans to write another $1 billion of loans in total for clients especially insurance companies and pension funds and for its own balance sheet. Guggenheim expects to hire at least a dozen staffers in coming months to staff planned regional lending offices. The company started putting its real estate group together in late 2009, initially focusing on the trading of CMBS. Its agency-lending business was propelled by the acquisition... http://www.staging.realert.com/headlines.php?hid=149263 Add KeyBank to the growing ranks of lenders reviving securitization shops. The Cleveland bank has started to rebuild its commercial MBS team by hiring three experienced originators. And it plans to add four more soon. Key was a mid-tier conduit shop in terms of volume before the market crashed. It contributed $3 billion of loans to securitizations in 2007, the last year of major issuance. That ranked 22nd among securitization programs, according to Commercial Mortgage Alert's CMBS Database. The origination goals for 2011 are unknown, but the revived program closed its first loan last month. The average loan size is projected to be about $11 million, the same as before Key pulled out of the CMBS market three years ago. The CMBS group remains under the direction of senior vice president Clay Sublett, who also oversees the Ginnie Mae lending program. He reports to real estate chief E.J. Burke. One of the new recruits has already started. Randy Martin joined in Chicago last month from Charlotte-based Grandbridge Real Estate Capital. He reports to Dan Baker, who runs CMBS originations. The two other loan pros recently hired will come on board within a month. The origination specialists, including Baker, are vice presidents. Key plans to station recruits in various offices in the Northeast, Southeast and Northwest, where they will mostly focus on arranging loans for the bank's mid-size clients. One will be assigned to handle publicly traded REITs, working out of Atlanta, Boston or Cleveland. Before the CMBS... http://www.staging.realert.com/headlines.php?hid=149138 The CRE Finance Council is poised to release a proposed standard for a key portion of securitization documents the representations and warranties that lenders provide about the adequacy and accuracy of collateral-loan data. The proposal could end up being included in guidelines now being devised by federal regulators. But at a minimum, the trade group would encourage all commercial MBS lenders to adopt the standard. Under the proposal, deal documents would have to clearly specify any variation from the standard. The initiative will be unveiled and discussed next week at the trade group's 12th annual January conference. Almost 1,200 industry professionals have signed up for the three-day confab, which kicks off Monday at the JW Marriott Hotel in Washington. More than 50 council members have spent hundreds of hours hammering out the standard over the past six months or so. The task force, led by Brian Furlong of New York Life and Thomas Nealon of LNR Partners, was formed as part of the council's ongoing effort to help regulators implement new disclosure requirements, risk-retention standards and other securitization reforms mandated last July with the passing of the Dodd-Frank Act. What we're trying to put forth is a package that can provide a level of flexibility for risk alignment and disclosure, said council president Lisa Pendergast, who co-heads CMBS trading and strategy at Jefferies amp; Co. These are living, breathing documents that will change and grow with the market. Pendergast... http://www.staging.realert.com/headlines.php?hid=149116 REITs are expected to scale back issuance of unsecured bonds this year, after bringing a near-record volume of paper to market in 2010. Thirty-two REITs floated $17.5 billion of bonds last year, nearly double the amount issued in 2009, according to Commercial Mortgage Alert's REIT-Bond Database. That was the second-highest annual volume, not far off the $18.5 billion record set in 2006. Bank of America retained its crown as the top bookrunner of REIT bonds, leading $2.8 billion of transactions, for a 16.3 market share (see ranking on Page 10). Close on its heels was Citigroup, which led $2.5 billion of transactions, capturing a 14.2 market share. Rounding out the Top 5 were J.P. Morgan ($2.3 billion), Deutsche Bank ($2.1 billion) and Wells Fargo ($1.5 billion). BofA also topped a separate ranking that gives full credit to all members of underwriting syndicates. The bank was lead or co-manager on $10.5 billion of deals, giving it a hand in 60.2 of the total volume. It edged out RBS ($10.4 billion) and Citi ($10.3 billion). Next came J.P. Morgan ($9.5 billion) and Deutsche ($9.1 billion). Last year's activity was driven in part by pent-up demand following three years of below-average issuance, as well as by opportunistic offerings aimed at exploiting rock-bottom interest rates. For example, some REITs used the proceeds to pay off higher-rate bonds a year or two early. But the explosion of issuance has exhausted some of the need for capital. What's more, interest rates have started to trend up, further... http://www.staging.realert.com/headlines.php?hid=148841 Lenders are feeling better about their prospects than they have for years but they're not ready to break out the champagne just yet. For the first time since the market crash, positive signs abound. Commercial real estate prices seem to be stabilizing. Property sales are picking up. Interest rates remain near rock-bottom lows. And the securitization market is finally starting to revive. Against that backdrop, lenders are cautiously optimistic. Insurance companies are increasing their mortgage allocations. And securitization pros expect commercial MBS issuance in the U.S. to triple this year, to $39 billion (see list of predictions on Page 15). The optimism is driven in part by improving real estate fundamentals, which are giving investors confidence to resume property acquisitions. Increasing demand has pushed capitalization rates on many investments down to 7-8. Most loan coupons are in the mid-5's, so relative to the cap rates, that's positive leverage, said one veteran CMBS lender. As hints of a rebound emerged, roughly a dozen banks resurrected their CMBS lending operations, including Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, RBS, UBS and Wells Fargo. Optimism has been further fueled by a massive bond rally that has made securitization programs more competitive with portfolio lenders. But CMBS executives said property deals alone won't be enough to keep their shops busy. What's needed to sustain growth is strong refinancing activity. ... http://www.staging.realert.com/headlines.php?hid=148733 Boston Properties has quietly begun shopping for a $700 million loan on the trophy office building at 601 Lexington Avenue in Midtown Manhattan. The Boston REIT, led by developer and publisher Mort Zuckerman, will use most of the proceeds to retire a decade-old debt package on the 1.6 million-square-foot building. But it will still be able to take more than $200 million of cash out of the property, formerly known as Citigroup Center. The existing debt matures in May. The buzz is that the REIT is unlikely to hire a broker to line up a loan and will instead conduct discussions directly with lenders. Market players said the REIT has already held a few preliminary conversations with balance-sheet lenders over the past several weeks. Securitization shops are likely to chase the assignment as well. But they face stiff competition from insurers and foreign banks, which have been aggressively prowling for loans on trophy Manhattan buildings. At the top of the list of candidates is Bank of China, which last year decided to significantly expand its origination of commercial mortgages in the U.S. The bank, backed by the government of China, has since bid aggressively to land several large loans, including an $800 million mortgage on the 1.8 million-sf skyscraper at 245 Park Avenue one of Manhattan's top office buildings. The building at 601 Lexington Avenue is virtually fully occupied. In October, Boston Properties signed British law firm Freshfields Bruckhaus to a 108,000-sf lease. Boston Properties lined up a... http://www.staging.realert.com/headlines.php?hid=148634 A JER Partners team has tapped Citigroup, Bank of America and Barclays to refinance $1.6 billion of debt on a healthcare portfolio. The dealers beat out a handful of competing bids by other commercial MBS shops. They will package about $1.5 billion of the new fixed-rate loan into the largest stand-alone healthcare securitization ever. The transaction will hit the market in the first quarter. JER, a fund shop in McLean, Va., teamed up with Formation Capital of Alpharetta, Ga., to buy Genesis HealthCare in 2007, taking the Kennett Square, Pa., company private. They financed the $2 billion takeover with the $1.6 billion debt package, which was supplied by GE Real Estate and CapitalSource. That debt, backed by the company's 220 skilled-nursing and assisted-living facilities, doesn't mature until 2014. But the JER team wants to refinance to take advantage of the prevailing rock-bottom interest rates. The Genesis portfolio, encompassing 26,000 beds, is located in the Mid-Atlantic and Northeast. The largest healthcare loan ever securitized was a $1.2 billion mortgage that Credit Suisse and Morgan Stanley originated in 2006 to finance Fillmore Capital's $2.2 billion acquisition of Beverly Enterprises, a nursing-home operator in Fort Smith, Ark. Healthcare loans traditionally have accounted for a tiny proportion of CMBS issuance, never exceeding $1.7 billion in a year. No healthcare loans have been securitized since 2007, but CMBS shops are chasing a handful of potential large assignments. Citi, BofA... http://www.staging.realert.com/headlines.php?hid=148551 Aareal Bank and two other foreign lenders have agreed to originate a $240 million floating-rate mortgage on a Hilton hotel next to San Diego's convention center. Aareal won the assignment and brought in two other lenders, including another German bank, NordLB. The third lender is also a foreign bank, but its identity was unclear. Each lender will fund an equal portion of the five-year mortgage on the 1,190-room Hilton San Diego Bayfront. Hilton Worldwide owns the property in partnership with a Middle East sovereign wealth fund. The loan-to-value ratio is about 65, indicating the hotel is worth almost $370 million. The Hilton partnership will use the proceeds to pay off the remaining balance of a $245 million construction loan on the luxury property, which opened in 2008. The assignment was shopped to life companies, banks and conduit shops. Lenders in recent months have shown renewed interest in hotel loans as the industry's fundamentals have improved. The size of the loan may have led some individual banks to back away. But it was well-suited for a club deal, in which two or more lenders team up to take down a loan, usually in equal amounts. Eastdil Secured is advising the Hilton partnership. The waterfront hotel, categorized as quot;upper-upscale,quot; had an average occupancy rate of 73 for the year ending Sept. 30. The average room rate for that period was $190, and daily revenue per room was roughly $140. By comparison, all upper-upscale hotels in downtown San Diego had a 75.7 average occupancy ra... http://www.staging.realert.com/headlines.php?hid=148433 Berkadia Commercial Mortgage plans to originate fixed-rate commercial mortgages and sell them to securitization shops. The Horsham, Pa., firm has set aside some $200 million to start the program. It will focus on loans of $5 million to $25 million on stabilized retail, office, warehouse and multi-family properties. A typical mortgage will have a term of 5-10 years, a loan-to-value ratio of 60-75, and a coupon of 5-6. Since being formed a year ago, Berkadia's lending operation has focused mostly on agency mortgages. The fixed-rate program, headed by commercial MBS veteran Joseph Franzetti, is the company's first attempt to build a private lending arm. Berkadia also is launching a floating-rate program that will provide bridge loans to apartment-property owners awaiting approval for permanent financing from Fannie Mae or Freddie Mac. Under the fixed-rate effort, Berkadia plans to fund the loans and then sell them to issuers amassing mortgages for securitization. It expects to form relationships with a handful of securitization shops. Berkadia would prefer to retain the primary-servicing rights to loans it sells in order to maintain relationships with borrowers and generate fee income. Berkadia will start accepting loan applications early next year. It would consider loans of more than $25 million, but would likely need a partner to take those down. Franzetti, a senior vice president, joined Berkadia's New York office in mid-April to build the firm's relationships with lenders. He previously wor... http://www.staging.realert.com/headlines.php?hid=148336 Lenders have resumed pursuing mortgages on hotels - the last sector to emerge from the credit crunch. Over the past few months, a cross-section of players has shown renewed interest in financing hotels, which previously had been left out in the cold as resurgent lenders focused their attention on shopping centers, office buildings and warehouses. quot;There has been a shift in the mindset of the market,quot; said Geoff Davis, president of Denver-based HREC Investment Advisors. quot;All of the traditional lenders are sticking their toes back in, not just a few specialized debt REITs. We're seeing the commercial banks, the investment banks and the CMBS lenders all getting active again.quot; What broke the ice Growing signs that hotels have hit bottom. quot;People believe the worst is over for hospitality,quot; said David Sonnenblick, co-founder of brokerage Sonnenblick-Eichner of Beverly Hills. quot;It's not so much that things are rapidly improving as it is that lenders believe things won't be getting any worse. People can underwrite based on the last 12 months without having to account for a big drop in revenues.quot; To be sure, the spigot isn't wide open. Lenders are approaching hotel loans cautiously in the wake of the carnage suffered in the sector during the downturn. But in recent weeks, Bank of America, Deutsche Bank, J.P. Morgan and others have closed on more than a dozen hotel mortgages in total - up from virtually zero in the first half of the year. The hotel market was hit disproportionately hard by the recession.... http://www.staging.realert.com/headlines.php?hid=148235 The federal regulator of credit unions this week resecuritized $3.8 billion of high-grade commercial MBS that it inherited from two failed institutions - the first and only such transaction it expects to conduct. The three-class offering, rated triple-A by Samp;P and Fitch, is guaranteed by the agency, the National Credit Union Administration. That means the bonds are backed by the full faith and credit of the U.S. government, Fitch said. The deal, led by Barclays, priced at spreads that were tighter than initially sought (see Initial Pricings on Page 16). The NCUA plans to conduct 8-10 resecuritizations totaling $35 billion, but all of the other deals will be backed by residential MBS. The first such offering, a $3.9 billion issue, priced Oct. 18. After this week's offering, the agency still has about $560 million of CMBS from other failed credit unions. A spokesman said the NCUA doesn't plan to resecuritize them. While the agency didn't specify an exit strategy, it will presumably sell the remaining paper in the secondary market. The CMBS resecuritization (NCUA Guaranteed Notes Trust, 2010-C1) is backed by bonds from the investment portfolios of Western Corporate Federal Credit Union and U.S. Central Corporate Federal Credit Union, which were seized last year. The collateral came from CMBS transactions issued from 2004-2007. The vast majority was originally rated triple-A, and more than half of the pool balance still carries triple-A ratings. The largest component - 81.7 - came from A-M... http://www.staging.realert.com/headlines.php?hid=148136 A joint venture between Beacon Capital and Allianz is quietly shopping for a loan of more than $300 million on one of Boston's top office towers. The fixed-rate mortgage would refinance debt on the 1 million-square-foot building, at One Beacon Street. Beacon, a Boston fund shop, obtained a $308 million fixed-rate mortgage on the property in 2006, when it was the sole owner. Goldman Sachs originated the five-year debt, consisting of a $210 million senior mortgage and $98 million of mezzanine debt. Goldman securitized the senior mortgage via a $4.2 billion pooled offering (GS Mortgage Securities Trust, 2006-GG8) and placed the mezzanine debt with high-yield investors. The senior loan has not amortized, and it's believed that the mezzanine debt also remains in place. The loan package matures in August. The buzz is that the Beacon joint venture is showing the assignment to a select group of portfolio lenders, bypassing commercial MBS shops. The Beacon team presumably thinks balance-sheet lenders will find the trophy property so appealing that they will bid the loan down to interest-rate levels out of reach for securitization shops. The office tower, which generated $25.9 million of net operating income last year, is 92 occupied. The tenants include Massachusetts Housing Finance Agency, law firm Skadden Arps and Deutsche Bank. In February 2009, Beacon sold a 50 stake in the building to insurer Allianz for $254 million. The transaction valued the property at $508 million. Some market players... http://www.staging.realert.com/headlines.php?hid=148047 MetLife has originated a $160 million fixed-rate mortgage for a Beacon Capital partnership that acquired an office complex in Washington last month. The five-year loan is backed by the 398,000-square-foot Terrell Place complex, in the East End submarket. Beacon, a Boston fund shop, teamed up with GE Pension Trust to buy the property from Tishman Speyer of New York for about $265 million. The duo tapped a credit facility to finance the purchase and then lined up the loan from MetLife to pay down the line. MetLife competed with a bevy of other insurers, banks and foreign lenders for the Terrell Place assignment. Cassidy Turley arranged the mortgage, which has a loan-to-value ratio of 60. While MetLife and other insurers have been actively originating loans on high-end office and retail properties this year, most have involved refinancings. The Terrell Place loan is one of the few that have financed acquisitions. But the sales market has started to perk up in recent months, which should provide additional opportunities for lenders. Terrell Place is 99 occupied. The lead tenant, law firm Venable, leases 269,000 sf as its headquarters. The three-building property, with entrances at 575 Seventh Street NW and 650 F Street NW, is across from the Verizon Center office building and about 10 blocks east of the White House. The site was formerly occupied by a Hecht's department store, which was constructed in 1924. In 2003, a client of J.P. Morgan, acting in partnership with CarrAmerica, completed a... http://www.staging.realert.com/headlines.php?hid=147955 Investment manager Ares Capital Markets has hired veteran lender John Bartling to explore the possibility of setting up a commercial-mortgage operation. Bartling joined the Los Angeles firm in September as head of real estate. His mandate is to map out a game plan for Ares to finance commercial properties across the U.S. Ares Capital is a unit of Ares Management, an alternative-asset manager and investment advisor with $37 billion under management. Ares Capital, which is headed by senior partner Greg Margolies, manages $18 billion of assets via funds and separate accounts, with an emphasis on investments in leveraged loans, high-yield bonds and other fixed-income instruments. Now Ares sees potential in the commercial-mortgage market and is kicking the tires. Bartling, who remains based in Dallas, will examine whether it makes sense to proceed and will head up any resulting operation. Ares is evidently considering the origination of portfolio mortgages, not loans for securitization. Bartling previously was chief investment officer of AllBridge Investments, a high-yield investment firm in Charlotte headed by Larry Brown. Before joining AllBridge in 2006, Bartling ran WMC Management, which oversaw residential real estate, golf courses, hotels and resorts. In the late 1990s, he was chief executive of Lexford Residential, a Columbus, Ohio, REIT that owned and managed 402 apartment properties in the Midwest and Southeast. It was eventually acquired by Equity Residential Properties of... http://www.staging.realert.com/headlines.php?hid=147853 A new player in the B-piece market - Rialto Capital - has circled the junior classes of an upcoming $850 million commercial MBS deal led by Wells Fargo and Bank of America. Rival investors said that Miami-based Rialto won the bidding contest by agreeing to pay a price that translated into a pre-loss yield of 14. That was 2-3 percentage points lower than the yields accepted by B-piece buyers in other recent deals. Market players said Rialto, a subsidiary of homebuilder Lennar, had to pay a premium for being relatively unknown to issuers and senior investors. Rialto, which was formed in 2007, is indeed a new entrant, but the firm's chief executive, Jeffrey Krasnoff, is a seasoned B-piece player. In the 1990s, he worked in Lennar's high-yield-debt group. In 1997, Lennar spun off the business to form LNR Partners. Krasnoff ran LNR from 1997 to 2007, during which time the firm became the leading buyer of B-pieces. But LNR took a big hit when the CMBS market turned down. Rialto's chief investment officer is former Deutsche Bank managing director Bill Landis. At Deutsche, Landis ran the syndicated and principal-side financing business for the commercial real estate group. Last year, Rialto teamed up with AllianceBernstein and Greenfield Partners to win designation as a qualified asset manager for the U.S. Treasury Department's Public-Private Investment Partnership. Also, Rialto joined forces with Miami-based Lennar this year to buy two structured-loan pools from the FDIC that had a cumulative unpaid... http://www.staging.realert.com/headlines.php?hid=147752 Morgan Stanley's revived commercial MBS operation has won a roughly $175 million mortgage on a mall in Hawaii, its second big retail assignment in the past few weeks. A partnership between fund shop Blackstone and Glimcher Realty will use the five-year, fixed-rate loan to finance its $245 million acquisition of the 1 million-square-foot Pearlridge Center in Honolulu from Northwestern Mutual Life. The loan-to-value ratio is about 71. Meanwhile, Morgan Stanley, as expected, also landed a $235 million fixed-rate mortgage on Christiana Mall in Newark, Del. The bank was viewed as having the inside track a few weeks ago. The 1.1 million-sf mall, about 10 miles south of Wilmington, is owned by a joint venture between General Growth Properties of Chicago and Prime Property Fund, which is operated by Morgan Stanley. The assignments are the first big loans originated by Morgan Stanley since it restarted its CMBS shop in the spring. The bank was the dominant bookrunner of CMBS transactions through much of the 2000s, as well as a leading originator of securitized loans. But like everyone else, it disbanded its real estate origination group after the market crashed. Morgan Stanley is expected to pool the two mall loans with other mortgages in a large CMBS offering, perhaps by yearend. The bank is also expected to bring other lenders into the deal to increase its size. The Blackstone team's advisor, Eastdil Secured, shopped the loan on the Hawaii mall to foreign lenders, domestic banks, life companies and securitization progra... http://www.staging.realert.com/headlines.php?hid=147664 A New York State Teachers partnership is trying to line up a $200 million mortgage on the office building at 525 Market Street in San Francisco. Lenders are being asked to submit proposals for a five- or 10-year loan, with either a fixed or floating rate. The loan-to-value ratio would be roughly 55, pegging the building's value at about $365 million. The partnership's advisor, Eastdil Secured, is shopping the assignment to domestic and foreign banks, commercial MBS shops and life insurers. New York State Teachers and its partner, J.P. Morgan Asset Management, would use the proceeds to retire a $150 million interest-only mortgage from MetLife that matures in the spring. The sponsors are hoping to take advantage of aggressive bidding by lenders for assignments from established sponsors on Class-A properties in top markets. The 1 million-square-foot tower is 94 leased, with Wells Fargo as the lead tenant. It has a LEED energy-efficient certification from the U.S. Green Building Council. The 38-story building, at First Street, was constructed in 1972. Nomura gained control of it in September 1997 by exercising a clause in a restructured mortgage it had provided to Tishman Speyer of New York. The next year, New York State Teachers bought the building from Nomura for $240 million in an all-cash deal. J.P. Morgan acquired its ownership stake later. The property was unencumbered when MetLife originated its five-year, fixed-rate mortgage in 2006. New York State Teachers originally preferred a floating-r... http://www.staging.realert.com/headlines.php?hid=147548 LNR Partners and two other special servicers are jointly shopping more than $400 million of nonperforming hotel mortgages - the largest offering of distressed loans on a single property type since the market collapse. LNR is supplying most of the roughly 60 securitized loans, with C-III Asset Management and J.E. Roberts Cos. kicking in the others. A two-day online auction will start Nov. 1, run by a partnership between Jones Lang LaSalle and REDC. Bidders can make offers on individual loans. Unlike with sealed-bid auctions, offers will be posted live and seen by all participants, although the bidders' identities remain anonymous. Investors can then increase their bids, akin to public-outcry auctions. The offering is by no means the largest in recent months. For example, LNR this summer sold $950 million of soured commercial MBS loans to multiple buyers for an average of 45 cents on the dollar. But other large offerings have included loans on a mix of property types. This is the largest sale of loans to multiple borrowers on one property type. The portfolio is likely to draw interest from both debt managers interested in restructuring the loans and so-called quot;loan-to-ownquot; investors eager to gain control of the underlying properties. Improving fundamentals in the hotel sector will likely spur interest. The hotels range from full- to select-service properties. They are spread across 23 states, with concentrations in Florida, California and Georgia. Investors have yet to see final due-diligence materials, however, so... http://www.staging.realert.com/headlines.php?hid=147435 At least a half-dozen insurance companies and commercial MBS lenders are scrambling to land a $500 million mortgage on Fashion Valley Mall, one of the West Coast's top malls. The owner, a 50-50 partnership between Simon Property and Prime Property Fund, began shopping for a long-term loan on the San Diego shopping center a few weeks ago. The Simon team is close to making a final selection. The assignment is generating keen interest because of the mall's high quality. Insurers paired off to bid, because they tend to limit the size of exposure to any one loan to about $250 million. Prudential Mortgage teamed up with Northwestern Mutual, while MetLife partnered with New York Life, according to market players. CMBS shops in the running include Deutsche Bank, Goldman Sachs and J.P. Morgan. But some lenders said securitization programs could face an obstacle. There was talk that Prime Property Fund, which is operated by Morgan Stanley, might balk at the inclusion of a quot;bankruptcy carveoutquot; in the loan terms. Such a provision, which has become the norm in CMBS loans, automatically converts a nonrecourse commercial mortgage to full recourse status if a borrower voluntarily files for bankruptcy. The provision is intended to prevent defaulted borrowers from delaying foreclosures by filing for bankruptcy, because doing so would make them personally liable for the loan amount and authorize the lender to pursue all of the borrower's assets to gain repayment. The 1.7 million-square-foot Fashion Valley Mall is near the... http://www.staging.realert.com/headlines.php?hid=147309 High-yield investment shop H/2 Capital has circled the below-investment-grade portion of J.P. Morgan's upcoming $1.2 billion conduit deal. While the Stamford, Conn., firm has made a number of opportunistic investments in commercial real estate debt since opening in 2004, this marks its first play in the B-piece arena. H/2 agreed to take down the bonds at a price that will provide a yield in the mid- to high teens, market players said. The company, headed by former iStar Financial president Spencer Haber, operates private equity funds and hedge funds. Since the new-issue commercial MBS market started to revive last November after a 17-month halt, only two other transactions have been structured with B-pieces. A debt fund operated by BlackRock acquired the B-piece of a $716.3 million multi-borrower offering that J.P. Morgan and Ladder Capital priced on June 11 (J.P. Morgan Chase Commercial Mortgage Securities Trust, 2010-C1). And hedge-fund shop Elliott Management won the bidding contest for the junior portion of a $788.5 million offering that Goldman Sachs, Citigroup and Starwood Property priced two weeks ago (GS Mortgage Securities Trust, 2010-C1). J.P. Morgan's upcoming deal will resemble its June transaction in terms of loan-workout rights and other structural features, market players said. In the June transaction, the B-piece holder has control over the appointment of the special servicer - and therefore the workout of any loans that go sour - in line with market tradition. But s... http://www.staging.realert.com/headlines.php?hid=147231 Cornerstone Real Estate is seeking to raise $500 million of equity for a fund that would originate commercial mortgages on transitional properties. Cornerstone, the real estate arm of Massachusetts Mutual, would provide borrowers with relatively high leverage - up to 75 of a property's value. In return, it would collect a fee upon the sale or refinancing of the collateral. quot;Essentially, they are providing flexible capital to the borrower via higher-LTV bridge financing,quot; said an investor familiar with the plan. quot;They get a piece of the action upon sale or refinance.quot; The vehicle, Cornerstone Enhanced Mortgage Fund 1, has a return goal of 11-14. The loans would likely carry terms of 1-3 years, according to the investor. With leverage, the fund could write $1 billion of mortgages. Since the credit crunch began to ease, most lenders have focused on long-term loans on stable properties, bypassing riskier mortgages on properties that need to be renovated or leased up. Hartford-based Cornerstone is angling to fill that void. The company, which declined to comment, is shooting for a first close by yearend. That timetable is seen as somewhat aggressive, given the ongoing reluctance of institutional investors to commit fresh capital to real estate and other investment vehicles. It would be the third debt fund formed by Cornerstone. In June, the company announced that it had closed on $1.75 billion of equity for a fund and a separate account that invest in plain-vanilla commercial mortgages. At the... http://www.staging.realert.com/headlines.php?hid=147120 Deutsche Bank, which was thinking about teaming up with Bank of America and Wells Fargo on a pooled commercial MBS offering, is going in another direction. The bank now plans to launch a roughly $1 billion offering with Ladder Capital and perhaps another lender as soon as late September. Market players said Deutsche is in discussions with Ladder about teaming up, and appears to be close to striking an agreement. Deutsche and Ladder declined to comment. Ladder, a mortgage REIT founded in late 2008 by former UBS real estate chief Brian Harris, contributed $154.7 million of loans to a $716.3 million offering that J.P. Morgan led in June (J.P. Morgan Chase Commercial Mortgage Securities Trust, 2010-C1). That transaction was the second multi-borrower deal to emerge since the CMBS market seized up in mid-2008. Deutsche apparently is on the prowl for at least one more partner as well. The bank had discussions in recent weeks with Basis Investment of New York, but that idea now appears to be dead. Basis, which declined to comment, is helmed by former CWCapital executive Tammy Heyman-Jones, with backing from JEMB Realty of New York. It's unclear why Deutsche didn't proceed on a deal with BofA and Wells, although some market pros said Deutsche may have had a faster timetable than its prospective partners. quot;I think one bank may have been ready to go, while another bank was in no big hurry, and that led to the split,quot; said one industry player. quot;It's hard to coordinate that many lenders in a single dealquot; because of the... http://www.staging.realert.com/headlines.php?hid=147019 (SEE CORRECTION BELOW) Hypo Real Estate is seeking a buyer for a $110 million mezzanine loan on five well-known luxury resorts owned by CNL Hotels. Broker Eastdil Secured is slated to take bids on the loan next week, and based on early discussions with investors the credit is expected to sell for roughly 70 cents on the dollar. The interest-only debt, pegged to 175 bp over one-month Libor, is secured by the following properties: The 780-room Grand Wailea Resort Hotel amp; Spa on Hawaii's island of Maui. The 796-room La Quinta Resort amp; Club in La Quinta, Calif. The 734-room Arizona Biltmore Resort amp; Spa in Phoenix. The 693-room Doral Golf Resort amp; Spa in Miami. The 279-room Claremont Resort amp; Spa in Berkeley, Calif. Like all luxury resorts, the five properties have suffered during the economic downturn. Occupancy fell to 61 last year, from 66 in 2008. The resorts generated $68.7 million of net operating income in 2009, down sharply from $123.9 million the previous year. The revenue drop-off caused the portfolio's debt-service-coverage ratio to fall to 1.2 to 1. The properties are helped, though, by ancillary revenue streams. Four of the five hotels have at least 60,000 square feet of meeting space. Four of the five properties also feature well-regarded golf courses. In the twelve months that ended May 31, the portfolio threw off more than $250 million of non-room revenue, according to marketing materials shown to investors. The debt is part of a $1.5 billion financing package that Orlando-based CNL lined... http://www.staging.realert.com/headlines.php?hid=146908 Douglas Emmett Inc. has lined up a commitment from a Eurohypo syndicate for a $400 million floating-rate loan backed partly by a large Hawaiian office complex that it acquired last month. The Santa Monica, Calif., REIT bought the 960,000-square-foot Bishop Square complex in Honolulu from a partnership between Northwestern Mutual Life and Calpers for $232 million. Douglas Emmett funded the acquisition with cash and money drawn down from its $350 million secured credit facility from a Bank of America syndicate. It will now replace that financing with the Eurohypo loan, for which it has also pledged some California office properties. The Eurohypo syndicate also includes Wells Fargo and PB Capital. The size of each lender's participation is unclear, but Eurohypo committed to fund half of the total, according to market players. But the German bank isn't expected to retain all of that amount on its own books. The buzz is that the syndication was oversubscribed. Eurohypo's lending relationship with Douglas Emmett goes back at least several years. The REIT has a conservative profile as a borrower, relying mostly on low-leverage loans for its well-leased properties. The company owns 57 office properties encompassing 14.3 million sf and nine apartment buildings with 2,868 units. The properties are concentrated in Southern California and Hawaii. The two-building Bishop Square complex is the largest office property in Hawaii. It is 91 occupied by about 200 tenants. With the acquisition, Douglas Emmett said it now controls... http://www.staging.realert.com/headlines.php?hid=146779 Bank of America has tapped veteran lender George Kok to oversee conduit lending. Meanwhile, the buzz is that BofA, Deutsche Bank and Wells Fargo are thinking of teaming up on a securitization later this year. With the hiring of Kok, BofA is installing a well-known face at the top of its conduit operation, which originates small-to-medium-size commercial mortgages for securitization. Kok oversaw conduit lending at Merrill Lynch from 2001 to 2008, following a five-year stint running the origination and underwriting group for Morgan Stanley's conduit operation. Before joining Morgan Stanley, he worked at Capital Lease Funding and Prudential Insurance. Most recently, Kok was head of credit at FundCore Finance of New York. Kok and three other Merrill alumni - Steven Ball, John Mulligan and Kevin Davis - launched that lending shop last August with backing from private equity shop Black Creek of Denver. Kok, a managing director, starts at BofA next week. He will report to managing director Mike Mazzei, head of commercial real estate debt capital markets. Managing director David Fallick continues to oversee large-loan originations in the capital-markets group. Along with perhaps a half-dozen other lenders, BofA has resumed originating loans for securitization following the market meltdown. CMBS shops, however, are having a hard time amassing enough collateral for deals because of strong competition from insurers and a limited pool of borrowers able to meet the more-stringent underwriting standards now... http://www.staging.realert.com/headlines.php?hid=146664 Former Morgan Stanley executive Kara McShane will join Wells Fargo next week to spearhead the bank's drive to set up a capital-markets operation for commercial real estate. McShane, a managing director, will shepherd commercial MBS transactions to market and also serve as chief trader of new-issue CMBS deals. She will report to managing director Julie Caperton, head of asset-backed-finance and securitization. McShane's post mirrors the one she held at Morgan Stanley before the bank slashed its CMBS group at the end of 2008. She ran that bank's capital-markets team for structured-finance products. When the securitization market was flourishing, Wells was an active originator of CMBS loans, but lacked the capability to underwrite securitizations and distribute the resulting bonds. So it contributed loans to securitizations led by Morgan Stanley. But Wells inherited a broker-dealer arm via its acquisition of Wachovia atyearend 2008. Now it intends to start underwriting transactions, an effort McShane will oversee as capital-markets chief in the securities and investment group. McShane, who declined to comment, is expected to recruit staffers to build out the platform. While many other lenders remain on the sidelines following the market slump, Wells has been relatively active in recent months. The bank, whose $130.4 billion commercial real estate loan portfolio is already the nation's largest, has been building out its CMBS lending team. As previously reported, it is setting up a... http://www.staging.realert.com/headlines.php?hid=146552 Beating out a host of rivals, Colony Capital is in line to buy a 40 stake in a $1.85 billion portfolio of commercial mortgages from the FDIC. The Los Angeles fund shop has been selected as the winning bidder and was in final negotiations on the price this week. It is expected to pay about 58 cents on the dollar, or $430 million, according to people familiar with the offering. The transaction values the portfolio at about $1.1 billion. Colony and the FDIC declined to comment. The FDIC, which is retaining a 60 interest in the assets, will supply low-cost debt financing for half of Colony's purchase, reducing the firm's cash outlay to about $215 million. Other firms that looked at the portfolio included Lennar Corp. of Miami, Lone Star Funds of Dallas and Starwood Capital of Greenwich, Conn. Barclays is advising the FDIC on the auction. The portfolio contains more than 1,500 commercial mortgages originated by nearly two dozen failed lenders. Loans from First Bank of Calabasas, Calif., and Las Vegas-based Community Bank of Nevada made up about half of the collateral pool, according to initial marketing materials provided to investors. About half the mortgages are performing, with a weighted average coupon of 7.5, according to those materials. The portfolio's makeup changed slightly in recent weeks, as roughly $120 million of mortgages were removed because of maturities, restructurings or for other reasons. Bids were taken about a month ago. The deal would be the second FDIC portfolio that Colony... http://www.staging.realert.com/headlines.php?hid=146455 Citadel is ramping up to originate commercial mortgages for securitization. The hedge fund giant, which formed a commercial real estate group in April, plans to start writing fixed- and floating-rate mortgages in about six months. Citadel has been aggressively branching into the commercial real estate arena. Early this year, the Chicago firm's Citadel Securities unit set up a broker-dealer desk to trade structured products, including commercial MBS, in the secondary market. It also created the real estate group, under the direction of managing director Joseph Vassallo, a former CMBS lender at Credit Suisse. Soon after, Citadel hired three other former Credit Suisse staffers for the New York-based group, including two who specialized in CMBS lending. Those hirings sparked speculation that Citadel planned to launch a securitization program, but the group has initially focused on trading B-notes and mezzanine debt in the secondary market on behalf of clients and its own account. Now comes word that the group also plans to get into direct lending. It is laying the groundwork for a program that would originate and securitize fixed-rate loans ranging from $10 million to $50 million. Citadel would retain the mortgages until they are funneled into CMBS offerings, which the firm could float on its own or with partners. Citadel will also selectively originate large floating-rate loans, which would be placed with insurance companies and other investors. Vassallo's four-member team is still setting up the internal... http://www.staging.realert.com/headlines.php?hid=146343 TIAA-CREF, which holds as much as $89 million of subordinate debt on a suburban Seattle mall owned by a General Growth Properties partnership, is thinking about refinancing the property's $196.9 million securitized mortgage to protect its investment. General Growth and its partner, New York Common Fund, face a deadline next month to pay off close to $300 million of debt on Alderwood Mall in Lynwood, Wash. If the duo cannot refinance the securitized mortgage, TIAA might step in to provide fresh financing as part of a reworking of the debt package, market players said. TIAA declined to comment specifically on the property, but said in a statement: quot;We are discussing strategies to manage our existing mortgage loan maturities, including loan extensions and refinances of loans with attractive credit characteristics.quot; The original debt package, arranged by Morgan Stanley in 2005, consisted of a $210.8 million senior loan, a $54.4 million B-note and a $35 million mezzanine loan. Morgan Stanley securitized the 4.7 senior loan, whose balance has since amortized to $196.9 million, and placed the B-note and the mezzanine loan with TIAA. It's unclear if the subordinate debt has amortized. The mall was built in 1979 and renovated most recently in 2004. While the property encompasses 1.3 million square feet, the debt is backed by only 565,000 sf. The anchor stores - Macy's, Sears, JC Penney and Nordstrom - aren't part of the collateral. The mall's occupancy rate was 95 at the end of last year. General Growth, a Chicago... http://www.staging.realert.com/headlines.php?hid=146210 The CRE Finance Council is close to unveiling a proposal to increase the level of detail that servicers must disclose when they modify securitized loans. The trade group - formerly known as the Commercial Mortgage Securities Association - is also ready to release a proposed list of quot;best practicesquot; that investors want commercial MBS issuers and servicers to follow in the wake of the market debacle of the past few years. Both initiatives will be hot topics at the council's annual convention in New York next week. Almost 800 people have signed up so far for the gathering at the Waldorf-Astoria hotel, up from 633 last year. The increased turnout reflects the brighter outlook for the lending market. While attendance will still fall well shy of the 1,262 peak in 2007, there's no question that the mood of the market has improved since last year's convention. Attendance is also being bolstered by the association's decision last year to expand beyond its traditional securitization focus to other parts of the lending market. The group created six quot;forumquot; groups, for investment-grade bondholders, CMBS issuers, portfolio lenders, multi-family lenders, servicers and investors in securities or loans. A council committee is expected to release key elements of a proposal to expand the information provided to bondholders when a CMBS loan is modified. Modifications have become much more frequent as the number of loans in special servicing has soared, but bondholders have complained about the difficulty of tracking the changes.... http://www.staging.realert.com/headlines.php?hid=146100 Securitized office mortgages, which initially were somewhat insulated from the market distress, are increasingly being dragged down as well. Deteriorating office loans were the impetus behind big spikes last month in special-servicing and delinquency rates for commercial MBS loans. The percentage of CMBS loans in special servicing, by balance, jumped to 11.7 at the end of May, from 11.3 a month earlier, according to Trepp. Meanwhile, the 60-day delinquency rate soared by 49 bp, to 7.97, Fitch reported. The increases dashed hopes in April that the measures of credit deterioration were starting to peak. The amount of office mortgages in special servicing climbed by a net $2.3 billion last month, or 12, to $21 billion. That accounted for three-fifths of the overall $3.7 billion increase in special-servicing volume. For the first time in this cycle, office loans are the largest category of loans in special servicing, exceeding retail mortgages, whose total declined by 3.4, to $20.2 billion, because some loans to General Growth Properties were removed after modifications. And the actual amount of office loans in special servicing is much higher. Late in May, a massive $4.9 billion mortgage was transferred to special servicing, according to Fitch. That transfer occurred too late to be included in the servicer reports that Trepp uses to compile its figures. Also, about $800 million of a $2.7 billion loan to Beacon Capital Partners hasn't yet shown up in the figures. Counting those loans, the amount of office mortgages... http://www.staging.realert.com/headlines.php?hid=145986 Crexus Investment, a mortgage REIT formed last year by Annaly Capital, plans to step up its investment in subordinate commercial real estate debt. Since raising $257 million via an IPO in September, the New York company has mostly acquired super-senior commercial MBS, tapping low-cost financing from the Federal Reserve's Term Asset-Backed Securities Loan Facility. Now that the Fed program has expired, Crexus is turning its sights to higher-yielding debt. It will look to invest in the junior portions of newly originated commercial mortgages and in the B-pieces of new-issue CMBS transactions. Crexus is looking to achieve yields quot;in the low double digitsquot; on the investments, said investment chief Robert Karner. The REIT still has roughly $150 million of untapped capital from the IPO. Karner noted that Crexus has always been interested in subordinate debt. quot;But now it is more of a focus,quot; he said. quot;We took some time to evaluate this space.quot; The REIT is in talks with a handful of senior institutional lenders to form alliances under which it would have the option to take down the B-notes of their originations and acquire the B-pieces of their securitizations. Last year, Crexus formed a strategic relationship with Principal Real Estate Investors, which agreed to originate, underwrite, close and service loans for the REIT. The servicing capability is critical if Crexus is to invest in B-pieces. With the new emphasis, Crexus joins the ranks of fledgling B-piece buyers, which are moving in to replace some... http://www.staging.realert.com/headlines.php?hid=145890 A partnership between insurer AXA Equitable and J.P. Morgan Investment Management is seeking a loan of up to $375 million on the office building at 1285 Avenue of the Americas in Midtown Manhattan. The duo wants a fixed-rate loan with a 10-year term, lenders said. The balance would equal less than half of the property's value. The low leverage and the fact that the 1.6 million-square-foot tower is fully leased make the assignment especially attractive for lenders. quot;Term sheets are flying on this one,quot; said one veteran lender. quot;It's a hot deal. It's going to be very competitive.quot; The buzz is that insurance companies and banks will likely trump commercial MBS lenders. CMBS shops would have a hard time competing with the prepayment and interest-only terms that portfolio lenders can offer, market players said. Holliday Fenoglio Fowler is shopping the assignment for the AXA partnership. It had asked for proposals on a loan of $325 million to $375 million, but lenders expect the balance to end up at the high end of that range. The existing loan, which has paid down to $305.2 million from its original balance of $372.3 million, doesn't mature until August 2011. But with lenders competing aggressively for low-leverage loans on well-leased properties, borrowers are motivated to shop for refinancing early to get the best possible terms. The tower stretches from West 51st Street to West 52nd Street on the west side of Sixth Avenue, about a block from Rockefeller Center. It was developed in 1961... http://www.staging.realert.com/headlines.php?hid=145763 Wells Fargo has originated a $50 million mortgage on a suburban Chicago office complex that fund operator Angelo, Gordon amp; Co. acquired in March. The five-year floater, which closed two weeks ago, is pegged to 285 bp over one-month Libor. Angelo Gordon used a swap to fix the rate at 5.8. The loan also carries an quot;earn outquot; provision that permits the fund operator to draw down an additional $5 million if the property achieves prescribed performance hurdles. The loan-to-value ratio is 62. The 641,000-square-foot complex is in Lisle, Ill., about 25 miles west of downtown Chicago. Angelo Gordon acquired it for $80 million of cash from a Tishman Speyer joint venture, which had acquired it in 2006 for $107 million. The property, called Central Park at Lisle, consists of a seven-story building at 4225 Naperville Road that was completed in 1991 and an eight-story building at 3333 Warrenville Road that was finished in 2000. There is also a 7.5-acre parcel suitable for development. New York-based Angelo Gordon made the acquisition via its $794 million AG Core Plus Realty Fund 2. http://www.staging.realert.com/headlines.php?hid=145633 Lending by the largest insurance companies slumped sharply for the second straight year in 2009, but the industry is now back in a growth mode. Originations by the 30 insurance organizations with the largest mortgage portfolios plunged by 41 in 2009, to $22.4 billion, according to Commercial Mortgage Alert's annual survey of lending by life insurers (see ranking on page 10). That was on top of a 35 decline in 2008. The upshot: Annual lending plummeted by $34.4 billion from the peak of $56.8 billion in 2007. All but three of the Top 30 firms posted a decline in originations last year. MetLife regained the title of most-active originator, even though its volume slipped by 26, to $3.4 billion. Allstate ranked second, with $2.44 billion of originations, followed by Prudential ($2.38 billion), John Hancock ($1.5 billion) and Pacific Life ($1.4 billion). But all signs indicate that the tide has turned. Across the board, insurers have captured many of the best lending opportunities that have emerged so far in the recovery, and a handful of firms plan to double their originations this year. The origination decline in 2008 and 2009 mirrored the freeze in the capital markets at large. quot;There were limited opportunities,quot; said one veteran insurance-company lender. quot;Investment-sales volume had fallen dramatically from the peak in 2007, and there was little in the way of construction loans maturing that had enough leasing to convert to a permanent loan.quot; Added another longtime lender:... http://www.staging.realert.com/headlines.php?hid=145520 MetLife is offering 22 performing commercial mortgages with a combined balance of $196.5 million. The fixed-rate loans, which have a weighted average remaining term of less than two years, are being pitched to lenders seeking the inside track on refinancing opportunities. The loans' 6.6 weighted average coupon also offers a relatively attractive spread. The mortgages are expected to trade for close to par value or, in some cases, above par. The bidders are likely to include mortgage REITs, mortgage funds, banks and securitization shops. Bids are due by May 14. CB Richard Ellis is handling the marketing campaign. MetLife is evidently offering the loans as part of its routine portfolio management. Many of the mortgages are smaller than the insurer's current target size. MetLife could also be seeking to take advantage of the strong secondary market for performing loans. Now that liquidity has returned after a long dry spell, the secondary market is once again an option for portfolio lenders seeking to fine-tune the makeup of their portfolios. The loans being offered by MetLife represent well less than 1 of its $33 billion commercial mortgage portfolio. The portfolio has been divided into four pools by property type. There are eight office loans with an unpaid balance of $97.2 million, three industrial/warehouse loans totaling $37.6 million, four multi-family mortgages totaling $34.8 million, and seven retail loans totaling $27 million. Investors can bid on individual pools or the entire portfolio.... http://www.staging.realert.com/headlines.php?hid=145426 Goldman Sachs has agreed to originate a $77 million commercial MBS loan for Taubman Centers on a Michigan mall. The bank is one of about a half-dozen securitization players seeking to amass collateral for their first multiple-borrower transactions since the market crash. Goldman is known to have originated at least one other mortgage so far - a $55 million loan on a mall owned by Glimcher Realty. Goldman is believed to be shooting to bring a securitization to market in June or July. The target size is unclear, but securitization programs generally think deals would have to reach the $500 million threshold to make sense. Multiple lenders might join forces to achieve critical mass. The Taubman loan will be funded soon, according to market players. It will be backed by the 612,000-square-foot Mall at Partridge Creek, in Clinton Township, which is 25 miles north of Detroit. The loan's terms aren't known, although mortgages originated by CMBS programs so far this year have carried fixed rates and terms of five or 10 years. In an SEC filing in February, Taubman said it planned to refinance the loan in the first half at a rate of nearly 6. The REIT, based in Bloomfield Hills, Mich., would use the proceeds to help retire an $81 million construction loan, pegged to 115 bp over Libor. That loan, originated in 2006, matures in September. The mall, which opened in 2007, is anchored by Nordstrom, Parisian and MJR Digital Cinema 14. The loan that Goldman wrote for Glimcher is backed by the 566,000-sf Mall at... http://www.staging.realert.com/headlines.php?hid=145308 As the commercial MBS rally rages on, investors are finding it easier, and often cheaper, to line up financing for bond purchases. After starting to make credit available again to bond buyers late last year, many of the big Wall Street dealers have become more aggressive over the last month or so. quot;Now, it's really competitive,quot; said one portfolio manager at a hedge fund. quot;We'll get two guys willing to finance us, and we can play them off each other. A couple of months ago it was just a question of whether they could do it at all.quot; Bank of America and J.P. Morgan are particularly willing to provide short-term loans known as repurchase agreements, or quot;repos.quot; Barclays, Credit Suisse, Morgan Stanley and RBS have also been busy, and UBS seems to be stepping up its activities, investors said. The recent surge of repo lending has coincided with a dramatic rise in CMBS prices. The rally continued this week. Bonds from Class A-4 of the benchmark GG-10 deal changed hands yesterday at about 295 bp over swaps - down 55 bp from a week earlier. The rebounding market has given dealers more confidence to provide credit. What's more, dealers' funding costs have fallen in recent weeks. That has pushed down borrowing rates and enabled investors to boost leverage. Dealers are also more likely to offer to finance bonds they are selling now, without making investors ask for it. Following a two-year absence, dealers resumed offering repo lines as liquidity improved in the secondary market during the latter half of last... http://www.staging.realert.com/headlines.php?hid=145189 Most of the re-emerging securitization shops are focusing their origination efforts on loans of at least $25 million, largely bypassing traditional conduit mortgages for now. The lenders see that as the most-effective strategy for amassing enough loans for multi-borrower securitizations. The approach also reflects the fact that commercial MBS shops, after laying off hundreds of originators and underwriters in 2008 and 2009, now find themselves back in the game with bare-bone crews. So they can get quot;more bang for the buckquot; by focusing on relatively large loans. quot;It's the same amount of work to do when you're underwriting a loan whether it's for $10 million or for $50 million,quot; said one industry veteran. quot;It means there is less work they have to do on the pool overall.quot; What's more, traditional conduit loans - generally ranging from $2 million to $20 million - often are backed by poorer-quality properties in secondary or tertiary markets. Gun-shy CMBS shops are still leery of such business. The emphasis on large mortgages is reflected in the first multi-borrower CMBS deal since June 2008 - a $309.7 million offering that RBS and Natixis were scheduled to price today. The transaction is backed by six loans ranging in size from $28.7 million to $77.7 million. At the same time, CMBS programs are on the prowl for loans of $250 million or more that would be securitized in stand-alone deals. A number of borrowers are discussing potential transactions with CMBS lenders. Even with the large-loan focus,... http://www.staging.realert.com/headlines.php?hid=145066 Wells Fargo has originated a $100 million Freddie Mac mortgage on a Manhattan apartment building. The 10-year loan, which closed two weeks ago, is backed by the 313-unit Fairfax apartments, at 201 East 69th Street in the Lenox Hill district. The borrower, TF Cornerstone of New York, used most of the proceeds to retire a fixed-rate loan that New York Life had provided in 2000. That loan, which had an original balance of $75 million, had amortized to $66 million. This was the second large agency loan that Wells provided to TF Cornerstone in the past few months. In December, the bank originated a $121.4 million Freddie mortgage on Chelsea Centro, a 356-unit building at 200 West 26th Street. The excess cash from both refinancings quot;gives our company even more ammunition to pursue acquisitions and continue developing our portfolio,quot; said Derek Marcus, an acquisition and finance executive at TF Cornerstone. Singer and Bassuk of New York advised TF Cornerstone on both loans. The 16-story Fairfax, which is fully occupied, includes 20,000 square feet of retail space and 7,500 sf of office space on the bottom two floors, as well as a 72-car garage. The building was constructed in 1927 as manufacturing and warehousing space for silver artifacts. It was later used as office space by the FBI. In 1980, TF Cornerstone's predecessor, Rockrose Development, converted the building for residential use. TF Cornerstone, which is controlled by brothers Tom and Fred Elghanayan, split off from Rockrose last year. Rockrose... http://www.staging.realert.com/headlines.php?hid=144952 A joint venture between Berkshire Group and Carmel Partners has acquired the $52.9 million subordinate portion of a $528.9 million mortgage on the massive Starrett City housing complex in Brooklyn. Wells Fargo originated the 10-year loan in December and sold it to Freddie Mac. Freddie securitized the $476 million senior portion on Feb. 25 via a two-class transaction underwritten by Citigroup and guaranteed by the agency (FREMF, 2010 K-SCT). Freddie placed the junior portion, structured as an unrated and nonguaranteed class, with the Berkshire partnership. Market players said the partnership paid a discount to the face amount that translated into a yield in the mid-teens. This is Berkshire's second transaction with Freddie in a few months. In October, the Boston investment firm, acting with an unidentified partner, acquired the unrated $80.6 million B-piece of a $1.1 billion Freddie offering backed by mortgages to multiple borrowers (FREMF, 2009-K4). Starrett City was appraised at $770 million last May. That puts the loan-to-value ratio at 68.7. The debt-service-coverage ratio is 1.14 to 1. The loan's original $531 million balance was paid down by $2.1 million by the time of the securitization. Berkshire and San Francisco-based Carmel each took down half of the junior class. Berkshire placed its portion in its Berkshire Multifamily Value Fund 2, a $590 million vehicle that had its final close in 2008. The fund, which also acquired the Freddie B-piece in October, is run by the group's Berkshire... http://www.staging.realert.com/headlines.php?hid=144837 The debt-fund bandwagon has hit a speed bump. The number of active and planned high-yield debt funds has slipped to 68 from 73 a year ago, according to an annual review of high-yield real estate funds by sister publication Real Estate Alert. That reverses a five-year string of increases (see list on Pages 9-11). More notably, the funds have significantly lowered their aggregate equity goals, in a bow to the difficulty of attracting capital from loss-ridden investors. The total amount of equity being sought now is $33.6 billion, down 31 from $48.4 billion a year ago. The review tracks both funds seeking to raise equity and fully operational vehicles that have invested less than 75 of their total equity. The debt funds identified in this year's review have already closed on $14.3 billion of commitments, or 43 of the aggregate goal. Overall, the review identified 414 property and debt funds seeking annual returns of at least 10, after fees. Debt funds accounted for 14 of the total equity being solicited, down from a 16 share a year ago. The number of debt funds had risen steadily from 24 in 2005 to the peak of 73 last year. While the number slipped to 68 this year, it is still the second-highest annual total. Most debt funds have the capability of either buying distressed debt or originating mortgages. A handful focus exclusively on originations. Among the funds that can do both, most have concentrated on debt acquisitions thus far. Debt funds are now facing... http://www.staging.realert.com/headlines.php?hid=144730 The FDIC's long-awaited program for securitizing real estate assets inherited from failed banks is starting to take shape. Last Friday, the agency floated $1.8 billion of notes backed by residential MBS from seven collapsed banks. On Wednesday, it conducted its first commercial MBS transaction - a $1.4 billion offering backed by condominium-construction loans, other commercial mortgages and foreclosed properties from Corus Bank. And next week, it is expected to launch an offering backed by residential mortgages. The FDIC is guaranteeing the low-yield bonds in all three offerings and tapped Barclays as the sole underwriter for each. Meanwhile, the agency is also working on a series of residential and CMBS transactions in which it would provide limited or no guarantees to bondholders. The FDIC is being advised on that effort by Pentalpha, an advisory shop in Greenwich, Conn., and Sandler O'Neill amp; Partners, a New York investment-banking boutique. The FDIC is close to selecting underwriters for the first deals. Because of the spike in failed banks stemming from the market downturn, the FDIC has inherited an avalanche of loans, securities and properties. Just as it did during the last major real estate collapse in the early 1990s, the agency is turning to securitization as a way to liquidate or finance some of those assets. This week's CMBS deal stemmed from the failure of Corus, a Chicago bank brought to its knees by a heavy concentration of condominium-construction loans. In October, the FDIC... http://www.staging.realert.com/headlines.php?hid=144613 The ongoing decline in commercial MBS credit quality continued at a rapid pace in February. The percentage of CMBS loans in special servicing spiked to 10.6, from 10 at the end of January, according to Trepp (see tables on Pages 10-11). Meanwhile, the 60-day delinquency rate for CMBS loans jumped another 29 bp, to 6.29, according to Fitch. At the end of February, $76.6 billion of the $722 billion of outstanding CMBS loans in the U.S. were in special servicing. The net amount of loans in special servicing climbed by 8.5, or $4.3 billion, last month. There was a net increase of 341 loans, bringing the total to 4,332. The special-servicing rate, now more than six times higher than the yearend 2008 level of 1.62, is being driven up by disproportionately large loans that are running into trouble. While the average CMBS loan is $12 million, the average loan in special servicing is 50 larger, noted Trepp managing director Manus Clancy. Last month 10 loans of $100 million or more were transferred to special servicers. Among them were the $419.6 million senior portion of a $675 million loan to Broadway Real Estate Partners and Lehman Brothers on the office building at 237 Park Avenue in Midtown Manhattan; a $284.5 million loan on a MeriStar hotel portfolio; a $249.8 million mortgage to developer Joseph Moinian on the office building at 1775 Broadway in Midtown Manhattan; and a $223.1 million mortgage to a partnership on an office portfolio in Woodbury, N.Y. A large proportion of loans transferred to... http://www.staging.realert.com/headlines.php?hid=144507 Spring Hill Capital, which received its broker-dealer license from the Financial Industry Regulatory Authority on Wednesday, plans to hire up to 10 structured-finance specialists by yearend. The New York company wants to beef up its 20-member staff so it can take on assignments to distribute new issues of commercial MBS and other structured-finance products as markets revive. The firm, which was formed about a year ago, also wants to step up trading of CMBS, residential mortgage bonds, CDOs and asset-backed securities in the secondary market, where it has been crossing bonds on a borrowed license since last year. Spring Hill has already started recruiting a structured-product sales chief, said managing partner Kevin White. He's also interviewing candidates for the sales and research openings, which range from entry-level to senior posts. The sales-and-trading desk mostly targets illiquid securities, commercial real estate debt and equity. The firm also provides advisory services and is in the process of setting up a commercial-property fund. White said the three-prong strategy differentiates the company from a slew of other broker-dealers that have cropped up during the credit crunch. Its advisory clients in the commercial real estate sector include insurers, regional U.S. banks and large European banks that need help evaluating and managing their investments in distressed CMBS, CDOs, mortgages and properties. Spring Hill also works with special servicers and CDO managers to restructure or liquid... http://www.staging.realert.com/headlines.php?hid=144412 LBA Realty is seeking a $130 million mortgage on ATamp;T Center in Los Angeles. The loan would equal about 60 of the office complex's estimated $220 million value. LBA is pursuing a five-year loan, with either a fixed or floating rate. The fund operator would use most of the proceeds to retire a $105 million loan from MetLife that matures this spring. LBA's advisor, Eastdil Secured, is shopping the assignment to regional banks, foreign banks, insurance companies and securitization programs. The 1 million-square-foot complex encompasses the 32-story Tower Building (formerly known as SBC Tower), at 1150 South Olive Street, and the 11-story Hill Building, at 1149 South Hill Street. LBA bought the buildings in 2005 for $129 million from a joint venture between Canyon-Johnson Urban Fund and New Pacific Realty of Los Angeles. It funded the acquisition with the interest-only MetLife loan, which consisted of a $65 million fixed-rate portion and $28 million floating-rate portion that were funded up front, plus $12 million that was drawn down over time for capital expenditures and leasing costs. The buildings were formerly part of a three-building complex called Transamerica Center. The other tower, with 492,000 sf, is now called the Broadway Building and is owned by the City of Los Angeles. LBA, of Irvine, Calif., spent $35 million renovating the two buildings, rebranding them as ATamp;T Center. As part of the upgrade, it added a two-story, lit crown to the top of the Tower Building. LBA has signed or... http://www.staging.realert.com/headlines.php?hid=144301 Developers Diversified Realty has pulled the plug on its plan for a second round of financing via the commercial MBS market. The fate of the proposed CMBS deal was sealed on Tuesday when the shopping-center REIT turned to the equity market, selling $304 million of common shares. Late last year, Developers Diversified gave the moribund CMBS sector a big boost by conducting the first offering in 17 months. Goldman Sachs originated a $400 million loan for the Beachwood, Ohio, REIT in October and securitized it the following month. Developers Diversified planned a follow-up offering this quarter of about the same size, via Citigroup. But now the company has decided not to proceed. The REIT's chief investment officer, David Oakes, confirmed the decision on Wednesday. quot;We believe the CMBS market is still available for well-structured deals like ours, but we have not opted to pursue an additional CMBS transaction at this time,quot; he said, declining to elaborate. The move leaves the CMBS pipeline empty for now, although a handful of lenders are trying to build loan pools for conduit deals. The list includes Bank of America, Bridger Financial, Cantor Fitzgerald, Citigroup, Deutsche Bank, Goldman, J.P. Morgan and RBS. Developer Diversified's first deal was fostered by the Federal Reserve's TALF program, which was designed to jumpstart frozen securitization markets. Under the program, formally known as the Term Asset-Backed Securities Loan Facility, buyers of top-grade securities can get low-cost loans from the Fed. The... http://www.staging.realert.com/headlines.php?hid=144170 The percentage of CMBS loans in special servicing has reached double digits. At the end of last month, a record 10 of securitized commercial mortgages, by balance, were in the hands of special servicers, up from 9.43 on Dec. 31, according to Trepp (see tables on Pages 8 and 9). Given the way that the special-servicing rate has skyrocketed over the past year, it's no surprise that the gauge reached 10. But the level is a noteworthy threshold for an industry battered by loan woes. Meanwhile, the 60-day delinquency rate soared to 6, from 4.71 a month earlier, Fitch said (see article on Page 10). At the end of December, $72.3 billion of the $723 billion of outstanding CMBS loans in the U.S. were in special servicing. The special-servicing rate is now six times higher than the yearend 2008 level of 1.62. The net amount of loans in special servicing climbed by 5.7, or $3.9 billion, last month. There was a net increase of 213 loans, bringing the total to 3,991. Among the large loans added in the past month were three backed by malls: a $550 million mortgage to Pyramid Cos. on Palisades Center in West Nyack, N.Y.; a $190 million senior portion of a $265 million loan to General Growth Properties on Montclair Plaza in Montclair, Calif.; and a $140 million loan to Pyramid on Galleria at Crystal Run in Middletown, N.Y. Special servicers also were handed a $140 million mortgage on the Hyatt Regency in Bethesda, Md., and a $116.8 million loan to New Dawn Cos. on four Tennessee apartment properties. Hotel... http://www.staging.realert.com/headlines.php?hid=144073 President Obama has thrown a wrench into the long-running commercial MBS rally. The booming demand that drove up CMBS prices for several months abruptly dried up in wake of the president's proposed financial-market reforms, which would curb investment activities at the country's largest banks. The plan was announced on Thursday last week, when many market players returned to their desks following a largely upbeat conference in Washington sponsored by the Commercial Mortgage Securities Association. The announcement quot;really kind of changed everyone's tone on a dime,quot; one CMBS trader said. quot;That caused people to become significantly more risk-averse.quot; Buyers of CMBS and REIT bonds beat a hasty retreat to the sidelines last Friday and have remained there since. Spreads on super-senior bonds widened - dramatically, in some cases - over the past week. Many market pros view the reversal as temporary, rather than a fundamental turn in direction. They expect demand to pick up again in a few weeks as investors digest the reform plan. But trading remained light yesterday. In some cases, spreads on super-senior CMBS widened by up to 100 bp over the past week. For example, bonds from the A-4 class of the benchmark GG-10 deal, which came to market in 2007, were changing hands at 485 bp over swaps on Monday and 525 bp yesterday, up from the 440-bp area a week ago. The going rate for comparable bonds from the GG-9 transaction, which was issued the same year, ballooned by 60 bp, to 370-375 bp. The spread-widening trend was... http://www.staging.realert.com/headlines.php?hid=143956 Citigroup is dipping its toes back into the conduit market. The bank is putting together the parameters of a program that would resume the origination of loans for securitization. While origination goals and other details haven't been worked out, the bank will apparently target fixed-rate loans of up to $50 million, underwritten to conservative standards. Citi would pursue mortgages on the major property types, excluding hotels. The bank becomes the latest in the string of lenders turning their sights back to securitization after a virtual market lockdown that started in mid-2008. Others that have resumed the targeting of commercial MBS loans over the past few months include Bank of America, Bridger Commercial Funding, Deutsche Bank, J.P. Morgan and RBS, although it is unclear how much lending is actually being done. Citi was an active CMBS originator before the market collapsed. In 2007, it securitized $6.9 billion of U.S. loans, ranking 13th in the industry. That year it was the 10th-largest U.S. bookrunner, with $11.5 billion of volume. http://www.staging.realert.com/headlines.php?hid=143823 Wells Fargo is by far the largest holder of commercial real estate loans among bank holding companies. The San Francisco company has $132.7 billion of real estate loans on its books - well ahead of runner-up Bank of America, with $105.3 billion. Rounding out the Top 5 are J.P. Morgan ($63.4 billion), BBamp;T ($40.4 billion) and PNC ($35.5 billion). The figures are based on a review of regulatory data by Foresight Analytics, a research firm in Oakland. Foresight found that the 1,000 largest banking companies held $1.46 trillion of commercial real estate loans on Sept. 30, according to the latest bank filings. That's equal to 9.7 of their $15 trillion of total assets (see tables on Pages 23-27). Banks divide their commercial real estate loans into three categories: commercial mortgages, multi-family mortgages and construction/land loans. Commercial mortgages make up the lion's share - 60.3 of the total, or $879.2 billion. Construction and land loans are the next-biggest category, at 27.8, or $405.5 billion. Multi-family loans are the smallest slice, at 11.8, or $172.2 billion. In the commercial mortgage category, Wells also leads the way, with $87 billion, followed by BofA ($54.6 billion), MetLife ($26.5 billion), J.P. Morgan ($22.7 billion) and BBamp;T ($22.5 billion). BofA ranks first in construction/land loans, at $39.3 billion. Next come Wells ($36.4 billion), BBamp;T ($16 billion), PNC ($10.8 billion) and Regions Financial ($9.9 billion). J.P. Morgan has the most multi-family loans, at $32.2 billion,... http://www.staging.realert.com/headlines.php?hid=143730 Colony Capital has won the bidding for a 40 stake in a $1 billion portfolio of mixed-quality commercial mortgages from the FDIC. The Los Angeles investment firm agreed to pay 44 cents on the dollar for the stake, or $180 million, according to market sources. The transaction values the portfolio at $448 million. The FDIC, which is retaining a 60 interest in the assets, will supply debt financing for half of Colony's purchase price, reducing the firm's cash outlay to $90 million. Other bidders included Encore Capital of Dallas and Texas banker Andrew Beal. The portfolio contains some 1,200 loans with an unpaid principal balance of $1.02 billion that the agency assumed from about two dozen failed banks. About one-third of the loans, by balance, are current. The rest are either nonperforming or subperforming. Land loans make up about one-third of the balance. The rest are backed mostly by retail, multi-family, office, industrial and hotel loans. There is also a smattering of niche and consumer loans. The sale is the largest by the FDIC since last fall, when it sold a 40 stake in a $4.5 billion portfolio of Corus Bank loans to a Starwood Capital team for $554.5 million, or about 61 cents on the dollar. At the time, some investors questioned whether Starwood overpaid because the two runners-up - a Colony partnership and a joint venture between Related Cos. and Lubert-Adler Partners - both bid around 50 cents on the dollar. The Corus portfolio encompassed somewhat more than 100 loans, putting the average bala... http://www.staging.realert.com/headlines.php?hid=143605 As the Commercial Mortgage Securities Association prepares to gather for its 11th annual January conference, the atmosphere is decidedly more upbeat than a year ago. A slightly improving economy and the recent re-emergence of securitization after a 17-month absence are supplying signs of hope for an industry battered by the financial collapse. While the sector still faces a long road back to anything approaching the go-go days of 2005-2007, real estate finance specialists traveling to Washington for the event have some reason for optimism - especially compared to last January, when the market was in a death spiral. quot;I'm going down to see what the mood is,quot; said one commercial MBS trader. quot;I assume it's going to be positive.quot; The association expects attendance to stabilize, following a big nosedive last year. Some 425 people have signed up so far for the gathering on Jan. 19-20 at the JW Marriott Hotel, slightly ahead of last year's pace. The group thinks the customary surge of last-minute registrants will push attendance past 750. That would be above last year's 706 total, but still well below the record 1,403 tally in January 2008, as the CMBS market was derailing. This time, the conference has some major changes, most notably the venue. For years, the event was held in the swanky South Beach section of Miami Beach. The relocation to Washington reflects the sensitivity of government-rescued lenders these days to the perception of junkets. It's also a bow to the reality that Washington is now the center of... http://www.staging.realert.com/headlines.php?hid=143497 A Monday Properties partnership that is looking to refinance $239 million of securitized mortgages is finding interest among lenders to be stronger than it expected. The partnership started shopping the assignment in September via Cushman amp; Wakefield. After touching base with multiple lenders, primarily insurance companies, the borrower now thinks it will get more-favorable terms than it originally envisioned. quot;We have been pleasantly surprised by how the lending market has picked up since we began this process in the summer,quot; said Richard Brookshire, director of acquisitions and investment management for New York-based Monday. quot;The good news is that it does appear there is debt capital available for high-quality real estate with strong sponsorship.quot; After considering several options, the partnership now expects to be able to achieve its preference: a 10-year, fixed-rate loan from one lender on the entire 1.1 million-square-foot portfolio of office properties in the Rosslyn section of Arlington, Va. However, with the market firming up and the existing loans not scheduled to mature until the middle of next year, the partnership is not in a rush to finalize terms. It is hoping that conditions will improve further over the next few months. To be sure, the Monday team is in a better position than many other borrowers seeking to refinance. Brookshire declined to specify what the loan-to-value ratio would be for a $239 million loan, but it would clearly be within a range acceptable to many lenders under the stricter... http://www.staging.realert.com/headlines.php?hid=143403 The percentage of commercial MBS loans in special servicing climbed sharply to almost 9 last month, fueled largely by the transfer of the $3 billion loan on the Stuyvesant Town apartment complex in Manhattan. There were $65.2 billion of loans in special servicing at the end of November, a net increase of $8.2 billion, or 14, from October, according to Trepp. Three giant mortgages accounted for more than half of the increase: the Stuyvesant Town loan, a $967.2 million mortgage on a hotel portfolio controlled by CNL Hotels amp; Resorts and a $344.6 million loan on a hotel portfolio owned by investor Ty Warner. But eight other loans of more than $100 million were also transferred. The $8.2 billion monthly increase was the second largest ever, after a $12.4 billion spike in May following the bankruptcy filing by General Growth Properties. The latest transfers drove up the special-servicing rate to 8.95, from 7.91 at the end of October. The net number of loans in special servicing climbed by 8, or 266, to 3,585. The special-servicing rate has now climbed for 19 months in a row and stands 22 times higher than the record low of 0.40 in August 2007. The bulk of the increase has come this year. Loans in special servicing have climbed by a net $52.7 billion, or 423, from $12.5 billion at the end of last year. The number of loans in the hands of special servicers has almost tripled, from 1,275 at the end of 2008. The recent revival of securitization activity could tamp down future loan transfers by providing some borrowers with a way... http://www.staging.realert.com/headlines.php?hid=143293 An Angelo, Gordon amp; Co. partnership has acquired a $34 million participation interest in a Manhattan apartment loan from Morgan Stanley for about 67 cents on the dollar. The debt is part of a $55 million senior fixed-rate loan that Morgan Stanley originated in 2007 on The Axton, an overleveraged Upper West Side building owned by Starrett Corp. of New York. Morgan Stanley securitized the companion $21 million interest, but got stuck with the larger piece when the commercial MBS market seized up. The securitized portion was transferred to special servicer LNR Partners on Nov. 4 because of a threat of default quot;due to cash flow problems,quot; according to a servicer report. The loan on the 229-unit Axton, at 733 Amsterdam Avenue, was underwritten aggressively, as was common when the real estate market was peaking. About 80 of the units were rent-stabilized, and Starrett expected to convert some apartments to market rents. Morgan Stanley projected that the net operating income, which totaled $1.2 million in 2007, would triple within a few years. However, net income this year is on track to total only $1.4 million, according to a servicer report. That's barely enough to cover the $1.3 million of annual debt service. Market players said that Angelo Gordon and its partner, Belvedere Capital Real Estate Partners, blame the aggressiveness of the loan, not Starrett's management, for the property's cash crunch. The Axton, which is between West 95th and West 96th Streets, was appraised at $82 million in mid-2007, but its value clearly... http://www.staging.realert.com/headlines.php?hid=143159 An investment group last week purchased a $15 million B-note on a major Los Angeles office building for about 80 cents on the dollar. A partnership between Lane Capital and FBE Limited, both of New York, bought the floating-rate note from an unidentified seller after weeks of haggling over the price and speed of execution. They ultimately struck a deal after the Lane-FBE team committed to completing its purchase in a matter of days. The note is backed by 6300 Wilshire Boulevard, a 388,000-square-foot office building in the Miracle Mile submarket of Los Angeles. The B-note was originated in 2006 as part of a $104.5 million debt package that Wachovia wrote to finance Legacy Partners' $133 million acquisition of the 21-story building. Legacy bought the property from Tishman Speyer that year through an investment vehicle called Legacy Partners Realty Fund 2. The property's debt was made up of $60 million of securitized loans, $29.5 million of mezzanine debt split between a senior and junior tranche and the B-note that the Lane-FBE group just bought. Lane and its partner could find itself in an advantageous position to put up more capital and take control of the property if the borrower, Legacy, comes under increased stress and defaults. But either way, Alan Leavitt, who runs Lane, sees his investment producing a sufficient return. Leavitt said he viewed the 6300 Wilshire deal as a rare opportunity because the discounted price his joint venture is paying for the note is favorable enough to make its return... http://www.staging.realert.com/headlines.php?hid=143049 A sweeping proposal by U.S. lawmakers to overhaul the regulatory framework for financial institutions could be the kiss of death for a revival of the commercial MBS market, market pros are warning. The latest volley from Congress would require CMBS lenders to retain 10 of the credit risk associated with loans they originate. The thinking is that securitization programs would be less willing to write risky loans if they would share in any resulting losses. When combined with accounting-rule changes under Financial Accounting Statement 167 that take effect at yearend, the proposed legislation would dramatically boost risk-based capital requirements for banks that run CMBS conduit platforms. The likely result is that many banks would delay or possibly even rule out returning to the frozen CMBS market, which hasn't produced a new issue since mid-2008, said Rick Jones, a partner in the real estate finance practice at Dechert. quot;If I was designing a way to impair recovery, this and FAS 167 is what I would do,quot; he said. quot;It will dramatically affect the revival of CMBS,quot; added Jan Sternin, a senior vice president of the Mortgage Bankers Association. quot;Anything that stymies the return of the capital markets is not a good thing.quot; While the proposed risk-retention requirement was spurred by the debacle in the home-loan market, legislators are also seeking to apply it to commercial mortgages. The Mortgage Bankers Association is lobbying to have commercial mortgages excluded. The... http://www.staging.realert.com/headlines.php?hid=142956 Bank of America is seeking to arrange $650 million of financing on a portfolio controlled by Fortress Investment, part of which could be raised via a securitization eligible for the Federal Reserve's TALF program. The fixed-rate debt package tentatively would consist of a $414 million senior loan and $236 million of mezzanine debt. BofA plans to securitize the senior loan, either inside or outside of the TALF program, by yearend. It is currently shopping the mezzanine portion at yields of 12-14. The debt package, which would have a term of 5-7 years, is contingent on BofA's ability to both securitize the senior loan and place the mezzanine debt. Fortress would use the proceeds to partially refinance $1.6 billion of mortgage debt provided in 2007 by BofA, Citigroup and Bear Stearns. The loan helped finance Fortress' $3.5 billion takeover of Florida East Coast Industries, which operated a railway and a property firm called Flagler Development. The loan is backed by Flagler's portfolio of office buildings, industrial properties and land. It's unclear how Fortress, a New York fund operator, would pay back the remaining portion of the $1.6 billion loan. It's also unknown which lenders are currently on the hook for that loan. Citi reportedly sold much of its position to Apollo Management, Blackstone Group's GSO Capital Partners and TPG. Bear was taken over by J.P. Morgan last year, but many of Bear's real estate assets were assumed by the Federal Reserve Bank of New York. The loan matures this year.... http://www.staging.realert.com/headlines.php?hid=142821 GE Capital Real Estate is seeking to raise up to $3 billion of equity for a fund that would originate senior fixed- and floating-rate commercial mortgages. The vehicle, GE Capital Real Estate Debt Fund, would underwrite fixed-rate loans to standards that make them eligible for securitization under the Federal Reserve's TALF program. GE's strategy is to securitize the senior portions of the loans and retain the subordinate portions. If TALF deals couldn't be arranged, the fund could securitize the senior portions of loans via traditional commercial MBS transactions. Floating-rate loans could be syndicated. Or the fund could simply retain whole loans in its portfolio, if necessary. The vehicle would be able to borrow one dollar for each dollar of equity. That means it would have up to $6 billion of investment power if the equity goal was achieved. GE itself will kick in 10 of the total equity, or up to $300 million. The managers would shoot for a 10-12 return, assuming the exit strategy of securitization and syndication is available. For retained loans, the return goal is 7-8. The fund would target loans on office, multi-family, industrial and retail properties in the U.S., Canada and Mexico. Loan terms would be 3-5 years. Loan-to-value ratios wouldn't exceed 65. Proceeds from maturing loans could be reinvested. Investments would be fully liquidated 7-9 years after the first equity close. GE is the latest in a series of players dipping their toes back into the lending market. As... http://www.staging.realert.com/headlines.php?hid=142714 More than two years into the credit crunch, commercial real estate lenders still see no easy way out. Property prices have yet to hit bottom, leaving both owners and lenders in disarray. The fresh capital pouring into the sector is dwarfed by the amount of debt scheduled to mature over the next few years. And several factors are combining to slow the massive wave of deleveraging necessary for the re-emergence of a sustainable lending market. The upshot: Despite the emergence of a few quot;green shoots,quot; the commercial mortgage market still has at least a couple of years of deep pain ahead. That's the consensus of a dozen debt-market pros interviewed by Commercial Mortgage Alert. While there was some disagreement on just how rough the road would be, most saw significant obstacles to a return of active originations. All agreed that the coming challenges would unfold slowly over several years, rather than result in a sudden meltdown. Likewise, they felt that originations would re-emerge slowly, as market-clearing prices are established across asset types and as worked-out properties qualify for loans in the new world of strict underwriting. The main concern for the next few years is the overhang of maturing debt that won't qualify for refinancing. quot;I think this is a much bigger problem than people realize,quot; said Jack Taylor, a managing director of Prudential Real Estate Investors. quot;The magnitude is unprecedented. It's much larger than we experienced either in volume or systemically in the RTC days.quot;... http://www.staging.realert.com/headlines.php?hid=142608 A Starwood Capital partnership's aggressive winning bid for the real estate assets of Corus Bank has left some market pros asking: Did Barry Sternlicht overpay The Starwood team's $554.5 million offer was 23 higher than the cover bid, according to market players. Word was that a partnership between Related Cos. and Lubert-Adler Partners offered $450 million. Colony Capital, leading a team that included iStar Financial, J.P. Morgan and Dune Capital Management - also bid close to $450 million. Next was believed to be a roughly $420 million offer from a group consisting of Angelo Gordon amp; Co., Westbrook Partners, BlackRock and Canyon Capital Realty Advisors. Starwood and its partners - TPG, Perry Capital, W.L. Ross amp; Co. and LeFrak Organization - will buy a 40 equity stake in the Corus portfolio, which has a $4.5 billion unpaid principal balance. The FDIC will hold the remaining 60 interest, valued at $831 million, and supply close to $1.4 billion of low-cost loans. That values the portfolio at $2.77 billion, or about 61 cents on the dollar. By contrast, the Related and Colony bids each valued the portfolio in the vicinity of $2.25 billion, or 50 cents on the dollar. The Angelo Gordon consortium was slightly behind, with a $2.1 billion valuation. The remaining four bids were all below $2 billion. The wide gap between Starwood's bid and the other offers raised eyebrows among participants in the auction and other market players, who asked why Sternlicht, Starwood's savvy chief executive, saw so... http://www.staging.realert.com/headlines.php?hid=142524 ---------- CORRECTION:An Oct. 2 article, quot;AREA, CIBC Teaming Up on Mortgage Fund,quot; misstated Richard Mack's title at AREA Property Partners. He is North America chief executive, not the firm's chairman. ---------- AREA Property Partners and CIBC are seeking to raise $250 million of equity for a fund that would originate senior commercial mortgages of up to $75 million. The vehicle, dubbed ACRE/First Mortgage Fund, will also be backed by a $500 million warehouse credit line from CIBC. That would increase its investment power to $750 million if the full equity goal is achieved. New York-based AREA, formerly known as Apollo Real Estate Advisors, and CIBC will co-manage the vehicle. At least two other players recently began eyeing the origination of relatively large mortgages. Goldman Sachs has committed an undisclosed amount of equity to two platforms that target loans of at least $25 million. And Deutsche Bank has a program to originate loans of up to $200 million. The activity provides hints that the largely frozen origination market may be starting to thaw. The fund operated by AREA and CIBC will write five-year, fixed-rate loans with coupons of 8-10 and amortization schedules of 25 or 30 years. The loan-to-value ratio will range up to 75 for individual properties and 65 for portfolios. Cashflows from collateral properties must be more than 1.3 times the amount needed to cover debt service, and higher for hotel loa... http://www.staging.realert.com/headlines.php?hid=142401 Investors this week got their first detailed look at two large distressed-loan portfolios in which the FDIC is offering minority stakes. The agency is shopping interests in a $1.1 billion package of commercial mortgages and land loans via Deutsche Bank and an $861.5 million portfolio of construction and land loans via the team of Midland Loan Services and Pentalpha Capital. The agency distributed marketing materials for the expected offerings this week, enabling investors to begin due diligence. Each portfolio is divided into two pools, based on geography. So up to four winners could be named. The stakes being offered have not yet been decided, but are expected to be either 20 or 40 for all-cash bids. But the level might rise to as high as 50 if a buyer uses debt financing to support its bid. That is aimed at ensuring a buyer puts up a minimum level of equity. The winning bidders will work out the loans and share the proceeds with the FDIC. The loans came from some two dozen banks that failed over the past two years. The Deutsche pool contains 1,232 loans. Loans representing about 70 of the total balance are backed by a mix of property types. The other 30 are land loans. The average balance is $887,000. Only 10 notes exceed $10 million. The loans are concentrated in Georgia (30.7 of total balance), California (14.7), Nevada (14.4) and Florida (13.5). Two-thirds of the portfolio is delinquent, and two-thirds matures by the end of next year. The 367-loan Midland/Pentalpha portfolio appears to carry higher risk. About... http://www.staging.realert.com/headlines.php?hid=142289 Cantor Fitzgerald has hired four former senior executives of Credit Suisse, including Steven Kantor, to oversee a major push into commercial real estate. The New York investment bank plans to hire a whopping 130 people to staff the effort. In addition to expanding its commercial and residential MBS trading activities, Cantor will set up a real estate investment banking operation, form a real estate lending and securitization group, and establish a real estate venture capital business. The push will be directed by Kantor and three other former Credit Suisse executives: Michael Lehrman, Anthony Orso and Lawrence Britvan. All were named senior partners of Cantor and BGC Partners, a public subsidiary of Cantor. They joined last month. Kantor held a number of senior positions at Credit Suisse and predecessor Donaldson, Lufkin amp; Jenrette. In recent years, he was co-head of global securities, which included oversight of the real estate finance group. He gave up that post in February, while continuing as co-head of the illiquid-alternatives unit in the alternative-investments division. He resigned from Credit Suisse in July. Lehrman and Orso were longtime co-heads of commercial MBS origination at Credit Suisse, while Britvan was in the CMBS group. They also resigned in July. Four other former Credit Suisse staffers have also joined Cantor: Matt Brody, Paul Fine, Keith Padien and Jesse Zarouk. The initial team will soon grow significantly. The 130 hires contemplated by Cantor will be divided am... http://www.staging.realert.com/headlines.php?hid=142205 Developers Diversified Realty is on track to unveil the first commercial MBS transaction under the TALF program in mid-October, but two other potential issuers - Simon Property and Westfield - have dropped out of the picture. The developments add some clarity to the murky CMBS pipeline, which has been the source of much speculation since May, when the Federal Reserve unveiled the TALF program for new-issue CMBS transactions. The current indications are that Developers Diversified will launch the first two deals: one in October and the other possibly in November. Vornado Realty is next in the queue, followed by a third, unidentified REIT. At some point, Inland Real Estate Group is also expected to come to market. If those deals go well, other issuers could follow. quot;Everyone is sitting on the sidelines to wait for the other guy to go first,quot; said one market veteran. But the defections of Simon and Westfield are blows to the TALF program, formally known as the Term Asset-Backed Securities Loan Facility, which enables investors to get low-cost financing from the government to buy super-senior CMBS. While Simon and Westfield were exploring CMBS transactions, the REIT bond market suddenly thawed out, so both firms rushed to float unsecured debt instead. Simon priced $500 million of bonds on Aug. 6, and Westfield followed with $2 billion of paper on Aug. 26. That enabled the mall REITs to lock in financing at relatively attractive rates, rather than waiting to float untried CMBS deals under the TALF umbrel... http://www.staging.realert.com/headlines.php?hid=142078 Seeing cracks in the frozen loan market, Goldman Sachs has launched a program aimed at originating fixed-rate commercial mortgages of $25 million or more. Goldman initially plans to retain, syndicate or sell the five-year mortgages in the whole-loan market. But it could start securitizing mortgages down the road if the commercial MBS market revives. The program supplements one for floating-rate loans that Goldman started early this year. The buzz is that Goldman thinks it's time to pursue high-end, fixed-rate loans because borrowers and lenders have moved closer to agreement on rates and terms than they were several months ago. It's unclear how much capital Goldman is allocating for the two loan programs. To be sure, no one expects the bank to open up the lending spigot. Still, the fact that a major lender is out in the market touting the availability of fixed-rate loans could be a sign that the credit crunch is easing. Goldman's origination specialists in Dallas started spreading the word about the fixed-rate program last week. The bank is offering to write five-year loans with 30-year amortization schedules and no extension options. Coupons will be in the vicinity of 8.5. Loan-to-value ratios can't exceed 65. There is a 1 origination fee and no exit fee at maturity. Loans cannot be prepaid for two years, after which defeasance is an option. Goldman will finance a mix of property types in metropolitan areas with at least 100,000 residents. The floating-rate program, which also has a $25 million... http://www.staging.realert.com/headlines.php?hid=141999 Barclays has granted a three-month extension on a $2 billion floating-rate loan that helped finance Morgan Stanley's ill-fated takeover of Crescent Real Estate Equities at the top of the market. The extension, until Nov. 2, gives Morgan Stanley more time to address Crescent's property portfolio, whose value has plunged since the $6.5 billion buyout in August 2007. Morgan Stanley has sold $1.4 billion of Crescent properties, enabling it to reduce the original $3.3 billion balance of the Barclays loan. But the sales effort has been slowed by the illiquid market. If Morgan Stanley is unable to pay down or refinance the remaining debt, the result could be one of the larger defaults in the downturn so far. In a regulatory filing last Friday, Morgan Stanley said it was in talks with Barclays quot;regarding the orderly transfer of collateral and asset operations and other related matters.quot; That vague wording could mean that Morgan Stanley plans to turn over the keys of properties to Barclays or that it will keep trying to sell properties. At another point in the filing, Morgan Stanley said it quot;will continue to evaluate the Crescent properties and position them for sale as opportunities arise.quot; A spokesperson declined to elaborate. The filing didn't identify Barclays as the lender, but Barclays led the financing for the Crescent takeover. The Barclays loan is nonrecourse, but Morgan Stanley has agreed to supply credit support of up to $125 million. It's unclear if that was a quid pro quo for the extension. Morgan Stanley has... http://www.staging.realert.com/headlines.php?hid=141876 A handful of former senior executives in Wachovia's real estate finance group have joined forces to launch an advisory firm in Charlotte. The principals are Bill Green, Brett Smith, Chuck Wolter, Bill Cohane and Sam Solie. They are actively looking to add staff in New York, Florida and California. Their shop, Tannery Brook Partners, will initially focus on advising borrowers and lenders on how to address overleveraged loans. The startup has already lined up a major advisory client: fund operator Starwood Capital. Green ran Starwood's debt-investment business for two years before stepping down in June. The five partners - co-equals in the venture - worked together at Wachovia for many years, establishing relationships with top real estate investors in the process. Wachovia was the most-active lender among U.S. securitization programs during the go-go years of 2005-2007. In 2007, for example, the bank contributed $24.2 billion of loans to domestic commercial MBS deals, for a 10.8 market share. The next-nearest competitor contributed $15.6 billion. Green, who was head of the CMBS group for six years and then oversaw the European real estate unit, left the bank in late 2007 to join Starwood. Cohane left Wachovia last year. Smith, Wolter and Solie left early this year, after the bank's acquisition by Wells Fargo. Tannery Brook expects to primarily advise borrowers on how to navigate the credit crunch and property-market downturn. For example, it will provide advice on raising equity, negotiating... http://www.staging.realert.com/headlines.php?hid=141769 After several lenders balked at fulfilling commitments, a Colony Capital partnership is seeking up to $500 million of replacement funding to complete a giant entertainment and retail complex next to the Meadowlands sports complex in New Jersey. A Credit Suisse syndicate originally agreed to provide roughly $1.1 billion of construction financing for the much-delayed Xanadu project, whose first phase is now scheduled to open in the second half of next year. The other syndicate members are Lehman Brothers, Capmark, NorthStar Realty Finance and Newcastle Investment, a REIT managed by Fortress Investment. After about $600 million of the loan was funded, Lehman failed to meet a call for $125 million of additional cash. That event, following the investment bank's bankruptcy filing last fall, set off negotiations between the Colony partnership and the other syndicate members, which were also reluctant to pump more cash into the project. The Colony team ultimately agreed to release the other lenders from their remaining commitments. In return, the lenders agreed that the roughly $600 million they had already funded would be subordinate to the replacement financing. The arrangement is enabling the Colony team to shop the new five-year loan assignment as senior debt that equals only about 20 of the project's overall $2.6 billion cost - a low loan-to-cost ratio for construction financing. Still, the group could face an uphill battle, given the dearth of available construction financing, the weak retail-sales market and... http://www.staging.realert.com/headlines.php?hid=141687 amp;nbsp; The Federal Reserve's decision to approve applications for TALF loans on legacy bonds from 35 of 36 commercial MBS deals buoyed the market this week, undoing some of the upheaval caused by a shocking about-face by Samp;amp;P. Spreads on super-senior bonds averaged 525 bp over swaps yesterday, in from 550 bp a week earlier and 675 bp two weeks ago. Secondary-market trading volume fell substantially from the $4 billion-plus of paper that changed hands last week. But volume was still on pace to top $1 billion - well above average for the year. CMBS traders expect the rally to continue for at least two to three weeks, as dealers and investors jockey for bonds that will be financed via the second monthly installment of the Fed program, formally called the Term Asset-Backed Securities Loan Facility. The next loan-application deadline is Aug. 20. Demand is expected to rise because of greater confidence among investors about which bonds are eligible for TALF loans. Another factor: Investment groups operating under the U.S. Treasury Department's Public-Private Investment Program, or PPIP, are preparing to make leveraged investments in CMBS as early as next month. The groups can tap TALF for some of those purchases. The Fed initially said that super-senior CMBS rated triple-A and not under review for downgrade would be eligible for TALF financing. But it reserved the right to kick out even bonds that meet those criteria, leaving... http://www.staging.realert.com/headlines.php?hid=141579 Major banks and brokerage firms are engaging in a commercial MBS buying frenzy, loading up on bonds expected to be in high demand when they qualify for U.S. government financing. The rally started late last week, after the U.S. Treasury Department moved closer to launching its Public-Private Investment Program and shed light on how the Federal Reserve will finance purchases of CMBS through its Term Asset-Backed Securities Loan Facility. In a conference call last Friday with market players, Treasury officials said all but 5 of CMBS issued before this year would likely qualify for TALF financing if it already met the general criteria previously released by the Fed. That announcement went a long way toward easing widespread fears that investors could be turned down for Fed loans after buying CMBS they hoped to finance via TALF. Yesterday, investors requested $669 million of Fed loans that would be collateralized by legacy CMBS they have purchased since July 2. The Fed will decide which of those loans to approve by the funding date of July 24. Demand for TALF loans is likely to increase next month, because most buysiders didn't have enough time to digest the new Treasury pronouncements about qualifying for the program prior to yesterday's loan-application deadline. Market players now expect an abundance of commercial-mortgage bonds to pass muster in Washington. In a report issued last week, Barclays estimated that up to $250 billion of CMBS issued before Jan. 1 could be eligible for TALF financing, ... http://www.staging.realert.com/headlines.php?hid=141477 The window has opened for TALF financing of quot;legacyquot; commercial MBS, but the program is expected to get off to a slow start. Trading volume is likely to be suppressed at first by uncertainty about which super-senior bonds will qualify for financing and how those bonds should be valued, market pros said. Bond buyers also expressed concern because they would have to line up bridge financing for the period between settlement and the release of TALF money. The Federal Reserve announced details late last week about how the TALF program would kick off for legacy, or seasoned, CMBS. Investors who buy eligible bonds between July 3 and July 16 can apply for a TALF loan on July 16. Subsequent loan quot;subscriptionquot; dates will occur monthly. The TALF program, formally called the Term Asset-Backed Securities Loan Facility, is aimed at jumpstarting dormant securitization markets by providing low-cost financing to buyers of senior bonds. In the CMBS sector, the program has two components - one for seasoned bonds and the other for new-issue paper. The first funding period for new offerings occurred last month, although no deals were floated. In the market for legacy bonds, a pricing disconnect has emerged between potential buyers and sellers of TALF-eligible CMBS, traders said. Super-senior bonds currently trade at about 700 bp over swaps. With TALF financing, buyers think eligible super-senior bonds will tighten to about 500 bp over swaps. But sellers point to the fact that the TALF program has driven down yields on... http://www.staging.realert.com/headlines.php?hid=141375 The amount of commercial mortgages in special servicing continued to climb in June, reflecting the ongoing deterioration in credit quality. According to Trepp, another $3.8 billion of loans were transferred to special servicers last month. That increased the total by 10, to $40 billion. At the end of June, 5.39 of the total balance of securitized commercial mortgages was under the control of special servicers, up from 4.92 at the end of May. The special-servicing rate has now climbed for 14 months in a row and is 13 times higher than the record low of 0.40 in August 2007. The bulk of the increase has come since the end of last year, when the rate was 1.62. Master servicers transfer loans to special servicers when signs of trouble emerge. Special servicers attempt to work out the problems with the borrower and return the loan to normal status or negotiate a payoff. Failing that, the loan is liquidated and the proceeds are forwarded to bondholders. The large number of loan transfers stems from two key trends: the poor performance of mortgages written as the bull market was peaking, and the inability of borrowers to refinance maturing loans because of the credit crunch. quot;If the percentage of loans capable of refinancing stays low, it's hard to see these numbers leveling off,quot; said Trepp managing director Manus Clancy. quot;Anything near its maturity date typically moves to special servicing. With more loans coming due in 2010 than in 2009, it will be hard to buck the trend.quot; In perhaps the only silver... http://www.staging.realert.com/headlines.php?hid=141274 ---------- CORRECTION: A June 26 article, quot;Vornado, Macerich, Inland Mull TALF Deals,quot; cited talk in the market that Alexandria Real Estate Equities explored a TALF-eligible securitization, but discovered that the Federal Reserve was uncomfortable with the REIT's property niche: bio-medical research space. However, Alexandria subsequently said that it wasn't rebuffed by the Fed and that after making an initial inquiry it decided not to pursue a TALF deal because it determined it could obtain more attractive mortgage financing from insurance companies. ---------- Vornado Realty, Macerich and Inland Real Estate are on the list of REITs lining up to issue commercial MBS deals eligible for government financing. The companies are among roughly a dozen REITs exploring whether the Federal Reserve's TALF program will push down borrowing rates enough to make CMBS financing economical. Other REITs in the mix, as previously reported, include Developers Diversified Realty, Simon Property and Westfield. The first CMBS deal eligible for TALF is expected to come out of the gate in July or August. The program, officially called the Term Asset-Backed Securities Loan Facility, will provide relatively low-cost financing to buyers of super-senior CMBS. The Fed is hoping that the subsidized loans will jumpstart the dormant CMBS market. A separate component of the program will finance buyers of seasoned CMBS. The initial new-issue... http://www.staging.realert.com/headlines.php?hid=141175 Bill Green has stepped down as head of Starwood Capital's debt-investment business. Green, one of the best-known commercial real estate lenders, left Starwood last week. He joined the firm in late 2007 after a long stint at Wachovia, including six years as head of the bank's U.S. commercial MBS group. The circumstances surrounding his departure were unclear, but several people familiar with the matter said that his exit had been planned for several months and that his relations with Starwood remain amicable. The buzz is that Green plans to relocate from New York to Charlotte and set up an investment business. Green's family has been in London since Wachovia transferred him there in 2007 to oversee its European real estate unit. He has been eager to reunite with them in Charlotte, where he was based for many years with Wachovia. At Starwood, Green oversaw a $630 million fund that started acquiring distressed debt last year. Returns for the vehicle couldn't be learned, but many debt funds that bought assets last year were hammered when real estate prices continued their deep descent. The Starwood vehicle, called Starwood Debt Fund 2, had a final close in February. It has $2.5 billion of investment power, including leverage. In April, Starwood completed raising about $300 million of equity for a quot;sidecarquot; fund that can co-invest with the main fund. Starwood began marketing the debt fund and its sidecar late in 2007. Starwood senior managing director Jeff Dishner, who has led the firm's opportunity fund gro... http://www.staging.realert.com/headlines.php?hid=141043 Moody's and Fitch said this week they don't expect to cut their triple-A ratings on outstanding super-senior commercial MBS, setting the stage for a sharp divide with rival Samp;P. Clarifying its intentions in a special report due out today, Moody's said super-senior classes from recent-vintage deals quot;are unlikely to experience downgrades.quot; Fitch on Monday issued a similar statement, saying that quot;super-senior AAA-rated classes are expected to stay AAA for the foreseeable future.quot; The upshot is that Samp;P will be by itself at the bearish end of the spectrum among the major rating agencies. Samp;P has proposed new rating criteria that would lead to downgrades for 90 of super-senior tranches from 2007 transactions, 60 from 2006 deals and 25 from 2005 offerings. The proposal, decried as excessive by many market participants, led to a massive selloff in the CMBS market because it would make many bonds ineligible for the Federal Reserve's new low-cost financing program, called TALF (for Term Asset-Backed Securities Loan Facility). A comment by an Samp;P executive this week prompted speculation that the agency might ease back on its proposal, which was put out for public comment. Managing director Kim Diamond, speaking at the Commercial Mortgage Securities Association's annual conference in New York, said it was a mistake to think the proposal was a quot;fait accompli.quot; Asked to elaborate, an Samp;P spokesman said: quot;There have been no final decisions made about our new CMBS criteria. Once we have examined all of the... http://www.staging.realert.com/headlines.php?hid=140959 Mike Mazzei, the dean of commercial MBS executives, is moving on. Mazzei has resigned as co-head of global real estate capital markets at Barclays, effective in late August. His fellow co-head and longtime colleague, Haejin Baek, will assume sole responsibility for the operation. The exit of Mazzei, one of the best-known commercial real estate dealmakers on Wall Street, adds an exclamation point to what has been a wholesale turnover of the CMBS industry's senior management and the complete dismantling of many major operations. While he declined to comment on his resignation, Mazzei isn't expected to remain on the sidelines for long. He's believed to be in the growing camp of executives who think the best opportunities lie outside of large financial institutions, which are likely to be hamstrung by capital constraints and increased regulatory scrutiny in the years ahead. Some other senior CMBS executives have turned to smaller, more nimble enterprises, such as funds backed by deep-pocketed investors or newly formed finance companies that aren't saddled with legacy assets. The buzz is that Mazzei, who is 48, will explore such opportunities. He joins a lengthy list of senior CMBS executives who have left their firms or transferred to other departments over the past few years as the market imploded, resulting in huge losses. Indeed, the top securitization executives at all but a handful of major lenders have departed. That roster includes John Westerfield of Morgan Stanley; Rob Verrone and Bill... http://www.staging.realert.com/headlines.php?hid=140853 Samp;P this week asked the industry to comment on proposed changes to its rating methodology that would result in sweeping downgrades of super-senior, triple-A commercial MBS. The agency may want to brace itself for the response. The initial reaction came fast and furious, with near-universal condemnation from bondholders, lenders and traders alike. Market participants said they were blindsided by the proposal, which most termed an overreaction by the agency. Some pointed out that the announcement seemed to contradict a previous indication from Samp;P that super-senior downgrades weren't in the offing. And many questioned Samp;P's motivation and timing - and warned that the agency is risking a backlash. The announcement, which amounted to a tacit admission by Samp;P that its previous methodology was significantly flawed, triggered a huge CMBS selloff on Tuesday, undoing much of the recent rally. Investors worried the shift would torpedo a new Federal Reserve program aimed at jumpstarting the CMBS market by providing low-cost financing to buyers of senior triple-A CMBS. Samp;P's new policy, if implemented, would render many of the super-senior bonds issued in recent years ineligible for the Fed program, known as TALF (for Term Asset-Backed Securities Loan Facility). To qualify for financing through the program, bonds can't be rated below triple-A by any agency. Samp;P said its proposal would likely lead to the downgrade of 25 of super-senior tranches from 2005 transactions, 60 from 2006 deals and 90 from 2007 offerings. Bo... http://www.staging.realert.com/headlines.php?hid=140733 The Federal Reserve's Term Asset-Backed Securities Loan Facility is spurring positive developments for commercial MBS issuance and secondary trading. On the new-issue front, Prudential Mortgage Capital and MetLife are among a number of insurers exploring the possibility of originating loans for bond offerings. Meanwhile, the formal announcement this week that TALF is being extended to seasoned fixed-rate CMBS buoyed market participants, further fueling the massive ongoing CMBS rally. Spreads on super-senior triple-A bonds tightened by another 115 bp, to 595 bp over swaps, as investors bet that the program, which provides low-cost financing to bondbuyers, will increase liquidity and drive up prices. quot;This is a whole new world,quot; said an executive at one of the biggest holders of CMBS. quot;It's like the sun came out.quot; While the initial market reaction to the expansion of TALF to legacy paper was overwhelmingly positive, some questions remain. It's unclear how much actual trading will be spurred by the program. Still up in the air is whether TALF will eventually be broadened to include subordinate triple-A CMBS. And, on a broader scale, while TALF could bolster liquidity, it doesn't address concerns about the underlying real estate risk, which has also been a major contributor to the plunge in CMBS prices. Some investors are doubtful that the bullishness generated by TALF will hold up if the economy doesn't rebound. quot;What happens to the long-term investor when the marginal buyers go away and we face the headwinds of the next few yearsquot;... http://www.staging.realert.com/headlines.php?hid=140649 Prompted by the new government program that will finance buyers of commercial MBS, Deutsche Bank has rolled out a program that aims to originate fixed-rate loans of up to $200 million for securitization. The fact that a major lender is willing to resume warehousing mortgages for securitization could mark an initial step toward a revival of the commercial MBS market, which has been frozen since mid-2008. But Deutsche is hedging its bets by offering strict terms and relatively high rates - features that would make it more palatable for the bank to retain the loans if necessary, but also might tamp down borrower interest. The program was being touted this week in an announcement circulated by a loan brokerage. quot;The lender is prepared to close these loans on their warehouse lines prior to securitization,quot; the brokerage said. The announcement didn't identify the bank, but several market sources said it was Deutsche. There was no indication how much the bank is willing to warehouse overall. A Deutsche spokesman declined to comment. Deutsche is pitching nonrecourse loans with rates of 9-10, terms of 3-5 years and a maximum loan-to-value ratio of 70. The loans would carry a 30-year amortization schedule. Office, industrial, retail and hotel properties would be eligible for financing. Those terms would fit the parameters of the Federal Reserve's Term Asset-Backed Securities Loan Facility. The TALF program was set up to spur originations by giving lenders an exit strategy for their loans. The thinking... http://www.staging.realert.com/headlines.php?hid=140549 A handful of lenders and REITs have started exploring the possibility of using the Federal Reserve's Term Asset-Backed Securities Loan Facility to foster new commercial MBS transactions, but no one expects a rush of deals to result. The buzz in the market is that Developers Diversified Realty and Simon Property are among the REITs interested in exploring how the TALF program might help them raise financing. Deutsche Bank, Goldman Sachs and J.P. Morgan have held preliminary discussions with officials at the Federal Reserve Bank of New York about possible TALF-eligible transactions. The Fed formally announced last Friday that the TALF program, which was originally set up to finance buyers of bonds backed by newly originated consumer and small-business loans, will be extended to new commercial mortgages in June. The hope is that the move, by creating relatively low-cost financing for bondbuyers, will encourage lenders to begin originating commercial mortgages for securitization again. The initial reaction, however, is that the terms of the program will limit participation. Some market players were disappointed because the Fed said it quot;expects collateral pools to be diversified.quot; Most observers believe initial transactions will involve single borrowers, both because lenders are still wary of the risk of amassing loans from multiple borrowers and because investors are likely to prefer them as easier to analyze. But the announcement added that the Fed would consider quot;nondiversifiedquot; deals on a case-by-case basis.... http://www.staging.realert.com/headlines.php?hid=140447 Special servicer ORIX Capital Markets said that Simon Property's decision to walk away from an aging Florida mall should cause investors to be wary about the willingness of even the biggest institutional sponsors to stand behind properties that run into trouble. Simon, the biggest mall operator in the U.S., surrendered the Palm Beach Mall two weeks ago after defaulting on a $50.7 million fixed-rate mortgage that was securitized in 2003 and scheduled to mature in 2012. Simon had owned the struggling 1.2 million-square-foot mall for more than 10 years. The Indianapolis REIT started emptying out tenants several years ago in order to reposition the property. But the effort lagged amid the economic downturn, leading Simon to throw in the towel and turn over the keys to ORIX, the special servicer of the $1.2 billion securitization that includes the mortgage. The decision left ORIX bristling. quot;We are surprised that Simon was unwilling to support this mall after having abandoned its reposition strategy,quot; said chief executive Mitch Wasterlain. quot;It is not the way Simon has behaved in the past, and it is causing us to re-examine our other exposure to Simon.quot; While Simon didn't return a call seeking comment, there's no question that the company was well within its legal right to bail out. Securitized mortgages carry no recourse to the borrower, meaning that lenders or bondholders can't lay claim to any other assets if a default occurs. Indeed, some investors were unfazed by Simon's action. quot;We're all big boys,quot;... http://www.staging.realert.com/headlines.php?hid=140321 Citigroup has placed slightly more than 10 of a $2.1 billion portfolio of fixed- and floating-rate mortgages with investors and continues to shop the remaining loans. The hotel-heavy package contains more than 50 performing and subperforming whole loans, senior participation interests, B-notes and mezzanine loans. The mortgages range in size from $233 million of mezzanine loans on La Costa Resort and Spa in Carlsbad, Calif., to a $2 million B-note on a Residence Inn hotel in White Plains, N.Y. Citi has evidently been marketing parts of the portfolio since sometime last year. In a recent offering memorandum distributed to potential buyers, the bank indicated that investors had already circled $268 million of the portfolio. Citi declined to comment. The bank didn't provide price guidance for many of the loans. Where specified, prices ranged from 70 to 92 of face amount. Most of the whole loans were in the vicinity of 85 cents on the dollar, while the mezzanine loans and B-notes typically were around 80 cents. Hotel loans dominate the portfolio. The floating-rate mezzanine loans on La Costa Resort and Spa, which mature next February but have a 2-year extension option, have coupons ranging from 186 bp to 326 bp over Libor. Price talk was specified for only the senior mezzanine tranche - 85 of face amount. There was also a $203.6 million fixed-rate participation interest in a $310 million mortgage on a Red Roof Inn hotel portfolio. That loan, which has a 6.7 coupon and matures in 2017, was... http://www.staging.realert.com/headlines.php?hid=140232 An HSBC syndicate is weighing an idea that could stave off the foreclosure of a high-profile Miami condominium complex and minimize losses on the $502 million loan that funded its construction. The proposal is aimed at spurring condo sales at Icon Brickell, an 1,800-unit luxury complex on Biscayne Bay developed by Jorge Perez. If it works, the idea might be applied to three other struggling condo projects operated by Perez. His company, Related Group of Miami, owes $1.9 billion to 45 banks on various condo developments. While many buyers put down deposits before construction started, sales have closed on fewer than two dozen units at Icon Brickell so far, according to market sources. In addition to the sagging economy, a major holdup is the fact that condo buyers are unable to line up financing because of the credit crunch. Under the proposal, HSBC would make loans to condo buyers, with the eight other syndicate members sharing in the risk. The availability of loans should enable more transactions to close, in turn permitting Perez to pay down the construction loan. But the strategy wouldn't be a cure-all. Given the glut of condos on the market in South Florida, buyers will certainly drive hard bargains on the units, which, according to some reports, were once expected to sell for $500,000 to $2 million. quot;No doubt there are going to be big discounts,quot; said one banker familiar with the situation. quot;But you can live with a 20 discount when the alternative is to lose 50 - if you're lucky.quot; The... http://www.staging.realert.com/headlines.php?hid=140112 A former Lehman Brothers executive has launched a firm with an ambitious strategy that includes an advisory arm, a broker-dealer platform and a fund operation. The firm, Spring Hill Capital Partners, is headed by Kevin White, a former Lehman managing director. The buzz is that the firm is in the process of recruiting more than a dozen former senior executives of Lehman, Morgan Stanley and private-equity groups. White worked at Lehman for 17 years. He spent part of that time as head of the institutional-client group and third-party sales, and also served as head of the syndicate desk of the securitized-products group. White declined to discuss his plans for Spring Hill, but is evidently seeking to create a quot;structured-finance merchant bankquot; specializing in CMBS, residential MBS, asset-backed securities, CDOs and private-equity investments. The company has leased office space at Rockefeller Center in Midtown Manhattan, and market players said White has been seeking to line up investors to back the operation. People familiar with Spring Hill's strategy said the company will seek to advise buyers and sellers of commercial, residential and consumer assets. Target clients include banks, REITs, insurance companies, CDO managers and investors. Among them are likely to be participants in the U.S. Treasury Department and Federal Reserve programs aimed at spurring the sale of toxic assets. Spring Hill also plans to trade securities as a broker-dealer and to set up funds with an asset-backed focus,... http://www.staging.realert.com/headlines.php?hid=140030 Veteran commercial MBS investors think there's a reasonable chance that the U.S. Treasury Department's new toxic-assets program will drive up prices enough to encourage institutions to unload their holdings of super-senior CMBS. However, most observers feel the prospects are much less certain for the portion of the program aimed at spurring sales of distressed commercial mortgages. While many of the program's details haven't been released, Wall Street analysts have started crunching numbers based on assumptions about the financing terms likely to be offered by the government. The consensus is that the Treasury Department will offer loan rates that will enable buyers of super-senior CMBS to achieve at least a 15 leveraged return. That yield, in turn, would work out to spreads of roughly 500-600 bp over swaps for super-senior bonds, according to some estimates. If those guesses prove correct, the CMBS market is in line for a major rally. Spreads on super-senior bonds are currently 300-400 bp wider. For example, super-senior paper from the benchmark quot;GG-10quot; securitization were trading at around 925 bp over swaps this week. Such a rally would cause CMBS prices to rise enough to make sales palatable to many institutions, investors said. Some portfolios are now so far underwater that institutions think the prices can only go up. That leaves them unwilling to sell, so the investments continue to clog up their balance sheets. But if spreads tightened to the 500-bp area, the losses would be cut enough ... http://www.staging.realert.com/headlines.php?hid=139926 The U.S. Treasury Department's proposal for spurring the trading of toxic assets touched off a huge rally in the commercial MBS market this week, leading some players to conclude that the tide might have turned. Spreads on super-senior bonds from the benchmark quot;GG-10quot; deal tightened by almost 400 bp, to 855 bp over swaps, after Treasury Secretary Timothy Geithner revealed the plan on Monday. quot;I really think the government is serious about doing something to get the securitization market going again,quot; said one CMBS veteran. quot;This is very encouraging news.quot; Geithner's announcement confirmed that commercial real estate assets would be included in various financing programs being set up by the government. It also expanded the efforts to include high-rated quot;legacy assetsquot; - both bonds and loans - clogging the balance sheets of banks. That combination, which would supply a big jolt of financing to an illiquid market, buoyed CMBS traders and investors, some of whom viewed the development as a potential quot;game-changer.quot; quot;We think that this program could first stop, then reverse the negative feedback loop of declining asset prices and delevering, which leads to further price declines that has plagued the markets over the past year,quot; said Alan Todd, CMBS analyst at J.P. Morgan. He predicted that spreads on super-senior paper could tighten to 600 bp over the next several months, helping to set the stage for lenders to resume originating. While many details about the plans haven't yet been disclosed, analysts said that... http://www.staging.realert.com/headlines.php?hid=139821 Fund operators continue to pour into the high-yield debt market, but few are pulling the trigger on investments so far. A review of high-yield real estate funds by sister publication Real Estate Alert identified 73 active or planned debt vehicles, up from 54 a year ago. The funds are seeking to raise $48.4 billion of total equity, up from $28.8 billion (see list of funds on Pages 10-13). The sponsors are attracted by opportunities created by the credit crunch. Given the level of distress in real estate markets, many investors think debt plays offer better potential returns than property investments - the reverse of traditional thinking. While the annual review found that property funds remain by far the dominant type of real estate vehicle, debt funds are clearly on the rise. Vehicles focusing on debt investments account for 16 of the combined equity goal of the 466 total funds identified by the review, up from 9 a year ago. And many property funds have increased allocations for debt plays, further boosting the potential demand for debt. The pure debt funds to date have managed to raise almost half of their aggregate equity goal, or $23.8 billion. But much of that equity was lined up before the financial crisis worsened last September. Since then, many institutional investors have pulled back from new commitments. That raises questions about whether the 46 funds that are still seeking to raise capital will be able to meet their goals. quot;I don't think it's possible for all... http://www.staging.realert.com/headlines.php?hid=139716 The game plan of securitization pioneer Ethan Penner, who joined CB Richard Ellis Investors last spring, is starting to emerge. Penner is seeking to raise $1 billion of combined initial equity for two open-end funds that would originate and buy commercial mortgages. The high-yield vehicles would each use about 50 leverage, giving them combined investment power of $2 billion. The vehicles will have differing risk profiles. CBRE Capital Partners would shoot for a return in the low teens, mostly by originating conservative mortgages on stable commercial properties with strong sponsors. Loan-to-value ratios would range from 55 to 75. CBRE Capital Partners Special Situations would seek a 15-20 return, primarily by originating higher-yield mortgages, with loan-to-value ratios exceeding 75. Both funds would also have the capacity to buy senior mortgages, mezzanine loans and commercial MBS in the secondary market. The special situations vehicle likely would focus on distressed debt, which offers higher potential returns. But the vehicles will emphasize originations. quot;Ethan's idea is very much to create a new premium brand of lending,quot; said one rival debt-fund operator. quot;There's no doubt he's trying to compete against the biggest names in the industry. He truly does believe he can build a premium brand to replace some of the biggest namesquot; driven out of the market by the downturn. CB Richard Ellis Investors, which already operates several other fund series, declined to comment on the new vehicles, but mar... http://www.staging.realert.com/headlines.php?hid=139591 More than a dozen large insurance companies have suspended lending for the foreseeable future - perhaps the entire year. The list includes industry giants Aegon, Allstate, Hartford Life, Northwestern Mutual and Principal Life, according to loan brokers and other lending sources. Their withdrawal removes billions of dollars in lending capacity from a market already short on credit. As recently as late last year, many of the companies were saying that they expected their 2009 originations to be reasonably strong, albeit down from the 2008 level. But the worsening financial crisis has taken a big toll on insurers' mortgage, commercial MBS and property portfolios, curbing their lending appetites. quot;We kind of went into the year thinking we would do a certain amount of lending, but the environment is so fluid, it just doesn't make sense to do anything right now,quot; said an executive at a major insurer. quot;A lot of us are just focused right now on being in a defensive position. We're checking our portfolios and looking for trouble, and a lot of us are finding it. If the situation turns around, we'd like to get back into lending, but right now it doesn't make sense.quot; Added a commercial banker: quot;All of a sudden these guys realize they have way too much real estate risk on their books.quot; The development is a further blow to the lending market. When the CMBS market seized up, portfolio lenders initially remained active, cushioning the impact of the credit crunch. And while some giant players are still willing to write... http://www.staging.realert.com/headlines.php?hid=139504 The investor holding an apparently worthless $25 million mezzanine loan on the Riverton apartment complex in Manhattan is angling for a payoff in return for allowing a workout to proceed. The investor, a finance company formerly managed by a CB Richard Ellis affiliate and now known as Realty Finance Corp., is seeking a payment in the neighborhood of $5 million. Even though a sharp decline in the complex's value appears to have wiped out the mezzanine loan's value, Realty Finance has some leverage because it must approve any loan workout. The owner of the complex, a partnership led by Larry Gluck's Stellar Management, appears eager to modify the loan terms in order to salvage its investment in the property. While the bondholders that own the securitized $225 million senior mortgage could foreclose and force Realty Finance out of the picture, the bondholders would incur a $7.5 million tax penalty, specific to Manhattan, for transferring the property's title. But if Realty Finance signs off on a loan workout, the bondholders would avoid the tax penalty. Realty Finance is trying to persuade the bondholders that it would be faster and more cost-efficient to pay it to go away. The buzz is that the bondholders, represented by special servicer CWCapital, and the Stellar partnership have teamed up to make a counteroffer to Realty Finance. Negotiations are ongoing. All parties involved declined to comment. The maneuvering demonstrates how junior investors in large loan packages can hold a trump card even when the... http://www.staging.realert.com/headlines.php?hid=139398 Blackstone Group's $26.2 billion takeover of Hilton Hotels, the last big real estate transaction before the market downturn began in late-2007, has left seven banks - and the Federal Reserve - holding massive chunks of debt that they can't sell without taking big losses. Blackstone has continued to make loan payments, giving the banks breathing room. But the real estate collapse has significantly driven down the values of the underlying hotels, seriously eroding Blackstone's original $5.7 billion equity stake in Hilton. And market players question how well the $20.6 billion debt package will weather the deep recession, which is hurting hotels more than most other property types. The original lending syndicate consisted of seven banks: lead lender Bear Stearns, plus Bank of America, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley. They gave Blackstone about $8.6 billion of senior debt and about $12 billion of mezzanine debt to complete the takeover in October 2007. The Federal Reserve Bank of New York later assumed Bear's share to facilitate the sale of Bear to J.P. Morgan. The lenders have sold $2.2 billion of the senior debt and at least $3 billion of the junior debt, leaving as much as $15.4 billion on the books of the banks and the Fed. The debt package originally called for a blended spread of about 185 bp over 1-month Libor, according to people familiar with the matter. But when market conditions deteriorated before the closing, a quot;material adverse conditionsquot; clause in ... http://www.staging.realert.com/headlines.php?hid=139295 Lone Star Funds is gearing up to solicit $10 billion of equity for what would be the second-largest real estate fund ever. Lone Star Real Estate Fund 2 would invest in distressed commercial real estate, both debt and equity. The percentage breakdown between the two categories is unclear. But most new funds are emphasizing debt investments, which are viewed as offering higher potential returns. The Dallas fund operator is simultaneously getting ready to raise another $10 billion for a separate fund, Lone Star Fund 7, that would invest in distressed residential MBS, corporate bonds and corporate loans. The equity goals for the vehicles seem ambitious, given that the financial crisis has squeezed the availability of capital. But Lone Star has had a strong track record of rolling out funds in recent years, rivaling the powerhouse fund operations of Blackstone Group and Morgan Stanley. Just last August, it completed raising $10 billion of total equity for the predecessor vehicles in the two fund series after just a 10-month marketing campaign. With its new commercial real estate fund, Lone Star seems to be positioning itself to become a major buyer of toxic commercial real estate debt from banks and other holders. Sales of such assets are expected to pick up in coming months as the U.S. Treasury Department and Federal Reserve expand their financial-rescue efforts. A $200 billion Fed program that finances buyers of high-grade consumer receivables is being increased to as much as $1 trillion and broadened to... http://www.staging.realert.com/headlines.php?hid=139184 The changing of the guard continues at the big real estate shops on Wall Street. Steven Kantor and Robert Brennan, longtime senior real estate executives at Credit Suisse and, before that, Donaldson Lufkin amp; Jenrette, are transferring to another area of Credit Suisse as the bank begins a retreat from the origination and new-issue underwriting segments of the commercial MBS business. Meanwhile, managing director Randy Reiff resigned yesterday as head of J.P. Morgan's CMBS group. Reiff, who previously was the top CMBS executive at Bear Stearns, won a power struggle to lead the group last year following J.P. Morgan's buyout of Bear. The word is he's being replaced by managing director Brian Baker, who had co-headed J.P. Morgan's CMBS group before the merger. The moves are the latest in a seemingly endless chain of personnel changes stemming from the CMBS-market train wreck. The ranks of the top executives have been largely wiped out by fallout from the debacle. Credit Suisse's chief executive, Brady Dougan, said this week that his company planned to leave the CMBS sector, in which it has been a major player. quot;The CMBS business, something where we have been a big player . . . is a business we are effectively moving out of,quot; Dougan said, according to a Reuters story. He did not specify a timetable for the withdrawal. Elaborating on Dougan's comments, a spokesman confirmed that the bank would no longer pursue CMBS originations and underwriting assignments, but would continue to support the trading of Credit... http://www.staging.realert.com/headlines.php?hid=139074 J.P. Morgan is preparing to launch a high-yield debt fund with an equity goal of roughly $2 billion. The investment bank hopes to raise much, if not all, of the capital by the spring, market players said. The fund would target mezzanine debt and commercial MBS. Details about the vehicle's management structure and return goal were unavailable, but most debt funds these days are targeting net returns in the mid-teens. It's unclear if the fund will use leverage. Market players said the vehicle would be run by J.P. Morgan Investment Management, part of the bank's institutional asset-management business. Company officials declined to comment. J.P. Morgan's move comes at a time when a number of players are launching high-yield debt funds to seek to take advantage of credit-market turmoil. Almost four dozen sponsors are currently marketing vehicles. At the same time, more than a dozen other funds have been delayed or ditched because of the difficulty of raising capital. J.P. Morgan's fund would be one of the largest debt vehicles to get off the ground since the credit crisis began in 2007. Market players expect the bank's size and brand name would help it raise capital more easily than other fund operators. The bank has past experience managing debt funds. In the early 1990s, J.P. Morgan and O'Connor Group launched two vehicles under the Argo name, investing more than $650 million of equity in distressed assets, including loan portfolios being liquidated by Resolution Trust Corp. Since then, high-yield funds run... http://www.staging.realert.com/headlines.php?hid=138967 Special servicers are increasingly extending the terms of maturing commercial MBS loans that can't be refinanced, a move that is pitting senior bondholders against B-piece players and is complicating the efforts of fledgling finance shops to get off the ground. The practice is often viewed as providing much-needed breathing room for borrowers, reducing the need for forced liquidations that contribute to the downward spiral of property prices. But extensions are coming under fire from some triple-A bondholders, who object to the delay in principal repayment and worry that collateral values will fall, jeopardizing their positions. Yet not all investors are upset - extensions result in a windfall for holders of interest-only strips because their payments continue longer than expected. At the same time, extensions are eating into the potential business of finance companies that were set up to exploit the credit crunch. The extensions eliminate borrowers who would otherwise be under severe pressure to take out new loans at the higher rates now prevailing. Some critics even contend that the practice is adversely affecting the real estate sector at large by delaying the process of determining market-clearing price levels. Firm numbers on the volume of extensions are unavailable, but servicers said the volume has clearly risen in recent months and will accelerate over the course of this year. At one large special servicer, the terms were extended on about 1.5 of the several hundred loans that matured... http://www.staging.realert.com/headlines.php?hid=138865 A group of institutional investors has laid out a sweeping agenda of changes it contends are necessary to revive the commercial MBS market. The proposals would affect nearly every aspect of securitization, from the way rating agencies are paid to the role of originators after loans are packaged for sale. The suggestions were outlined this week at the Commercial Mortgage Securities Association's annual investors conference in Miami Beach. The investors, including representatives of major insurance companies and asset managers, said that investor demand for CMBS couldn't be rebuilt without the changes. While the investors don't maintain that every proposal has to be adopted, they said the suggestions represent the types of changes needed for investor confidence to rebound. A common theme of the proposals is that the interests of the various parties involved in transactions need to be better aligned. But some lenders attending the conference expressed doubts about the prospects for many of the suggestions. They said some of the ideas would be unworkable and had little likelihood of being implemented. As previously reported, the ad-hoc group, which calls itself the quot;the investor roundtable,quot; is primarily calling for increased disclosure of loan information and better analysis of risk. At the conference, the group outlined a more-detailed list of suggestions, urging the industry to: Simplify deal structures, with fewer tranches - for example, only one class per letter grade. Prohibit debt... http://www.staging.realert.com/headlines.php?hid=138733 Shell-shocked securitization pros are already writing off 2009 as pretty much a lost cause. The financial crisis has left the securitization market so devastated that participants think it's unlikely commercial MBS shops will resume lending this year. Indeed, as the downturn gained momentum in the second half of last year, when no CMBS deals were floated in the U.S., questions began to emerge about whether securitization would be revived at all. quot;The infrastructure of our industry has been destroyed,quot; said Boyd Fellows, a longtime CMBS executive. quot;It's been a slow-motion train wreck, and I think that's going to continue for another two or three years.quot; While there are differing opinions about when - or even whether - a rebound will occur, there's universal agreement that the CMBS machine that drove lending to frenzied levels from 2005 to 2007 is now broken and won't be fixed in the short term. CMBS spreads have blown out to astronomical levels, making originations uneconomical. The credibility of rating agencies and securitization shops has been severely undermined. Sweeping consolidation and cutbacks have gutted lending operations. And the economy is facing the prospect of a deep recession. Few expect that list of problems to be addressed in a meaningful way this year. Some CMBS pros think the best they can hope for is to start laying the groundwork to make money in 2010. One wild card is whether the federal government will step in to prop up the commercial real estate sector, either... http://www.staging.realert.com/headlines.php?hid=138627 Worried that many borrowers will be unable to refinance maturing loans next year, the commercial real estate industry is lobbying decision-makers in Washington for financial and regulatory relief. The Real Estate Roundtable, an industry group, is pressing the Federal Reserve and the U.S. Treasury Department to broaden the bailout of the financial system to include commercial mortgages. It is also proposing a sweeping agenda of regulatory, accounting and tax changes that would provide relief for borrowers. Among the proposals: permitting automatic extensions of performing commercial MBS loans. Much of the effort is being spearheaded by developer William Rudin, a member of the trade group's board, who has been calling government officials in Washington for several weeks. quot;We're trying to make people aware of the magnitude of the problem,quot; he said. As the credit crunch has deepened with no hint of a rebound in sight, owners who have watched the values of their properties plunge have become increasingly worried about how they will refinance maturing loans. quot;They're staring down the barrel of maturity defaults,quot; said one leading real estate attorney in New York. quot;They're looking at a disaster.quot; Using back-of-the-envelope calculations, the Roundtable estimates that roughly $400 billion of secured and unsecured commercial real estate debt, including credit facilities, is scheduled to mature next year. Other analysts think a range of $150 billion to $250 billion is more likely. Whatever the case, everyone... http://www.staging.realert.com/headlines.php?hid=138518 With no end in sight to the credit freeze, Deutsche Bank has detailed a senior executive to Washington to approach government officials about ways to help the crippled structured-finance markets. Toby Cobb, former co-head of Deutsche's U.S. real estate division, is pushing his bank's view that private-sector players need to work together to devise ways to end the logjam in the commercial MBS, residential MBS and asset-backed markets. Deutsche believes federal regulators could play a key role in organizing and coordinating meetings among lenders. Cobb was quietly given the special assignment as Deutsche's liaison to Washington several weeks ago. He is reporting to Seth Waugh, chief executive of the Americas, who came up with the idea of the fulltime liaison. Cobb is meeting with officials from the Federal Reserve, the Treasury Department, the FDIC, Fannie Mae and Freddie Mac to both offer feedback on existing bailout programs and promote Deutsche's view that the private sector will be key to any long-term recovery for structured finance. quot;I am not prepared to say that we have thought of the solution, or that anybody has thought of the appropriate solution,quot; Cobb said. quot;But I can say we are concerned about the possibility of another hundred-billion-dollar proposal for yet another government-sponsored program. So far the markets have not responded too well to these efforts. We think the private sector has to come together and create a solution, and we are encouraging the government to... http://www.staging.realert.com/headlines.php?hid=138415 LoanCore Capital, which raised $500 million of equity from Singapore's sovereign wealth fund this summer to buy distressed debt, is now seeking to line up more than $3 billion for a commingled fund that will originate loans. The Government of Singapore Investment Corp. has committed to kick in another $1.5 billion for the new fund, on the condition that it not be the majority investor. That means LoanCore still needs to solicit more than $1.5 billion from other investors. The company, formed several months ago by Mark Finerman and two other former RBS Greenwich executives, has tapped Eastdil Secured as its placement agent. Logical capital sources include other sovereign wealth funds and pension funds that will have fresh investment allocations in the first quarter. LoanCore's first vehicle is backed solely by the Singapore sovereign fund. It is focusing on the acquisition of distressed debt. Including leverage, the vehicle has $1.5 billion of buying power, most of which has not yet been deployed. The origination strategy for the second fund is unclear. But when Finerman left RBS in May, there was talk he believed that, in the wake of the market meltdown, lenders would have to retain a portion of loans if they wanted to sell participation interests to investors. For example, a lender seeking to securitize a loan portfolio might sell the triple-A and double-A securities and retain the rest to show investors that it is willing to stand behind its loans. While LoanCore currently plans to set up a separate fund,... http://www.staging.realert.com/headlines.php?hid=138309 The commercial MBS market's freefall continued yesterday as the third large loan in a week was suddenly transferred to special servicing. With investors worried about the possibility of other nasty surprises, demand for bonds was virtually nonexistent, causing prices to plunge to unprecedented levels. quot;There is little to stop the cratering of prices now,quot; said one investor. quot;No one wants to throw himself in front of this moving train of a market.quot; Spreads on super-senior triple-A paper shot out to a record 1,600 bp over swaps on Thursday, before pulling in to 1,525 bp. The benchmark bonds were trading at just 49 cents on the dollar, translating to an eye-popping 18 yield. Just a week ago, the same bonds were trading at 74 cents on the dollar, or an 11 yield and an average spread of 810 bp. That means the paper's value plunged by one-third in a week. The loans collateralizing the bond transactions would have to suffer a 30 loss before the super-senior bonds would be affected. The fact that such securities were commanding 18 yields suggests that the market is pricing in an economic depression. Meanwhile, the cost of buying protection against defaults has skyrocketed (see article on Page 3). The latest leg of the long-running downturn was touched off last week when U.S. Treasury Secretary Henry Paulson officially pulled the plug on the idea of having the government buy billions of dollars of structured bonds. It accelerated on Tuesday when it became known that two large commercial mortgages originated... http://www.staging.realert.com/headlines.php?hid=138222 ---------- CORRECTION: A Nov. 14 table of large CMBS mortgages scheduled to mature next year incorrectly included two loans: a $254 million mortgage to Americold on an industrial portfolio and a $77.2 million loan to Ross Partrich of Redwood Group Holdings on a mobile-home-park portfolio. Both loans have already been refinanced. The loan to Americold, which was subsequently acquired by Yucaipa Cos., was also referred to in an accompanying article, quot;Few Big CMBS Loans Set to Mature in 2009.quot; ---------- Less than $6 billion of large securitized mortgages mature next year, indicating that the near-term refinancing volume should be relatively manageable even given the virtual shutdown of lending markets, according to a review by Commercial Mortgage Alert. The review examined a subset of securitized loans that potentially could be hardest to refinance - those of $50 million or more that were originated in the past five years. Only 47 first mortgages totaling $5.3 billion fall in that category (see list of loans on Pages 11-12). The largest borrower in the group, by far, is General Growth Properties. The mall REIT, whose severe debt problems have been well publicized, accounts for one-quarter of the total. Other borrowers with large loans coming due next year include New York developer Joseph Moinian ($382 million) and private-equity firm Yucaipa Cos. ($254 million). The total is relatively modest - a tiny fraction of the $230 billion of securitization... http://www.staging.realert.com/headlines.php?hid=138103 ---------- CORRECTION: The second paragraph of a Nov. 7 article, quot;Lehman, Credit Suisse Top Writedown Tally,quot; incorrectly attributed Credit Suisse's $2.6 billion commercial real estate writedown over the past year to J.P. Morgan. The headline and first paragraph correctly reported that Credit Suisse took the second-largest writedown. J.P. Morgan didn't disclose its commercial real estate writedowns, as was correctly stated lower in the article. ---------- Lehman Brothers and Credit Suisse took the largest commercial real estate writedowns over the past year, according to a review by Commercial Mortgage Alert. Lehman had $4.8 billion of global net writedowns, followed by Credit Suisse at $2.6 billion (see table on Page 12). Five other lenders had totals exceeding $1 billion: Bear Stearns ($2.2 billion), Wachovia ($2.17 billion), Deutsche Bank ($2 billion), Citigroup ($1.6 billion) and Merrill Lynch ($1.1 billion). All told, a dozen major lenders took $19.4 billion of net writedowns in the 12 months ending Sept. 30. That was equal to 9 of the 12 lenders' total $215 billion net exposure to commercial real estate at the end of last year. Not included in that group is J.P. Morgan, which disclosed only combined commercial and residential writedowns. Over the past year, 13 major lenders (including J.P. Morgan) reduced their net commercial real estate exposure by 39 via a combination of writedowns, asset sales and the runoff ... http://www.staging.realert.com/headlines.php?hid=137996 CWCapital has hired commercial MBS veteran Tad Philipp to oversee a new business that will advise clients on how to evaluate and manage commercial real estate risk. With the move, Boston-based CWCapital is seeking to build upon its experience as a B-piece buyer and servicer. And it has turned to a well-known CMBS specialist to head up the effort. Philipp spent 17 years at Moody's, most of the time in charge of the CMBS group, before leaving in July. The new unit, dubbed CWCapital Investments Risk Management Solutions, will analyze CMBS, whole loans, mezzanine loans and equity positions in order to determine valuations. It will also devise hedging, workout or capital-management strategies. Clients are expected to include banks, insurance companies, monoline insurers and other financial institutions. The operation will also be positioned to apply for contractor or subcontractor assignments for the federal government's $700 billion Troubled Asset Relief Program (TARP) or for the FDIC. Philipp, a managing director, started yesterday at CWCapital's New York office. He reports to Charles Spetka, president of the investment and asset management divisions. The advisory team also includes senior vice president Julia Hu, who was already on board at the firm. The plan is to launch the business with those three key players and rely on support from other CWCapital staffers, including servicers, appraisers, analysts and lawyers. quot;We're going to use the existing infrastructure in a different way, and work... http://www.staging.realert.com/headlines.php?hid=137889 After significantly reducing the amount of leverage originally planned, Bank of Ireland and Bank of America are close to wrapping up a $360 million syndicated loan for a mixed-use tower that a Vornado Realty partnership is building in Boston. The four-year loan, which will help finance the construction of the 1.5 million-square-foot building, at One Franklin Street, is $186 million smaller than the Vornado group initially sought. As a result, the leverage ratio for the $700 million project is only 51, down from the originally intended 76. The development group was forced to put up more equity because of the tighter credit market. Bank of Ireland and BofA took the assignment on a best-efforts basis, meaning that they committed to fund part of the senior loan facility on the condition that they line up additional lenders for the rest. The size and terms of the loan changed during the lengthy syndication effort, reflecting the tough market conditions. The amount of proceeds was reduced at least twice, to reduce the leverage. And the rate, initially pegged at 225 bp over Libor, ended up at 275 bp. Bank of Ireland committed $135 million, and BofA pledged $75 million. Rounding out the syndicate are Helaba Bank ($75 million), HBOS ($40 million) and Capital One ($35 million). The loan is scheduled to close Nov. 15. The members of the Vornado partnership boosted their equity commitments in proportion to their stakes in the project, which was originally projected to cost $719.4 million. Vornado, a New York REIT, is... http://www.staging.realert.com/headlines.php?hid=137787 Developer Harry Macklowe is facing a debt squeeze on yet another Manhattan office building. The 536,000-square-foot property, at 1330 Avenue of the Americas, has seen its cashflow fall because of a decline in the occupancy rate. That has forced the developer's company, Macklowe Properties, to tap reserves set up to cover loan-payment shortfalls. But now the company is burning through the reserves, putting it under pressure to raise more equity. Macklowe is quietly holding discussions with potential partners, according to market players. The amount of equity being sought is unclear. The company is apparently conducting the talks directly, without using a broker. A Macklowe spokesman declined to comment. Macklowe bought the property for $498 million from German syndicator Deka Immobilien at yearend 2006, as the market was peaking. Reflecting the high leverage available at the time, the company lined up a $500 million mortgage package via Deutsche Bank to finance the deal. But property values have since sagged in Manhattan. That factor and the relatively low vacancy rate have driven down the building's value by as much as $150 million, according to some local real estate players. The loan package matures in January. But Macklowe has three one-year extension options that can be exercised under certain conditions, giving the company some breathing room. The immediate problem is that the reserves are being depleted faster than expected. When Macklowe acquired the property, the occupancy rate was 90.3....