http://www.cmalert.com Commercial Mortgage Alert en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Mon, 08 Feb 2010 12:36:44 -0700 60 http://www.cmalert.com/headlines.php?hid=68035 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.cmalert.com/headlines.php?hid=68060 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.cmalert.com/headlines.php?hid=67875 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.cmalert.com/headlines.php?hid=67505 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.cmalert.com/headlines.php?hid=67531 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.cmalert.com/headlines.php?hid=67175 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.cmalert.com/headlines.php?hid=66998 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.cmalert.com/headlines.php?hid=67023 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.cmalert.com/headlines.php?hid=67197 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.cmalert.com/headlines.php?hid=66427 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 propertys 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.cmalert.com/headlines.php?hid=66246 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.cmalert.com/headlines.php?hid=66266 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.cmalert.com/headlines.php?hid=65914 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.cmalert.com/headlines.php?hid=65545 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.cmalert.com/headlines.php?hid=65354 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.cmalert.com/headlines.php?hid=65378 ---------- 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.cmalert.com/headlines.php?hid=65109 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.cmalert.com/headlines.php?hid=64932 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.cmalert.com/headlines.php?hid=64957 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.cmalert.com/headlines.php?hid=64658 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.cmalert.com/headlines.php?hid=64541 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.cmalert.com/headlines.php?hid=64375 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.cmalert.com/headlines.php?hid=64204 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.cmalert.com/headlines.php?hid=64228 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.cmalert.com/headlines.php?hid=64036 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.cmalert.com/headlines.php?hid=63889 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.cmalert.com/headlines.php?hid=62337 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.cmalert.com/headlines.php?hid=63709 ---------- 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.cmalert.com/headlines.php?hid=55357 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.cmalert.com/headlines.php?hid=47852 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.cmalert.com/headlines.php?hid=47877 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.cmalert.com/headlines.php?hid=47665 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.cmalert.com/headlines.php?hid=46871 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.cmalert.com/headlines.php?hid=46890 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.cmalert.com/headlines.php?hid=45809 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.cmalert.com/headlines.php?hid=45010 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.cmalert.com/headlines.php?hid=29133 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.cmalert.com/headlines.php?hid=29149 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.cmalert.com/headlines.php?hid=28864 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.cmalert.com/headlines.php?hid=28880 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.cmalert.com/headlines.php?hid=28772 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.cmalert.com/headlines.php?hid=28689 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.cmalert.com/headlines.php?hid=28589 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.cmalert.com/headlines.php?hid=28384 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.cmalert.com/headlines.php?hid=28401 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.cmalert.com/headlines.php?hid=28288 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.cmalert.com/headlines.php?hid=29020 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.cmalert.com/headlines.php?hid=28148 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.cmalert.com/headlines.php?hid=27920 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.cmalert.com/headlines.php?hid=27788 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.cmalert.com/headlines.php?hid=28163 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.cmalert.com/headlines.php?hid=27380 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.cmalert.com/headlines.php?hid=27401 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.cmalert.com/headlines.php?hid=26784 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.cmalert.com/headlines.php?hid=26768 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.cmalert.com/headlines.php?hid=26752 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.cmalert.com/headlines.php?hid=27144 ---------- 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.cmalert.com/headlines.php?hid=26723 ---------- 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.cmalert.com/headlines.php?hid=27199 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.cmalert.com/headlines.php?hid=26707 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.cmalert.com/headlines.php?hid=26693 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.... http://www.cmalert.com/headlines.php?hid=26677 ---------- CORRECTION: An Oct. 10 article, quot;Barclays Axes Most of Lehman's CMBS Team,quot; didn't fully describe Paul Hughson's duties at Lehman Brothers. Hughson oversaw the distribution of all debt products in the commercial real estate group. ---------- Barclays this week made deep cuts in the commercial real estate operation that it inherited from Lehman Brothers, dismissing more than 100 staffers - including nearly the entire commercial MBS team. But Barclays retained Lehman's real estate investment banking group, which has about three dozen members. Still unclear is the fate of a handful of people from Lehman's real estate trading group. The dismissals were unsurprising, given the central role commercial real estate played in Lehman's collapse. Lehman was stuck with a largely illiquid, $32.6 billion portfolio of real estate assets. Many doubted that Barclays would want to significantly expand its relatively modest presence in the U.S. commercial real estate market after Lehman's experience. Among those let go were managing director Mark Walsh, Lehman's top commercial real estate executive, and managing director Ken Cohen, head of the CMBS group. Also dismissed were managing director Larry Kravetz, head of the large-loan group, and managing directors Brett Ersoff and John Herman, who co-headed the conduit loan operation. Those departing also include: Paul Hughson and Robert Caldwell, managing directors who worked on the distribut... http://www.cmalert.com/headlines.php?hid=26661 Commercial real estate specialists are coming out of the woodwork to position themselves to advise buyers and sellers of the growing pool of distressed assets. Many shops - large and small, new and old - are angling to get a piece of what is shaping up as a bonanza of opportunities to provide valuation, asset-management, due-diligence and other advisory services. Much of the focus is on the $700 billion rescue program proposed by the U.S. Treasury Department. But the specialists also are eager to pursue assignments from the FDIC and the private sector. Among the players launching advisory efforts are Allon Financial of Denver, Cobblestone Advisory of Greenwich, Conn., and Savills of New York. Allon, which was formed five months ago, provides due-diligence services. Cobblestone, a newly formed affiliate of JBK Capital of New York, consults on loan workouts and valuations of whole loans and CMBS, and also helps clients develop acquisition and disposition strategies for distressed assets. And Savills has set up a distressed real estate division (see articles on Page 3). That's just the tip of the iceberg. Big-name players like BlackRock, Blackstone, J.P. Morgan, Morgan Stanley and Pimco are all closely watching the government rescue program for possible advisory contracts. Meanwhile, law firms, including Katten Muchin and McKee Nelson, are laying the groundwork to advise managers hired by the government. Just this week, BlackRock, a major player in the distressed arena, beefed up its financial... http://www.cmalert.com/headlines.php?hid=26646 Lenders and analysts are hopeful that the proposed government bailout agency would be a step in the right direction toward resuscitating the commercial mortgage market. While much depends on the actual execution, market players said, the proposal to have the government spend up to $700 billion on distressed mortgage-related assets should provide benefits - for the most part indirectly - in the commercial mortgage arena. Most importantly, the agency could stop the downward trend in home-mortgage values and help establish prices for hard-to-value assets, they said. That would do much to restore confidence in the broad economy, providing benefits across sectors and possibly setting the stage for a rebound. quot;The U.S. economy isn't going to recover until housing recovers and the foreclosures stop,quot; said one veteran commercial MBS executive. quot;To the degree that this plan creates extra liquidity in the housing-loan market, it's going to have a beneficial effect.quot; More specifically, securitization shops would gain a viable exit strategy for their most-illiquid assets - large floating-rate mortgages and commercial real estate CDO bonds. And regional and community banks, which are saddled with large volumes of troubled construction loans, could also gain. The market participants cautioned that many unknown details - such as how government auctions would be conducted, which institutions would be eligible, how purchase prices would be determined and the specific types of assets qualifying for s... http://www.cmalert.com/headlines.php?hid=26626 Panic from the growing financial crisis washed over the commercial mortgage market this week, dashing any remaining hope that the sector would only be sideswiped by what has grown into a crisis of historic proportions. Lenders and investors alike hunkered down, dazed by the collapse of one financial giant, the unprecedented government rescue of another and the shotgun marriage of a third. Fear of the known - and the unknown - became the controlling emotion, accelerating the downward spiral and setting the stage for further declines in debt and equity valuations. Amid widespread expectations that more financial dominoes were still to fall, market players fixated on what else could go wrong. Front and center was concern that Lehman Brothers' massive $32.6 billion commercial real estate portfolio might be liquidated quickly, driving prices down further. Also raising jitters was the possibility that AIG, which is inder pressure to raise cash to pay back an $85 billion loan from the Federal Reserve, might dump some of its $23.2 billion CMBS and commercial real estate CDO portfolio, which was the second largest among insurers at the end of last year. Likewise, there was speculation that Fannie Mae and Freddie Mac, now under government control, might unload some of their giant CMBS portfolios or pull back from financing multi-family properties. While there were good reasons to think that none of those fears would come to pass, investors clearly were in no mood to take any chances. Demand for triple-A C... http://www.cmalert.com/headlines.php?hid=10780 J.P. Morgan, which had maintained a relatively large conduit operation in hopes of positioning itself to capture market share when the sector rebounded, reversed course last week and heavily cut back the group. The bank closed the U.S. regional and Continental European lending offices in its commercial real estate lending operation. All told, about 50 staffers were laid off. That left roughly 50 people, including support staff, in the group. The move bolstered a growing consensus that the commercial MBS downturn will last far longer than originally expected. Hopes that CMBS lending would resume late this year have been dashed because of the ongoing turmoil in the credit markets, and many lenders now fear that the freeze-up will continue for at least another year - and possibly much longer. As one of the few Wall Street firms to weather the credit crisis relatively well, J.P. Morgan was viewed as being in a strong position to help restart the CMBS market. Even after some cutbacks, the bank retained a relatively large CMBS staff following its March takeover of Bear Stearns. J.P. Morgan maintained a skeleton crew in its regional offices - typically an underwriter, an originator and a support staffer - in order to be able to move quickly when the lending market began to thaw. Most of its rivals, by contrast, had already jettisoned their outposts. But with the latest deep round of layoffs, J.P. Morgan appears to be giving up on hope for a resumption of activity anytime soon. The dismal outlook is expected to prompt further... http://www.cmalert.com/headlines.php?hid=10645 New York developer Douglas Durst and Bank of America are seeking $650 million of permanent financing on One Bryant Park, a 54-story office tower nearing completion in Midtown Manhattan. The partners have hired Chatham Financial to canvass lenders. Durst and BofA, which are 50-50 equity partners in the property, are looking for a 10-year, fixed-rate loan. Durst is aiming to complete the financing by Nov. 1. Durst said he was quot;extremely pleasedquot; by the level of interest shown by commercial banks and life insurers. quot;To paraphrase Mark Twain, reports of the death of the lending industry are greatly exaggerated,quot; Durst said. Even with real estate debt generally hard to come by in the current credit crunch, lenders are apparently attracted by the strong positioning of One Bryant Park, whose 2.1 million square feet are nearly fully leased. The project was financed with a $350 million construction loan originated in December by BofA and Bank of New York, debt that supplemented $650 million of financing raised through an issue of tax-exempt Liberty Bonds. The new loan will probably be co-originated and underwritten by multiple lenders in a quot;club deal.quot; Durst said part of the proceeds from the new financing would be used to retire the construction loan. In August 2004, construction began on the tower, which is on Sixth Avenue between West 42nd and West 43rd Streets, just east of the 48-story Conde Nast building -- another Durst project. The tower occupies most of a full city block and required... http://www.cmalert.com/headlines.php?hid=10484 Deutsche Bank and Boston Properties have apparently settled a month-long dispute that threatened to unravel the syndication of a $1.3 billion senior loan on the General Motors Building in Manhattan. The settlement means that the syndication can close and that Deutsche can proceed with its planned sale of a $306 million senior mezzanine loan on the building to GIC Real Estate, the investment arm of the Government of Singapore. Neither Deutsche nor Boston Properties would discuss the reason for the standoff. People familiar with the deal said Boston Properties, which holds $294 million of junior mezzanine debt on the property, had refused to sign off on an amendment to the inter-creditor agreement that was necessary to close the syndication. The buzz is that the Boston-based REIT, which has a reputation for being a tough negotiator, was demanding rights and guarantees normally given only to senior lenders. The people familiar with the matter indicated that because Deutsche closed the sale of the $294 million junior mezzanine loan to Boston Properties before the details of the senior-loan syndication were worked out, Boston Properties gained the leverage to make more demands. quot;From the Boston Properties point of view, there was no reason not to do it,quot; said one lender. quot;They had a power position. Why not use it to leverage some advantagesquot; Deutsche apparently met at least some of the demands of Boston Properties, which acquired the GM Building with two partners in June for $2.8 billion. The syndication was on... http://www.cmalert.com/headlines.php?hid=10339 ORIX Capital Markets has agreed to buy a $500 million B-piece portfolio from J.P. Morgan in a transaction criticized by one major high-yield investor that wasn't given an opportunity to bid. Market players said that J.P. Morgan didn't unload the bonds at fire-sale prices, but rather was able to negotiate a price that was not a deep discount to book value. One source put the price at quot;north of $200 million,quot; but declined to be more specific. No J.P. Morgan personnel are moving over to Dallas-based ORIX as part of the transaction. The portfolio contains the below-investment-grade bonds from more than 80 commercial MBS deals that were floated mostly between 1997 and 2002, when underwriting standards were more conservative. J.P. Morgan assumed most or all of the portfolio via its 2004 takeover of Bank One. J.P. Morgan continued to operate Bank One's Chicago-based B-piece group and made limited B-piece purchases over the past few years. The size of J.P. Morgan's remaining B-piece portfolio is unclear. It's unknown whether the company shopped or is shopping those bonds as well. The portfolio J.P. Morgan is selling to ORIX evidently wasn't widely marketed - a decision that some investors questioned. Some leading B-piece investors, including CWCapital and LNR Partners, weren't given a chance to bid on the bonds, according to market sources. LNR did not return a call seeking comment, but Charles Spetka, president of CWCapital, confirmed that his firm was bypassed and expressed bewilderment, noting that... http://www.cmalert.com/headlines.php?hid=10201 Eurohypo has agreed to lead a $365 million mortgage on a Southern California office portfolio that Douglas Emmett Realty acquired earlier this year from GE Real Estate's Arden Realty. The five-year floater will retire seller financing that GE provided in March when Douglas Emmett bought the 1.4 million-square-foot portfolio for $610 million. The Eurohypo loan, brokered by Eastdil Secured, is expected to close in a few weeks. Eurohypo is leading the financing on a best-efforts basis. It has committed to fund a portion of the loan on the condition that it is able to line up lenders willing to provide the rest. Such quot;club dealsquot; have become more common during the credit crunch. Before the market went south, lead lenders typically committed to fund loans themselves, assuming the risk of syndication. Eurohypo is shopping the interest-only loan at Libor plus 165 bp. Some lenders described the spread as relatively tight. But the leverage is conservative, and Douglas Emmett might be providing recourse. Potential syndicate members were scheduled to make commitments last week, but that deadline has slipped. quot;Conditions in the market make everything very slow,quot; said a source familiar with the deal. quot;It's a good portfolio, and the deal will get done. People are taking their time making decisions.quot; Douglas Emmett, a REIT based in Santa Monica, Calif., initially financed the acquisition of the portfolio via a $380 million bridge loan from GE. That loan is scheduled to mature in December. The portfolio is made up... http://www.cmalert.com/headlines.php?hid=10045 Market players see a slowdown in what had been a flood of capital into high-yield real estate debt funds - a shift they say is due to a perception that too many funds are chasing too few opportunities. There are now about 42 high-yield commercial real estate debt vehicles attempting to raise roughly $30 billion of equity, a task that fund operators and investors say is becoming increasingly difficult. It's still too early to quantify the fund-raising slowdown, but market players insist it's real. Only a portion of the distressed-debt fund managers trying to drum up capital are likely to reach their targets, said Jeff Friedman, a co-founder of Mesa West Capital, which manages a real estate debt fund. quot;It's definitely a case of the 'haves and have-nots.' quot; quot;It's hard to tell who's getting commitments, because managers don't like to admit they're not getting their fund raised,quot; Friedman said, noting that quot;pension funds and endowments have greatly reduced allocations for new real estate investments.quot; A major reason for the fund-raising slowdown is that fund investors simply have less capital on hand. For starters, few opportunity funds are making distributions that limited partners can redeploy in other funds. In addition, pension plans and others have seen their stock-market holdings battered this year, which has caused investors to bump up against their allocation limits for debt funds and other asset classes. quot;It's being said that debt is the new tourist destination for fund managers,quot;... http://www.cmalert.com/headlines.php?hid=9879 Investors are penalizing two massive commercial MBS deals floated last year that have significant amounts of their collateral loans on servicer watchlists. The benchmark triple-A classes of the transactions are trading in the secondary market at spreads that are 10-15 bp wider than comparable tranches of other deals that priced last year. quot;There is no question that the watchlist issue is causing these bonds to trade cheap,quot; said one analyst. The deals in question - the two largest CMBS transactions ever - are Wachovia's $7.9 billion quot;C-30quot; offering and the $7.6 billion quot;GG-10quot; issue by RBS Greenwich Capital and Goldman Sachs. The C-30 transaction includes a big chunk of the largest commercial mortgage ever placed on a single property. That loan financed a Tishman Speyer partnership's $5.4 billion purchase of the Peter Cooper Village and Stuyvesant Town apartment complexes in Manhattan near the top of the market. Because of the liquidity associated with their massive sizes, the two transactions have been bellwethers of CMBS prices. But as servicers have increasingly flagged the transactions' collateral loans for not meeting prescribed credit-quality measures, investors have demanded a premium spread for the bonds. About half of the loans in both deals are now on servicer watchlists. According to Trepp, 50.4 of the GG-10 deal's collateral pool balance is on watchlist, as are 47.9 of the C-30 loans. By contrast, the average is about 20 for all 2007 issues, 15.4 for 2006 deals and 9.5 for... http://www.cmalert.com/headlines.php?hid=9722 A maneuver by Andy Stone's Petra Capital Management is raising eyebrows in the CDO market. Petra has used uninvested cash from a $1 billion CDO that it manages to make a $50 million unsecured loan to an affiliated REIT. That loan has now become part of the collateral pool of the CDO, called Petra CRE CDO 2007-1 Ltd. As collateral manager of the CDO, Petra can invest the CDO's cash, as well as repaid principal from collateral loans, according to specified guidelines. But the fact that it has lent the money to an affiliate, rather than to a third party, has raised questions about a conflict of interest. The $50 million loan was made to Petra Real Estate Opportunity Trust, a newly formed REIT that Petra Capital plans to take public. The two-year loan, which was sold to the CDO on April 22, is pegged to one-month Libor plus 1,100 bp - currently equal to 13.4. Some market players said that the terms seem favorable for a REIT with no operating history. quot;In the open market, the chance that a new REIT would be able to borrow on an unsecured basis at any price has got to be low,quot; said one longtime CMBS lender. quot;People have trouble borrowing on a secured basis. This is way too borrower-friendly in pricing.quot; quot;It just doesn't smell right, does itquot; said one investor, who, like the lender, didn't want to be identified. quot;It seems like self-dealing. Investors have to wonder why they aren't lending to a third party.quot; Rating agency officials said that Petra was acting within its rights by substituting a REIT loan into the pool.... http://www.cmalert.com/headlines.php?hid=9577 A Vornado Realty partnership has agreed to kick in more equity for a mixed-use project in Boston after lead lenders Bank of America and Bank of Ireland were unable to put together a syndicate for a $545.5 million construction loan. The equity infusion will reduce the required amount of debt to $400 million. BofA and Bank of Ireland will now test whether that decrease in leverage will be enough to entice other lenders to help finance the $719.4 million project, at One Franklin Street. The assignment provides stark evidence of how dramatically the lending environment has changed. During the real estate bull market, a project with a strong sponsor like Vornado would have had no trouble lining up financing. Lead lenders would have committed to providing the full amount, taking on the risk of completing the syndication. In this case, BofA and Bank of Ireland took the assignment on a quot;best effortsquot; basis. They committed to provide a total of $200 million - on the condition that they were able to line up syndicate partners to provide the remaining $345.5 million. They started shopping the loan at Libor plus 225 bp and later widened the spread to 275 bp. In keeping with the growing trend toward recourse on construction loans, the Vornado team guaranteed repayment of up to 45 of the face amount in the event of a default. But even with the recourse provision, the sweetened pricing and Vornado's sponsorship, there wasn't enough demand to form a syndicate. quot;The times have changed, baby,quot; said one lender familiar w... http://www.cmalert.com/headlines.php?hid=9430 Robert Verrone, who stepped down last month as co-head of the U.S. commercial real estate operation at Wachovia, is in discussions to join hedge-fund operator Scoggin Capital Management. The talks indicate that Scoggin, which has $3.2 billion of assets under management, intends to make a big push into the commercial real estate arena. The New York company recently lined up more than $500 million of equity for a debt fund that will invest in commercial mortgages, bank loans and municipal bonds. It's not clear if Verrone would run that vehicle, called Scoggin Credit Opportunity Fund, or another Scoggin venture. Speculation has swirled for months that a handful of players are seeking to line up private equity to launch finance operations that would write and securitize commercial mortgages, now that Wall Street shops have pulled back from the business. Scoggin might be pursuing that strategy, or it could be one of many fund operators targeting distressed assets. Verrone is in talks with Scoggin chief executive Craig Effron about joining the firm at the end of the summer, according to market players, who said an agreement seems likely. Verrone and Effron declined to comment. Scoggin was founded in 1988 by Effron and Curtis Schenker. It invests on behalf of institutions and high-net-worth individuals, primarily in quot;event-drivenquot; situations like bankruptcies, mergers and spin-offs. The firm says it has produced in excess of 17 net returns to its partners since inception. Verrone became one of the best-known lenders... http://www.cmalert.com/headlines.php?hid=9276 Two new deals are flowing into the bone-dry commercial MBS pipeline. A $1 billion-plus fusion offering, with loans from Prudential Mortgage, Morgan Stanley and perhaps others, is expected to hit the market after Labor Day. Most or all of the collateral would consist of loans that have been warehoused for some time, rather than mortgages originated in recent months. Meanwhile, General Growth Properties is working on a single-borrower transaction that could be as large as $3 billion, although some market players think it is more likely to weigh in around $500 million. Wachovia and Goldman Sachs are among the underwriters in the hunt for the assignment. The timing of the transaction is unclear. Also, there's talk that other property owners are exploring the possibility of single-borrower transactions. Simon Property and Vornado Realty are seen as possible candidates. The feeling is that investors stung by the CMBS market downturn would be more receptive to single-borrower deals, which are easier to analyze than fusion transactions backed by dozens of loans from multiple borrowers. Word of the activity provides hope that at least some CMBS issuance will emerge in the second half of the year. For weeks, there was just one transaction left in the pipeline, and that deal - a $1.3 billion fusion offering led by Bank of America and Barclays - priced yesterday (see Initial Pricing on Page 10). The fallout from the fixed-income crisis has almost shut down the CMBS market. So far t... http://www.cmalert.com/headlines.php?hid=9140 J.P. Morgan's acquisition of Bear Stearns has resulted in significant cutbacks in commercial MBS staffing, both because of deep layoffs and the departure of executives unhappy with new roles. The merged CMBS group will have about 80 staffers. That marks a roughly 60 reduction in headcount from the total of approximately 200 workers at the CMBS operations of J.P. Morgan and Bear earlier this year. Among those departing were Craig Sedmak, who ran Bear's CMBS trading desk, and Rodman Azar, who headed a J.P. Morgan lending team. Both were dissatisfied with the jobs they were offered in the merged group. Originators from the J.P. Morgan side who were laid off included Patrick Ciriello, Scott Towbin and Michael Cozza, who were vice presidents, and Jim Fitzpatrick, an executive director. Also let go were securitization banker Manny Chrysoulakis and trader Glenn Riis, both from the J.P. Morgan side. The merging of the two groups, worked out over several weeks, came to a climax late last week when the bulk of the decisions were revealed. Among the big winners: Randy Reiff, the Bear executive who, as previously reported, was named head of the merged group; Bear executives Michael Sarkozi and Richard Kirikian, who were put in charge of originations; and longtime J.P. Morgan trader Andy Taylor, who will oversee the CMBS trading desk. Christopher Hoeffel, who co-headed Bear's CMBS group with Reiff, and Brian Baker, who co-headed J.P. Morgan's CMBS group, are staying on in senior posts, although their specific... http://www.cmalert.com/headlines.php?hid=8973 Securitization pros expect a dramatically different commercial MBS industry to emerge from the deep downturn, with as many as one-third of conduit shops leaving the sector, new players emerging and senior managements insisting on tighter risk controls and bigger profit margins. A few CMBS programs are likely to start dipping their toes back into the U.S. loan market in the fourth quarter, with others following gradually next year. But broad-based lending probably won't resume for more than a year, meaning that full-scale CMBS issuance wouldn't occur until 2010. And normalized annual issuance in the U.S. is likely to range from $75 billion to $100 billion - well below the $200 billion average of the past three years. Those are the predictions of a cross-section of CMBS veterans who were asked by Commercial Mortgage Alert to assess the state of the market as their industry gathers for its annual convention, which starts Monday in New York. To be sure, a host of wild cards will affect the timing of the market's re-emergence, ranging from economic conditions to CMBS spread levels to the willingness of senior managements to resume allocating capital for lending. Perhaps as important a factor as any, some players said, is the mere passage of time, which will allow institutions to rebuild equity, markets to settle down, issuers to regain the confidence of investors and any legislative or regulatory changes to shake out. But the CMBS pros, who agreed to speak on the condition of anonymity, offered some... http://www.cmalert.com/headlines.php?hid=8831 Borrowers who fled the securitization arena because of doubts about pricing and certainty of execution are finding that the same concerns have followed them into the syndication market. Commercial banks, increasingly allergic to risk and unwilling to commit to large loans without plenty of partners, are asking borrowers to consent to fees and quot;market flexquot; language that allows loans to be repriced if enough syndicate partners can't be lined up. One increasingly common feature is a quot;hold-offquot; agreement, in which a borrower agrees not to seek a loan from another source for a prescribed amount of time while a lender determines its syndication prospects. To be sure, there are still traditional loan syndicates in which one or two banks commit to originate a big mortgage and later line up partners. But an increasing number of loans are quot;clubquot; deals, with a group of lenders co-underwriting the loan up front. Each participant determines how much of the loan it wants to retain and how much it wants to syndicate - but doesn't proceed unless it lines up the syndicate partners before the closing. quot;People determine their 'hold' position, the amount of money they want to keep from the loan, and underwrite with that in mind,quot; one portfolio lender said. quot;Nobody wants to go out on a limb anymore.quot; Club deals are usually cumbersome and slow to close, adding complications for borrowers. quot;What makes these deals harder is that someone has to lead the deal, and it's very difficult to get three or four lenders on the same page,quot;... http://www.cmalert.com/headlines.php?hid=8692 The ongoing commercial MBS rally is fueling cautious optimism that securitization programs might be able to start lending again this fall, although plenty of hurdles remain. CMBS pros think that two broad conditions are necessary for a widespread resumption of lending: the stabilization of CMBS spreads at levels that make securitization shops competitive with portfolio lenders, and the willingness of financial institutions to devote capital for fresh mortgage commitments. The recent CMBS rally, which has driven benchmark triple-A spreads down to 130 bp over swaps from a peak of around 315 bp in March, has gone a long way toward addressing the first condition. Portfolio lenders are still quoting tighter loan spreads than those offered by securitization programs, but the gap has narrowed substantially over the past couple of months. Many observers believe there is a reasonable chance that CMBS spreads will tighten by the fall to levels that make securitization shops competitive again and that ongoing stabilization in the credit markets will persuade senior managements that the lower spreads are sustainable. If so, that would remove one large obstacle for CMBS shops. What might be a bigger roadblock is getting senior credit officers to reinstate credit lines used to fund new mortgages. Most of the leading CMBS programs are operated by broad-based financial institutions that need to replenish their capital after suffering big losses from both inside and outside of the commercial real est... http://www.cmalert.com/headlines.php?hid=8545 Barclays and SL Green have agreed to provide $460 million of short-term financing to Carlyle Group for its purchase of a stake in the retail space at the office building at 666 Fifth Avenue in Midtown Manhattan. Barclays will originate a $325 million senior loan, and SL Green will fund $135 million of mezzanine debt. The floating-rate loans, brokered by Carlton Group, will carry two-year terms. They are scheduled to close next month. Barclays plans to syndicate its loan, although it has not yet decided how many other lenders to bring in or how much of the loan it will keep. Carlyle has agreed to buy a 49 stake in the 85,000-sf retail portion of 666 Fifth Avenue for $525 million. The seller, Kushner Cos. of Florham Park, N.J., is retaining the remaining interest in the retail space, as well as full ownership of the office space at the 1.5 million-sf building. Kushner purchased the trophy tower last year for $1.8 billion, tapping Barclays and UBS for a $1.6 billion debt package. Property prices have since come under pressure because of the credit crunch. The sale of the stake to Carlyle will help Kushner repay some of the mezzanine debt in the acquisition package. The 1.5 million-sf building stretches from West 52nd to West 53rd Streets on the west side of Fifth Avenue, just north of Rockefeller Center. The retail space is along one of the world's premier retail corridors. The retail tenants include a National Basketball Association store, a Hickey-Freeman clothing store and Brooks Brothers. It's been reported that... http://www.cmalert.com/headlines.php?hid=8386 Mark Finerman, one of the best-known lenders in commercial real estate, is leaving the top commercial MBS position at RBS Greenwich Capital. The buzz is that Finerman, a managing director, was getting job offers from buy-side firms and wanted to be free to discuss his options openly. He resigned from RBS this week, although he is expected to stay on for several weeks to tie up loose ends. Finerman's departure, which had been rumored for weeks, follows the mid-April resignation of managing director Perry Gershon, the No. 2 CMBS executive at RBS. While turnover among top CMBS executives has been relatively light so far given all the turmoil in the industry, it is expected to increase. Just this week, managing director Robert Verrone, who co-headed U.S. real estate at Wachovia - the largest CMBS lender for the past several years - announced he was leaving the bank (see article on Page 1). With the CMBS market in the doldrums and likely to remain there at least until next year, some CMBS executives are looking for greener pastures. Many institutions are licking their wounds from losses on commercial mortgages and, more significantly, subprime residential mortgages. Until they replenish capital and wind down existing positions, the institutions are unlikely to do much lending. For senior executives whose compensation is tied to volume, prospects aren't good for the next year or two. What's more, some executives at institutions that have taken big commercial mortgage writedowns might be pressured to lea... http://www.cmalert.com/headlines.php?hid=27184 Bear Stearns executive Randy Reiff is taking the reins of the merged commercial MBS group of J.P. Morgan and Bear. Word started to circulate this week among Wall Street players that Reiff had gotten the nod from J.P. Morgan's senior management, which has been working to integrate Bear's operations with its own sprawling business since negotiating the takeover in March. The current co-heads of CMBS at J.P. Morgan - managing directors Brian Baker and Steven Schwartz - are expected to stay on and report to Reiff. The buzz is that Reiff's new job will give him responsibility for J.P. Morgan's global commercial real estate group - both lending and bond distribution. At Bear, Reiff has been a senior managing director and co-head of the global CMBS group with Christopher Hoeffel, also a senior managing director. Hoeffel is expected to be a senior member of the merged CMBS group. Other members of Bear's CMBS team are likely to stay as well. It's unclear how large the merged group will be or how many current Bear or J.P. Morgan staffers might be laid off. Some industry players expressed surprise Reiff came out on top in the merged group, given the fact that J.P. Morgan is calling the shots in the takeover and that J.P. Morgan has had higher CMBS lending and underwriting volume than Bear. However, J.P. Morgan has made the retention of Bear executives and Bear platforms a top priority, and Reiff is well-regarded in the CMBS industry. What's more, there is precedent in the real estate industry... http://www.cmalert.com/headlines.php?hid=8111 Credit Suisse, which runs one of the biggest commercial MBS operations on Wall Street, had another big round of layoffs this week as the company continued to downsize in the wake of the CMBS freeze-up. The bank gave pink slips to 72 CMBS staffers, including managing directors Ken Rivkin, Peter Smith, Thomas quot;Tupquot; Fisher and Paul Angle. Twelve vice presidents and 14 directors were also among those let go. Credit Suisse's global CMBS group, including the Column Financial origination arm, has now been cut roughly in half from the peak level of about 370 staffers last year. Previous rounds of layoffs were made in October and at yearend. But deep as the cuts have been, market players took some solace from the fact that Credit Suisse is still maintaining a sizable operation in the face of dismal lending conditions. They viewed that as a sign that Credit Suisse remains committed to the market and is willing to bear the cost of maintaining an infrastructure in order to be ready to crank up its origination engine when the market revives. A person familiar with Credit Suisse's thinking said that further CMBS layoffs weren't anticipated. The cutbacks were part of 500 layoffs worldwide at Credit Suisse. They came as the company announced a $2 billion net loss for the first quarter. The firm took $822 million of global commercial mortgage writedowns in the quarter, on top of $534 million in full-year 2007. The bank has significantly reduced its CMBS exposure, to $18.7 billion, down 25 from yearend and 46 from the end of the... http://www.cmalert.com/headlines.php?hid=7952 Another wave of layoffs has started crashing over the commercial MBS market, with at least 30 staffers losing jobs at Wachovia and Bank of America. Meanwhile, the buzz is that Credit Suisse, Merrill Lynch and UBS are all poised to implement substantial layoffs of their own, likely next week, in the wake of dismal earnings reports. The bulk of this week's dismissals came at Wachovia, where at least 18 people were cut from the CMBS operation. Layoffs were made among staffers working on deal management, lending, securitization and trading, as well as among Wachovia's once-bustling commercial real estate CDO team. The moves came the same week that the bank reported $521 million of CMBS writedowns. Peter Scola was the most senior person to go. Scola, a managing director, worked on originations and on some of the bank's key institutional-client relationships. He was involved in some of the larger deals at Wachovia in recent years, including a 2005 financing package for Blackstone Group's $3.2 billion purchase of hotel operator Wyndham International. Also departing was Bill White, who focused on trading below-investment-grade CMBS and secondary CDO paper. He had been there for nearly a decade. Barbara Smith, a director who oversaw the structuring team, was also let go. All together, Wachovia laid off 35 people, or about 7, of its U.S. real estate group. That group was set up last year by the consolidation of three divisions - real estate capital markets, which handled CMBS and servicing; real estate financ... http://www.cmalert.com/headlines.php?hid=7800 The market downturn is producing a flood of business for loan-sale advisors. Major advisors, including Eastdil Secured, Carlton Advisory Services, CB Richard Ellis Capital Markets, DebtX and Mission Capital Advisors, report significant increases in activity. Meanwhile, Jones Lang LaSalle is setting up a dedicated loan-sale unit (see article on Page 10). In some cases, the sellers are Wall Street lenders seeking to dispose of commercial mortgages that cannot be securitized because of the weak bond market. Sometimes special servicers are turning to advisors for help in selling troubled securitized loans. And in other cases, the sellers are portfolio lenders seeking to adjust their holdings. Eastdil, viewed as the market leader, either marketed or sold some $4 billion of commercial and residential loans in the first quarter - four times its total activity for all of last year. The firm just concluded the sale of $700 million of short-term, fixed-rate loans originated by Metropolitan Life, which is seeking to fine-tune its portfolio. The mortgages were organized into pools. Commercial banks and insurers were the bidders. Eastdil and CB are shopping separate parts of a $1 billion portfolio of whole loans and small-balance commercial mortgages originated by Countrywide, which originally planned to securitize them. Carlton is marketing four portfolios. One contains $150 million of mezzanine debt originated by an investment bank. Two encompass nonperforming commercial mortgages originated by separate commerc... http://www.cmalert.com/headlines.php?hid=7655 After seeing U.S. commercial MBS issuance plunge by 90 in the first quarter, market players say it increasingly looks like any recovery won't happen until next year. Only four U.S. deals totaling $6 billion priced from January through March, according to Commercial Mortgage Alert's CMBS Database. It was the lowest quarterly issuance since 1997. Not a single transaction priced in January, marking the first month without U.S. issuance since 1990. The results were much the same outside the U.S., where issuance plummeted by 78 from a year ago, to $4.5 billion - the smallest quarterly volume since 2003. Moreover, real estate CDO issuance virtually dried up. The first-quarter league tables are a shadow of years past, as the low volume and pervasive market gloom have robbed the rankings of much of their luster. Bank of America led the way in the global and U.S. bookrunner tables for CMBS transactions, while Hypo Real Estate finished first outside the U.S. BofA was the top loan contributor to global CMBS deals (see rankings on Pages 16-17). With lending pretty much on hold and not expected to pick up anytime soon, shell-shocked securitization pros see little hope of an issuance revival this year. Said one senior CMBS executive: quot;2008 is dead. People are taking their lumps and trying to figure out how to fix the problem and prepare for next year.quot; A survey of CMBS issuers found that four fixed-rate deals totaling about $5.9 billion are in the works (see list on Page 14). Another eight floating-rate transactions... http://www.cmalert.com/headlines.php?hid=7498 The commercial MBS industry's trade group is urging the release of more information about the CMBX index so investors can better assess the validity of pricing levels. The Commercial Mortgage Securities Association has formally asked Markit, the research group that administers the synthetic index, to disclose the number of trades and total transaction volume each day. The index, which lets investors take short or long positions on a basket of commercial MBS deals, has grown increasingly influential as the CMBS sector has been dragged down by the fixed-income crisis. As the issuance and trading of cash CMBS bonds have plummeted, CMBX spreads have played a growing role in determining CMBS values. CMBX spreads have ballooned in recent months, forcing holders of CMBS to sharply mark down the value of their bonds. Veteran real estate players are complaining bitterly that CMBX spreads have become divorced from real estate fundamentals and are forcing them to take unnecessary losses. They also say that a lack of transparency in the CMBX index has opened up the question of whether short-sellers are manipulating spreads to capture windfall profits. The trade group said that the release of more information about how pricing levels are set would help assure that the market was operating efficiently. quot;Given the role the index has come to play in determining the mark-to-market value of securities held by financial institutions in the current market environment, greater transparency on CMBX trading volumes and... http://www.cmalert.com/headlines.php?hid=7341 Securitization veteran Brian DiDonato has joined hedge fund operator Sorin Capital to help expand the firm's commercial real estate debt portfolio. DiDonato, who headed Capmark's fund business for the past six years, was named a senior partner. He will work with Sorin founder and chief executive Jim Higgins as a portfolio manager of commercial real estate products. Sorin invests in fixed-income products, including commercial MBS, via a $1.6 billion hedge fund. Higgins and DiDonato will oversee efforts to broaden Sorin's investments in commercial real estate debt and equity. The duo also will work together to manage the firm's growth and overall strategy. The hiring is a coup for Sorin, which has prospered in a down market by aggressively shorting fixed-income securities. The firm's fund has returned 14.5 annually since being formed in 2004, with a 27 net return to investors last year. Sorin, which has 25 employees, recently hired CMBS trader Chuck Mather from Bank of America. DiDonato joined Capmark (then called GMAC Commercial Mortgage) in 2002 as co-head of the funds management business. He became sole head when Chuck Spetka left for CWCapital in 2003. He oversaw Capmark's private funds business, which is based in San Mateo, Calif. The group manages more than $10 billion of debt and equity in North America, Europe and Asia via a variety of opportunity funds. In 2005, DiDonato was named president of Capmark Investments. The firm has issued more than a dozen CDOs totaling more than $4... http://www.cmalert.com/headlines.php?hid=7177 Real estate veterans are increasingly complaining about a lack of transparency in the trading of CMBX contracts. At issue is whether the synthetic CMBX index is susceptible to manipulation because of the absence of trading-volume data. Some market players fear that short sellers are driving up spreads amid relatively thin trading in order to capture windfall profits - dragging down the commercial MBS market in the process. Also, critics contend, a potential conflict of interest exists because transactions are not carried out on a formal exchange. CMBX spreads are calculated daily when dealers report the levels for their transactions to Markit, the index's administrator, which is controlled by 16 Wall Street firms. Yet those dealers can also take CMBX positions - indeed they are believed to be among the most-active traders. That sets up the possibility, some investors contend, that a dealer could try to manipulate spreads in order to increase the value of its holdings and could encourage unwitting clients to take the same positions, driving up the value of the dealer's investments. The criticisms, which some market participants view as unjustified, have grown with the CMBX index's sudden and unexpected emergence as a key mechanism for valuing CMBS. As trading in cash bonds has dried up, CMBX spreads have become a proxy for determining CMBS prices. When CMBX spreads blew out over the past several months, holders of CMBS were forced to take big paper losses. The level of pain inflicted by spread widening has... http://www.cmalert.com/headlines.php?hid=7054 Faced with shrinking collateral pools, Credit Suisse and the Morgan Stanley-led quot;IQquot; team have decided to combine their upcoming securitizations. The two sets of issuers originally planned separate offerings totaling about $2.6 billion. But the collateral pools shriveled almost by half because some loans didn't close, others were kicked out by the B-piece buyer, and four members of the IQ team dropped out altogether. Credit Suisse and IQ are now scheduled to bring their joint $1.4 billion offering to market in about a week. Credit Suisse will supply nearly half of the collateral pool. The rest will come from PNC Bank (30), KeyBank (15), National City Bank and Morgan Stanley. The offering will be written via IQ's shelf. Credit Suisse and Morgan Stanley will serve as co-bookrunners and co-lead managers. The IQ team consists of a rotating group of banks and life companies assembled by Morgan Stanley. This marks the first time that Credit Suisse is participating in an IQ deal - and the first time that Morgan Stanley is sharing IQ bookrunner credit with another dealer. The combination helped the deal achieve critical mass. Investor demand currently is so weak that a deal with small class sizes would likely struggle to find buyers. The combination was simplified by the fact that both of the original deals had the same B-piece buyer - Hillenbrand Partners - and both were rated by Samp;P and Fitch. Sources said Hillenbrand pushed aggressively to remove collateral loans that it viewed as having questionable credit quality.... http://www.cmalert.com/headlines.php?hid=6918 Attracted by juicy yields, opportunity funds are increasingly turning their sights to the debt market. At least two dozen vehicles - a mix of traditional debt players and funds that normally focus on properties - have either lined up or are in the process of soliciting well over $10 billion of equity to invest in high-yield debt. quot;It's nuts how many guys are raising money,quot; said one veteran mezzanine-loan executive. The vehicles are seeking to capitalize on the surge in debt yields in recent months. For example, triple-B commercial MBS are now trading at Treasuries plus 1,300 bp - or a whopping 16.7 - according to Morgan Stanley. Likewise, the unleveraged return on mezzanine loans is in the mid-teens. Those yields far exceed the returns that funds could garner by purchasing real estate - if properties were available to buy. Sales have plummeted because owners are unwilling to accept bids that are down 10-20 from a year ago. quot;Risk-adjusted returns on debt look better than those on equity,quot; said a high-yield investor. Players that have raised or are raising capital solely or substantially for high-yield-debt investments include Allbridge Investments, Angelo Gordon amp; Co., BlackRock Realty Advisors, Blackstone Group, Brookfield Asset Management, Centerline Capital, Capital Trust, Concord Debt Holdings, Goff Capital, Goldenbridge Advisors, H2 Capital Partners, ING Clarion Capital, MSD Capital, OakTree Capital Management, PCCP, Page Mill Properties, Square Mile Capital, Starwood Capital, Tishman Speyer Properties and Wrightw... http://www.cmalert.com/headlines.php?hid=6794 Nomura this week laid off 30 members of its commercial MBS group, prompting speculation that the bank was exiting the market for the second time. Those given pink slips include senior lenders Joe Joseph, a 20-year industry veteran who wrote large loans, and Troy Miller, a managing director who was in charge of the West Coast operation based in Los Angeles, according to market sources. It's unclear whether the cuts represented a complete break from the CMBS business or if the Japanese bank is cutting its operation to the bone while the lending market is dead. There were indications that senior executives Bruce Viergever and Mark Brown, who were among those hired when the commercial mortgage unit was reformed in 2001, remain with the firm. One rumor was that Nomura planned to sell the management rights of a CDO it issued in 2006 to Centerline Capital, which would hire some or all of the remaining CMBS employees. Spokespersons for Nomura and Centerline declined to comment. Nomura's decision comes amid a spate of staff reductions industry-wide amid a virtual shutdown of the lending market. It also comes not too long after the bank had gotten some momentum in its second go-round in the business. Nomura supplied $4.4 billion to U.S. CMBS deals last year and $4.3 billion in 2006. It also had begun to be an active player in the large-loan market. In March 2007, Nomura priced a $950 million CDO via Wachovia that was backed primarily by floating-rate whole loans. New York-based Centerline was named special... http://www.cmalert.com/headlines.php?hid=6698 Morgan Stanley this week slashed nearly 100 staffers from its global commercial MBS groups, including deep cuts in its European and Asian operations. Several other CMBS players also shed employees in recent days amid the deepening industry slump. Countrywide Financial laid off about 100, or roughly half its CMBS staff, while Capmark gave pink slips to about 30 and Bank of America cut the remnant of LaSalle Bank's CMBS group. Morgan Stanley's move was the most significant, coming from the most-active underwriter in the industry for all but one of the past eight years. In fact, Morgan Stanley's dominance has been the most pronounced outside the U.S., where it has perennially ranked far ahead of its rivals. That dominance overseas could be ending, given the moves this week. Sources said the firm laid off 40 in London and 30 in Asia. Cuts in London included Russ Rahbany, a senior executive who was in charge of the securitization of whole loans, loans on pubs, and other assets. Also let go were senior originator Brent Williams and James Fadel, who was in charge of residential MBS. Senior employees who remain include Ellen Brunsberg, who is in charge of securitization of all products in Europe, Tom Jackivicz, who structures and trades whole loans, and Peter Ireland, who heads loan distribution and syndication efforts. In Asia, the layoffs involved mostly junior and mid-level employees. Group heads Eric Ellison and Rei Rothberg are believed to remain. The cuts suggest that the bank will focus more on risk... http://www.cmalert.com/headlines.php?hid=6560 Citing poor market conditions, Wells Fargo has pulled its loans from the latest quot;TOPquot; brand securitization. Wells originally planned to contribute about $200 million of fixed-rate mortgages to the transaction. Now its longtime TOP partners - Morgan Stanley, Bear Stearns and Principal Commercial - will proceed with a scaled-down $1.2 billion deal. The offering, which is the 29th in the TOP series, hit the market this week and is on track to price next week, which would make it the first transaction of the year. Wells emphasized that it remains committed to the long-running TOP program and will participate in future deals when conditions improve. However, it decided that it made no sense to securitize loans at a time when CMBS spreads are at record highs. quot;We didn't feel there was any urgency to sell good loans with spreads blown out at these levels,quot; said senior managing director Adam Davis, who heads the bank's CMBS group. Wells will hold the loans, betting that the market is oversold and that loan values will rise over time. But the bank is also assuming the risk that conditions might deteriorate further. As CMBS spreads have widened, lenders have been forced to take big losses on mortgages awaiting securitization. quot;We're confident in our loans,quot; Davis said. quot;We're willing to take the cost. We're willing to be patient.quot; CMBS spreads would have to tighten significantly for Wells to proceed with a securitization, Davis said. Spreads have been highly volatile over the past few weeks, but generally... http://www.cmalert.com/headlines.php?hid=6411 The commercial MBS slump is likely to drive some securitization shops out of the market, but most observers expect the shakeout to be relatively limited. Lenders surveyed by Commercial Mortgage Alert project that CMBS originations will plunge by almost 50 this year, as the market retrenches amid the credit crunch. But while some observers think such a dramatic pullback could crush as many as one-quarter of the 38 active securitization programs, most expect no more than a handful - primarily smaller shops - to exit the business (see origination table and list of programs on Pages 30-40). Larger players, which view commercial real estate finance as an integral part of their product menu, are expected to pare staff to skeletal levels and ride out the storm - a process that has already begun. And even most of the smaller players, which have relatively low overhead costs, have some flexibility to survive. To be sure, CMBS lenders caution that predictions about the extent of a shakeout are highly speculative, given the uncertainty facing the sector. What's more, decisions at larger shops are likely to be influenced by factors outside of the CMBS market. Ongoing losses in other sectors could cause senior managers to drop out of CMBS lending as part of broad restructurings. Indeed, some veteran CMBS executives think the fallout could be substantial. Said one: quot;It depends on how this plays out, but by June, one-quarter of the shops could be shut down.quot; But the consensus is that most firms will hunker down and wait for... http://www.cmalert.com/headlines.php?hid=6265 Seven commercial MBS shops laid off about 140 staffers as the fixed-income slump tightened its grip on the sector. Credit Suisse and Lehman Brothers cut almost 90 people in total. Pink slips were also handed out since late last week at Citigroup, UBS, Deutsche Bank, Bank of America and Eurohypo. Most of the victims were low- and mid-level staffers, but some senior industry veterans also were dismissed, including Citi's Ron Wechsler, Jim Howard of Eurohypo and Matthew Kirsch of UBS. The round of layoffs is the latest of several - and is unlikely to be the last. Most market players think industry-wide cutbacks will continue in upcoming weeks. Many CMBS shops made relatively minor staff cuts late last year in hopes that the lending slowdown would be short-lived. However, the market turmoil has gotten worse, forcing securitization programs to downsize their operations further. CMBS issuance in the U.S. is expected to plunge by more than half from last year's $230 billion level. Credit Suisse made the biggest cuts this week, laying off about 50 in its real estate finance operations in the U.S. and London. Credit Suisse let go a similar number of staffers in October, resulting in a roughly 30 total reduction in manpower. Also, the buzz us that managing director Jeff Altabef, who has overseen securitization in the U.S., is being transferred to London to run the European CMBS operation. It's unclear who will replace him in the U.S. Lehman dismissed roughly 40 employees - or about 20 of its real estate debt and... http://www.cmalert.com/headlines.php?hid=6136 Commercial MBS spreads blew out to unprecedented levels in the secondary market this week, dismaying market players who had hoped for better things in the new year. Benchmark triple-A paper of a recent vintage traded yesterday at about 125 bp over swaps - about 30 bp wider than the previous week. The plunge in prices followed a barrage of negative business news capped by yesterday's disclosure of a $16.7 billion writedown by Merrill Lynch. quot;How confident can you be in any asset class when firms like Merrill and Citi are taking $20 billion hitsquot; said one mezzanine investor. quot;The entire world is skeptical about asset quality.quot; At the same time, market players suggested caution in interpreting the market weakness. For one thing, no new offerings were being shopped. So spreads were being set only on the basis of fairly thin trading in the secondary market. What's more, the only paper being traded was from deals originally offered in 2007 - when weak loan underwriting was peaking. Higher-quality paper with more seasoning might have commanded tighter spreads, some traders said. quot;Maybe we are seeing the market start to differentiate among the vintages,quot; said one investor. quot;In that case, it makes sense that they would assign wider levels to the newer stuff.quot; With the market largely frozen, investors don't expect the year's first new issue to hit until late this month. It's still unclear which issuer will go first. quot;They're playing a game of chicken,quot; said one investor. quot;No one wants to be the first out, beca... http://www.cmalert.com/headlines.php?hid=5998 Wachovia was by far the most-active U.S. commercial MBS program in 2007 - a dubious distinction in a year when the market crashed. Wachovia securitized $24.2 billion of commercial mortgages, a whopping $8.6 billion, or 55, more than runner-up Bank of America. Wachovia single-handedly accounted for 10.8 of last year's total securitizations. Five other lenders contributed at least $10 billion of loans to CMBS deals: BofA, Lehman Brothers, Credit Suisse, Morgan Stanley and J.P. Morgan. And six others packaged between $8 billion and $10 billion, according to Commercial Mortgage Alert's CMBS Database (see rankings on Pages 14-17). In normal years, the title of most-active securitization program is highly coveted. During the long-running bull market, large loan volumes usually indicated big profits. As a result, the league table of loan contributors was viewed as a rough proxy for ranking the sector's most-successful players. But last year's ranking was more of an indicator of the risk exposure of CMBS programs. The reason: As bond spreads blew out dramatically, the value of loans awaiting securitization plunged. Lenders with larger mortgage volumes presumably suffered bigger losses, although the timing of transactions and the use of hedging complicate the picture. On paper, Wachovia had the largest potential exposure by far last year. The bank emerged as the most-active CMBS lender in 2005 and has now topped the loan-contributor ranking for three years in a row. Wachovia securitized $61 billion of U.S.... http://www.cmalert.com/headlines.php?hid=5827 Morgan Stanley last year pulled off the first clean sweep of the four main underwriter league tables for commercial MBS, as the sector's long-running bull market came to a screeching halt. Morgan Stanley easily won the global bookrunner and global syndicate rankings, and also had a comfortable edge over runnerup Wachovia in the coveted U.S. bookrunner table. It sealed the sweep with a narrow victory over Lehman Brothers in the non-U.S. bookrunner ranking, according to Commercial Mortgage Alert's CMBS Database (see rankings on pages 33-40). The results cement Morgan Stanley's position as the industry's most-active underwriter. The dealer has long dominated the global bookrunner, global syndicate and non-U.S. rankings. In two previous years, 2003 and 2006, it won all three league tables, only to fall short of a sweep by losing the U.S. bookrunner crown. But last year it captured the U.S. title for the first time since 2000. Morgan Stanley's achievement came in a year of upheaval for the CMBS industry, which was dragged down by turmoil that started in the subprime-loan market and spread across fixed-income sectors. After four years of explosive growth, global CMBS issuance continued to soar early last year, only to derail in the second half. Global volume managed to climb by 5.6 for the year, to $314.7 billion from $297.9 billion in 2006. But global issuance in the fourth quarter plunged by 57, to $45.6 billion from $106 billion. And real estate CDO issuance plummeted by 61 in the fourth quarter....