Commercial Mortgage Alert OCTOBER 24 2008 Leverage

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					OCTOBER 24, 2008                             Leverage Cut on Vornado Project in Boston
                                                After significantly reducing the amount of leverage originally planned, Bank
 3 Moody’s Differs on Resecuritizations      of Ireland and Bank of America are close to wrapping up a $360 million syndi-
 3 TIAA Drops Plan for Boston Loan           cated loan for a mixed-use tower that a Vornado Realty partnership is building
                                             in Boston.
 4 Decline in Libor Bolsters CMBS               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
 6 DBRS Cuts More CMBS Staff
                                             Vornado group initially sought. As a result, the leverage ratio for the $700 million
 7 Potomac Fills Conduit-Lender Void         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.
 8 Crisis Writedowns Pass $400 Billion          Bank of Ireland and BofA took the assignment on a best-efforts basis, meaning
10 Risks Seen in Buying Bad CMBS Loans       that they committed to fund part of the senior loan facility on the condition that
                                             they line up additional lenders for the rest.
11 Trepp Integrating Midland Data               The size and terms of the loan changed during the lengthy syndication effort,
                                                                                                               See BOSTON on Page 10
12 Antares Says CMBS Loan Is Solid
13 Bankruptcy Looms Over Rouse Bonds         Durst Targets Distressed Construction Loans
13 CALENDAR                                     Developer Douglas Durst is looking to buy distressed construction loans in order
                                             to gain control of the underlying projects.
                                                Durst and frequent partner Sidney Fetner Associates plan to launch a fund that
                                             will acquire loans, mostly on office and residential properties in the New York area.
                                                The vehicle will be capitalized with upwards of $300 million of equity, which
THE GRAPEVINE                                would be supplemented with an unspecified amount of debt. As the operation pro-
                                             ceeds, other investors might be recruited. The partners plan to begin buying loans
The buzz is that Richard Sigg, who over-     early next year.
sees Merrill Lynch’s commercial MBS             Durst said the fund was originally planned as a development venture called
trading desk, is expected to stay on when    DFR, or Durst-Fetner Real Estate. “Now we’re going to call it ‘Distressed and Failed
Bank of America completes its takeover of    Real Estate,’ ” he joked.
the firm. Sigg joined Merrill’s CMBS            Developers have become more-active buyers of distressed construction loans,
team in 1994, after working in the bank’s    seeking to take advantage of their knowledge of local markets. “There are a lot of
asset-backed securities group. BofA has-                                                                        See DURST on Page 14
n’t formally announced which Merrill
staffers will be retained once the deal is
closed.
                                             Several Lending Vehicles Lining Up Capital
                                                The credit markets may be largely frozen, but a handful of real estate specialists
Charles Spero, who moved over to             are either raising or have just lined up capital for investment vehicles that will orig-
Barclays following its takeover of some      inate commercial mortgages.
Lehman Brothers operations, has been            Mesa West Capital, Terra Capital Partners, Infinity Funding and Lodging Capital
named head of mortgage credit trading.       Partners are among the firms looking to take advantage of the pullback by tradi-
His duties include trading oversight for     tional lenders.
CMBS, asset-backed securities and non-          A host of other players have formed debt vehicles over the past year. But while
agency mortgage bonds. Spero is spear-       many of them have the authority to originate loans, they are primarily buying dis-
heading Barclays’ efforts to expand its      tressed mortgages. The operators of the newer vehicles plan to concentrate on
trading operation.                           writing first mortgages and mezzanine loans.
                                                Broadly speaking, investors have jumped on the debt bandwagon, saying they
A Capmark high-yield bond fund that          think that the risk/reward analysis has flipped in favor of debt investment vehicles
posted a negative 20.6% return in the        from property funds since the market peaked in early 2007. Property funds are
                See GRAPEVINE on Back Page                                                                     See CAPITAL on Page 14
                    B                 T  .
                    D                 T .
            D                        I A   ...
         IT’S BACK TO THE FUTURE

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  advisor and placement agent for subperforming and nonperforming commercial
      mortgage loans for Commercial Banks, Life Companies, RTC and FDIC.

                        We haven’t forgotten our roots…




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  ORANGE COUNTY   SAN DIEGO   SILICON VALLEY   BOSTON   LONDON DALLAS

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October 24, 2008                                Commercial Mortgage            ALERT                                                 3


                                                                    gies of the agencies that might account in part for the discrep-
Moody’s Differs on Resecuritizations                                ancies in downgrades. Unlike its rivals, Moody’s has never
    S&P and Fitch have downgraded commercial MBS resecuri-          publicly released its rating model for real estate CDOs, but it is
tizations at a much faster rate than Moody’s, according to a        believed to rely more heavily on qualitative factors than the
review by Commercial Mortgage Alert.                                models used by S&P and Fitch. While S&P and Fitch also take
    The discrepancy highlights differences in the methodolo-        anecdotal information into account, they are seen as relying
gies used by S&P and Fitch, on the one hand, and Moody’s on         more on quantitative factors.
the other. It also illustrates the difficulty of projecting CMBS       “Of the three agencies, Moody’s . . . was much more subjec-
loss rates at a time when the economy is deteriorating but          tive in its methods and more open to stories and anecdotal
underlying defaults remain near historic lows.                      matters,” said an executive who structured real estate CDOs. “It
    The review tracked the 74 transactions floated from 2005 to     worked both ways. For instance, if your collateral was going
2007 that were backed entirely or almost entirely by previous-      down in value, they might downgrade it, even it still was per-
ly issued CMBS, usually below-investment-grade bonds. S&P           forming well.”
rated 60 of the deals, followed by Moody’s (53) and Fitch (33).        Some analysts think that CMBS defaults could remain low,
    Of the 74 issues, 29 have had at least one class downgraded.    vindicating Moody’s more-cautious approach.
S&P rates all 29 and has downgraded all of them. Fitch rates 15        Citigroup CMBS analyst Darrell Wheeler said it is possible
of the 29 and has downgraded 11, or 73%. Moody’s rates 20 of        that S&P and Fitch “are taking the experience of residential
them but has downgraded only 5, or 20%.                             real estate CDOs and translating it into what will happen with
    Following the rating-agency actions, there are now nine         CMBS CDOs.”
deals in which Moody’s ratings are significantly higher than           “Time will tell if that is justified with commercial real estate
those of S&P and/or Fitch. In those deals, the Moody’s rating       CDOs,” he said. “But, given their strong performance, we
on at least one class ranges from three to nine notches higher      would have thought more time would be required to tell if that
than those of its rivals.                                           surveillance approach is justified with commercial real estate
    For example, in an $806.7 million resecuritization in 2006      CDOs.”
by ING Clarion Capital (Ansonia CDO Ltd., 2006-1), Moody’s             J.P Morgan analyst Alan Todd thinks that economic deterio-
has maintained its “Aaa” rating on Class A-FX, which has been       ration is likely to produce more CMBS downgrades in the near
cut five notches by S&P to “A” and eight notches by Fitch, to       term, which would in turn spur more resecuritization down-
“BBB.” Likewise, in a $761.2 million resecuritization in 2007 by    grades.
LNR Partners (LNR CDO Ltd. 5), Moody’s has maintained its              “Going forward, everyone will be downgrading the 2006
“Ba1” rating on Class J, which has been slashed eight notches       and 2007 bonds,” Todd said. “It is very fair to say that, as eco-
by S&P to “CCC-” and five notches by Fitch to “B-.”                 nomic fundamentals weaken and the consumer pulls in, real-
    The findings clearly suggest that S&P and Fitch view the        ized cashflows on properties will begin to fall short. Then we’ll
credit risks of resecuritizations in a harsher light than           see downgrades across the mezzanine portion of the fixed-
Moody’s.                                                            income capital structure. Some of the [commercial real estate]
    This year, S&P and Fitch have lowered their projected           CDOs may have that collateral.” O
recovery ratios and adopted more-conservative rating assump-
tions for commercial real estate CDOs, including resecuritiza-
tions. Fitch this month said it is looking at more changes to its
                                                                    TIAA Drops Plan for Boston Loan
CDO rating methods, including an increase in default esti-              TIAA-CREF has shelved its plan to put a $200 million float-
mates for portfolios concentrated in single sectors and single      ing-rate mortgage on a mid-rise office property in the Back
vintages.                                                           Bay section of Boston.
    Moody’s, which did not return phone calls seeking com-              Several German lenders, including Eurohypo and Helaba
ment for this article, hasn’t revised its commercial real estate    Bank, made proposals for a short-term loan on the 620,000-
CDO methodology since 2007.                                         square-foot building, at 501 Boylston Street. But TIAA did not
    Karen Trebach, a senior analyst in Fitch’s real estate CDO      find any to its liking.
group, said economic deterioration has made it necessary for            TIAA bought the Class-A property in 2006 for $370.5 mil-
her agency to change its rating assumptions, particularly for B-    lion in cash from Broadway Partners of New York. Broadway
pieces. “The risks facing first-loss and junior-rated bonds         flipped the property after assuming it via a $3.4 billion port-
within the capital structure of CMBS transactions have              folio acquisition from Beacon Capital Properties. Boston-
increased with expectations of a rise in commercial real estate     based Beacon paid MetLife $122.6 million for the property in
defaults from current low levels, especially given that they are    2002.
often thin slices,” she said. “Even a relatively modest increase        The 10-story building, now known as the Newbry, was orig-
in [commercial real estate] losses could be material for these      inally the corporate headquarters of New England Life. While it
CMBS B-piece resecuritizations.”                                    owned the property, Beacon converted about 150,000 sf into
    Investors and analysts noted differences in the methodolo-      retail space. MetLife is the major office tenant. O
October 24, 2008                                          Commercial Mortgage         ALERT                                                  4


                                                                           4.5% a week earlier. It was hovering around 2.8% just before
Decline in Libor Bolsters CMBS                                             Sept. 15, when Lehman Brothers filed for bankruptcy. Libor is
    A sharp drop in Libor rates is easing the credit freeze, lead-         also used as a benchmark for pricing a wide range of fixed-
ing to a substantial narrowing in commercial MBS spreads this              income products.
week that reversed the recent trend.                                           Aside from banks, hedge funds are also playing a part in pro-
    The improved atmosphere led to a modest pickup in CMBS                 moting CMBS trading. Some fund managers who never bought
trading. That softened a severe liquidity drought that took                the securities before are being attracted by still-fat spreads on
hold last month, when the broader financial markets entered                triple-A bonds tied to loans with relatively strong credit profiles.
another big slump.                                                             “CMBS is now ridiculously cheap from a fundamental per-
    Spreads on benchmark super-senior securities averaged                  spective,” another trader said. “This is a totally oversold prod-
500-545 bp over swaps from Monday through Thursday, down                   uct. Super-senior triple-A CMBS bonds are not really going to
from the 580-bp area late last week. The average returns offered           have defaults.”
for those 10-year bonds hit a record high of 620 bp on Oct. 15.                Nevertheless, CMBS spreads are likely to keep moving in
    Industry insiders attributed the spread-tightening trend to            and out as yearend approaches, J.P. Morgan analyst Alan Todd
the drop in Libor, which reflected renewed interbank lending               predicted. That’s partly because large non-leveraged holders of
and enabled dealers to trade more actively for the first time in           CMBS, such as insurance companies, will try to clean up their
weeks. “Funding is getting cheaper, so people are starting to              balance sheets by unloading huge batches of bonds. Those
come back to the market,” one trader said.                                 uncoordinated sell-offs will probably disrupt the balance of
    The lower Libor rates stem from the latest attempt by banks            supply and demand.
and government agencies in the U.S. and Europe to thaw the                     Todd also projected that cumulative losses on commercial
frozen credit markets. Banks use Libor to determine short-                 real estate debt could rise from 1% to 6% over the next 10
term lending charges for each other, so the rates had soared               years.
when financial institutions stopped doing business with each                   Meanwhile, the values of synthetic CMBS instruments also
other following last month’s onslaught of bad news in the cap-             reversed direction this week. On Thursday, triple-A spread
ital markets.                                                              from Series 5 of the CMBX index, the latest version, stood at
    Three-month Libor fell to 3.5% on Thursday, down from                  208.4 bp, down from 220.0 bp a week earlier. O


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October 24, 2008                                  Commercial Mortgage           ALERT                                               6


                                                                         Meanwhile, in Toronto, DBRS laid off senior vice president
DBRS Cuts More CMBS Staff                                             Tim Westlake and vice president Karen Gu. That leaves the rat-
   DBRS scaled back its commercial MBS rating group this              ing agency without any dedicated CMBS analysts in its home
week, cutting one analyst in Chicago and the two remaining            market, though its asset-backed securities analysts could jump
CMBS specialists at its Toronto headquarters.                         in if deals start to surface again.
   Abbey Fitzgerald, a vice president in charge of U.S. surveil-         Westlake joined DBRS in October 2004 from Toronto-
lance, was let go. Her departure leaves global CMBS chief John        Dominion Bank, where he served as head underwriter in the
“Jack” Toliver with eight U.S. staffers, all in Chicago. Vice pres-   CMBS unit. Gu came on board in March 2005 from the real
ident Erin Stafford, who was Fitzgerald’s supervisor, has             estate appraisal group at Royal Lepage, a Toronto brokerage.
assumed her responsibilities.                                            DBRS has cut at least 50 structured-finance staffers in
   Fitzgerald joined DBRS in July 2004, after three years at          Chicago, New York, Toronto, London, Paris and Frankfurt this
Fitch.                                                                year because of the dearth of bond issuance since the credit
                                                                                                   crunch took hold in mid-2007. The
                                                                                                   layoffs started in January, when
                                                                                                   DBRS axed all 43 employees in its
                                                                                                   fledgling European operation —
                                                                                                   including group head Saul
                                                                                                   Greenberg. He had joined DBRS
                                                                                                   only three months earlier from the
                                                                                                   European conduit area at Deutsche
                                                                                                Bank.
                                                                                                   DBRS ranked a distant fourth in
                                                                                                CMBS rating volume around the
                                                                                                world last year, grading 14 deals
                                                                                                totaling $21 billion. That was good
                                                                                                for a 6.7% slice of global issuance,
                                                                                                up from 1.6% a year earlier. DBRS
                                                                                                also boosted its CMBS market share
                                                                                                in the U.S. to 5.7% last year, from
                                                                                                1.1% in 2006.
                                                                                                   Amid the ongoing slump of
                                                                                                CMBS issuance, the agency is sus-
                                                                                                taining its commercial mortgage
                                                                                                business by issuing private ratings to
                                                                                                investors on outstanding U.S. deals,
                                                                                                Toliver said. O




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October 24, 2008                                Commercial Mortgage            ALERT                                                7


                                                                       Stewart has been in the mortgage industry for 20 years,
Potomac Fills Conduit-Lender Void                                   including 10 years at Credit Suisse in Tampa. She remains in
   Potomac Realty Capital is positioning itself to grab turf once   Florida.
dominated by mainstream conduit shops that have ceased                 Strug, who is based in New Jersey, logged time at a number
lending due to the credit crunch.                                   of firms over the last 13 years. The most recent was Carlton
   The Needham, Mass., lender kicked off the initiative by          Advisory, where he was a senior vice president. He previously
adding five originators over the past few weeks. The recruits       worked for Resource Real Estate Funding, the IDB Bank of New
— Bill Ruiz, Rob Beck, Mike Strug, Anne Stewart and Adam            York, Assurant and TIAA-CREF.
Marsh — will target borrowers that need to refinance matur-            Palmier is also a Lehman alumnus. But he launched Potomac
ing commercial MBS loans from now-dormant lenders.                  after seven years at Arbor Realty of Uniondale, N.Y., where he was
   Potomac has written more than $3 billion of commercial           an executive vice president overseeing credit, risk and asset man-
mortgages since chief executive Daniel Palmier founded the          agement. O
shop in 2004. It specializes in pro-
viding commercial real estate own-
ers with preferred equity or bridge
and mezzanine loans. Potomac rais-
es most of its capital from institu-
tional investors.
   Some of the latest additions to
Potomac’s staff previously worked
for CMBS shops. Ruiz, for example,
spent the past 12 years as a senior
vice president in Lehman Brothers’
real estate group. He was previously
employed by Huntoon Hastings and
Heller Financial. Ruiz and Marsh,
who spent the last six years running
Empire Capital Partners in New
York, are based in Potomac’s New
York office.
   Before joining Potomac in
Connecticut, Beck was vice presi-
dent of originations for Countrywide
Financial in New York. That fol-
lowed stints at Gramercy Capital and
Credit Suisse.




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October 24, 2008                                                         Commercial Mortgage                             ALERT                                                    8


                                                                                                             by sister publication Asset-Backed Alert.
Crisis Writedowns Pass $400 Billion                                                                             In the past week, Credit Suisse took another $2.1 billion of
    New valuation cuts disclosed by Credit Suisse, Wachovia                                                  markdowns on investments in CMBS, leveraged-buyout loans
and other banks over the past 10 days have boosted the credit-                                               and residential-mortgage securities. The CMBS portion
crisis writedowns of the world’s largest financial institutions                                              totaled $867 million and primarily involved European assets.
above $400 billion.                                                                                          The bank’s gross exposure to commercial mortgages fell by
    The fresh marks mean financial institutions around the                                                   15% in the third quarter, to $11.4 billion from $14.7 billion at
world have slashed the values of their holdings of commercial                                                June 30.
MBS, residential MBS, CDOs, asset-backed bonds, credit-                                                         Wachovia, which will become part of Wells Fargo by yearend,
default swaps and related assets by $408.4 billion since the                                                 heaped on $2.9 billion of market-disruption losses in the third
credit crisis took hold last year, according to an ongoing survey                                            quarter. Also this week, U.S. Bancorp said its 2008 writedowns
                                                                                                                                          had reached $700 million.
                                                                                                                                              Writedowns are certain to rise in
                                              NOTICE OF PUBLIC SALE OF MEMBERSHIP                                                         the coming weeks as numerous
                                                                     AND
                                                        PARTNERSHIP INTERESTS
                                                                                                                                          other institutions report their July-
                                                Tuesday, December 16, 2008 at 10:00 a.m.                                                  September results. Many banks are
                                   at 2211 Grand Isle Drive, Brandon, Hillsborough County, Florida
         Please take notice that GR Mezzanine Lender, LLC and GR Mezzanine Lender Parallel, LLC (collectively, "Lender") will             inclined to be as aggressive as possi-
 conduct a public sale of certain collateral pledged to Lender on December 16, 2008 at 10:00 a.m.
      The collateral Lender intends to sell at the public sale consists of the following (the "Collateral"): (1) the membership interests
                                                                                                                                          ble with markdowns now that the
 pledged by Rivage Mezz, LLC, a Delaware limited liability company, in Rivage Senior, LLC, a Delaware limited liability company,          U.S. and other governments are
 which is the ground lessee of certain real property and the owner of certain improvements thereon located in Brandon, Florida
 (the "Property"); (2) the limited partnership interests pledged by Rivage Partners, LLC, a Delaware limited liability company, in        offering to shore up their balance
 The Grand Rivage at Brandon Lakes, Ltd., a Florida limited partnership, the fee owner of the Property; and (3) the membership
 interests pledged by Rivage Partners, LLC in Rivage GP, LLC, a Florida limited liability company, the sole general partner of The
                                                                                                                                          sheets with emergency capital injec-
 Grand Rivage at Brandon Lakes, Ltd. The Property consists of a 390-unit apartment complex known as "The Grand Rivage                     tions.
 Apartments" located at 2211 Grand Isle Drive, Brandon, Hillsborough County, Florida 33511. The sale will be conducted at the
 Property. Lender is selling the Collateral only. No direct interest in the Property will be conveyed through the sale.                       Asset-Backed Alert’s survey takes
     The Collateral to be sold has been transferred to Lender as the secured creditor of Rivage Mezz, LLC and pledgee of Rivage
 Partners, LLC. The Collateral will be sold only as a block to a single purchaser. Lender is reserving the right to credit bid for and
                                                                                                                                          into account only the 53 financial
 purchase the Collateral at the sale.                                                                                                     institutions that have reported pre-
     The sale will be made to the highest qualified bidder. Any successful bidder must satisfy all transfer restrictions and investor
 qualification requirements to assume the senior mortgage loan ("Senior Loan") encumbering the Property held by Wells Fargo               tax writedowns of $500 million or
 Bank, N.A., as Trustee for the Registered Holders of Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-
 Through Certificates, Series 2005-2 ("Senior Lender"), and deliver such investment letters and legal opinions as may be required
                                                                                                                                          more on holdings of structured secu-
 under the applicable governing documents relating to the Collateral.                                                                     rities or mixtures of bonds and loans
     The prevailing bidder will be required to deposit (x) one million dollars ($1,000,000) by a cashier's or certified check at the
 conclusion of the bidding and (y) the balance of the purchase price within seven (7) days after the sale (collectively, the "Sale        since the beginning of 2007. It focus-
 Deposit"). The Sale Deposit shall be paid to Lender on account of the purchase price at closing. Closing on the sale shall be
 required to occur within five (5) days after Senior Lender approval of the prevailing bidder, but in no event later than forty-five (45)
                                                                                                                                          es on securitization, and therefore
 days after the conclusion of the bidding. A back up bidder will also be selected and the Collateral will be sold to the back up bid-     excludes loss provisions that lenders
 der in the event the prevailing bidder does not close on the sale as required. The back up bidder will be required to close within
 thirty (30) days of the date it is determined by Lender that the prevailing bidder will not close as required under the sale terms.      have taken for home mortgages,
     In order to bid at the sale, any bidder (other than Lender or its affiliates) shall be required to have completed, with all required
 information filled-in, and provided to Lender at least seven (7) days prior to the sale, the loan assumption application required by the
                                                                                                                                          credit-card receivables and other
 Senior Lender. The prevailing bidder shall be required to submit such application, together with all required deposits and fees, to the  troubled debt. The writedown sur-
 Senior Lender immediately upon being selected as the prevailing bidder. In addition, at the conclusion of the bidding, the prevailing
 bidder will be required to enter into a purchase and sale agreement on the form provided by Lender (without changes). Such pur-          vey can be found at ABAlert.com, in
 chase and sale agreement shall set forth the terms and conditions of the sale, including, without limitation, provisions governing the
 pro-ration of real estate taxes and other property expenses, provisions governing the escrowing of the Sale Deposit and its applica-
                                                                                                                                          the “Marketplace” section. O
 tion in the event that the prevailing bidder fails to timely close the transaction and other applicable terms and conditions of the sale.
     Any prevailing bidder will also be required to represent in an investment letter (the "Investment Letter") delivered at the conclu-
 sion of (but a copy of which must be provided to Lender for review at least one business day prior to) the bidding: (a) that the
 Collateral is being acquired for the purchaser's own account, (b) that Collateral will not be sold or otherwise transferred except
 pursuant to an effective registration statement under the Securities Act of 1933 (the "1933 Act") or a valid exemption therefrom,
 (c) that the purchaser has sufficient knowledge and experience in financial and business matters to be capable of evaluating the
 risks and merits of the investment, and (d) that the purchaser has sufficient financial means to afford the risk associated with
                                                                                                                                             Top Writedowns
 investment in the Collateral, and to simultaneously provide Lender with reasonable and customary certifications as to such pur-
 chaser's compliance with anti-terrorism, money laundering and similar laws. Lender reserves the right to request additional infor-                                     ($Bil.)
 mation regarding the prevailing bidder and its finances as Lender reasonably may require to determine whether the Investment
 Letter is accurate in all material respects. The certificates evidencing the Collateral will bear a legend to the effect that they are
                                                                                                                                              1   Merrill Lynch          $51.2
 restricted and may not be sold or transferred without registration under the 1933 Act or a valid exemption therefrom.                        2   Citigroup               46.8
     The Collateral is being sold "AS IS, WHERE IS" with no representations or warranties regarding the Collateral or the Property
 (whether express or implied) of any kind made by Lender or any other person acting for or on behalf of Lender, other than Lender's           3   UBS                     41.2
 authority to sell the Collateral, and without any recourse whatsoever against Lender or any of its officers, employees or agents.
     Prospective purchasers may obtain additional information regarding the Collateral and the Property, the terms of the sale and            4   AIG                     36.3
 the bidder qualifications and copies of the Senior Loan assumption application, the forms of the required purchase and sale
 agreement and of the escrow agreement that will control the Sale Deposit escrow by contacting Lender at the offices of its coun-             5   Lehman Brothers         15.3
 sel set forth below. Prospective purchasers are advised to obtain and review these materials as the terms of the purchase and
 sale agreement and the other documents to be provided shall govern and control over any inconsistent provision of, and contain               6   Royal Bank of Scotland 14.4
 terms in addition to those set forth in, this notice. The contact to obtain copies of all such materials is as follows:                      7   Morgan Stanley          11.5
                                                          Siobhan M. O'Donnell, Esq.
                                               Klehr Harrison Harvey Branzburg & Ellers, LLP                                                  8   Bank of America         11.1
                                                            260 South Broad Street
                                                   Philadelphia, Pennsylvania 19102-5003                                                      9   Deutsche Bank           10.8
                                                           Direct dial: 215.569.3022
                                                               Fax: 215-568-6603                                                             10   Ambac                   10.4
                                                          Email: SODonnel@klehr.com
                  In addition, the Property will be available for reasonable inspection prior to the sale by appointment.                    10   J.P. Morgan             10.4
           Lender reserve its rights, in its sole discretion, to postpone or cancel the sale or to waive any conditions thereof.
October 24, 2008                                                  Commercial Mortgage          ALERT                                                 9




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   54136 LA CS 1031 hand ad_PRINT.i1 1                                                                                         1/24/07 12:12:14 PM
October 24, 2008                                Commercial Mortgage            ALERT                                                 10


                                                                    who oversees Belle Harbour Capital of New York, previously
Risks Seen in Buying Bad CMBS Loans                                 worked at law firms Clifford Chance and Paul Hastings.
   The volume of distressed securitized mortgages is expected          Sharp and Wolpert’s unnamed partnership is seeking to buy
to grow in coming years, but investors seeking to buy such          distressed securitized loans of $1 million to $10 million backed
loans to gain control of the underlying properties face a host of   by office, retail and multi-family properties in the Midwest
pitfalls if they are unfamiliar with the commercial MBS market.     and Northeast. Their joint venture, which is backed by an
   Challenges include competition from securitization partic-       unidentified investor, won’t use leverage.
ipants for the best opportunities, uncertainty over whether a          The delinquency rate on CMBS loans remains minuscule —
borrower can declare bankruptcy, and the possibility that the       just 0.45% at the end of September, according to Fitch. But the
special servicer might change during the negotiation process.       level is expected to rise as the effects of the weak economy take
Such details can make the process daunting even for savvy real      hold. Goldman Sachs has projected that losses on commercial
estate players if they have not had hands-on CMBS experience,       mortgages originated in 2007 could reach 11%. “So far, only
according to market players.                                        the tiniest amount of CMBS loans have dropped through to the
   “A very big portion of the equity real estate investor world     special servicers,” said one market player. “But that trickle
has never even heard of a special servicer,” said securitization    could turn into a tsunami.” O
pro Matt Sharp, who recently formed a partnership that aims
to buy nonperforming and distressed real estate debt. “People
are calling up the origination guys at the investment banks,
                                                                    Boston ... From Page 1
trying to find loans to buy. They don’t realize the banks have      reflecting the tough market conditions. The amount of pro-
no idea what happened to the loan after they wrote it.”             ceeds was reduced at least twice, to reduce the leverage. And
   Some specialists are offering to help buyers from outside        the rate, initially pegged at 225 bp over Libor, ended up at 275
the CMBS market navigate the potential obstacles. One exam-         bp.
ple: Larry Sullivan, who ran a capital-markets group at                 Bank of Ireland committed $135 million, and BofA pledged
Capmark until the firm made cutbacks this summer. He has            $75 million. Rounding out the syndicate are Helaba Bank ($75
launched an advisory business, Raniere Partners of New York,        million), HBOS ($40 million) and Capital One ($35 million).
that helps investors source and value distressed CMBS loans.        The loan is scheduled to close Nov. 15.
   “Hypothetically, you could start chasing a loan that has             The members of the Vornado partnership boosted their
already been targeted by the special servicer and the B-piece       equity commitments in proportion to their stakes in the proj-
buyer as something they want to keep for themselves,” Sullivan      ect, which was originally projected to cost $719.4 million.
said. “But without guidance, you would have no way of know-         Vornado, a New York REIT, is now kicking in $170 million.
ing that, which could result in a big waste of time and energy.”    Special Situation Property Fund, an open-end vehicle run by
   Another potential trap: Discerning whether the borrower          J.P. Morgan Investment, is supplying $119 million. New York
can throw a loan into bankruptcy. Most borrowers are required       developer Gale International and Mack-Cali Realty of Edison,
to own properties via “bankruptcy remote” entities that can’t       N.J., are contributing the remaining $51 million.
be dragged into bankruptcy if the borrower runs into trouble.           The 39-story property, bounded by Franklin, Washington,
But in other cases, the loan buyer runs the risk that a bank-       Summer and Hawley Streets, will encompass 540,000 sf of
ruptcy filing could delay the foreclosure process for months or     office space, 297,000 sf of retail space, 225,000 sf of hotel space,
even years.                                                         136 residential condominium units and a five-level under-
   Also, while securitized loans are liquidated by a special ser-   ground garage with at least 300 spaces. The Vornado team has
vicer, it’s possible that the servicer might change in the midst    pre-leased a portion of the office space. Construction, which
of purchase negotiations. That could happen if the most-junior      has already started, is scheduled to finish in three years. O
class — which controls the special servicer — is fully wiped
out. The holder of the next class up the ladder would then take
charge of the special-servicing process. That holder could the-
                                                                    Corrections
oretically oppose the sale of a particular distressed loan.         An Oct. 17 article, “Barclays Keeps 2 Lehman Traders,” incor-
   Sharp, who runs Milton Point Investments of Essex, Conn.,        rectly said that CMBS traders James Im and David Cook, who
is teaming up with real estate attorney Ivan Wolpert on his         were retained by Barclays following its takeover of some
investment venture. “You really need to have a real estate          Lehman Brothers operations, report to Jeff Lewis. In fact, they
lawyer on your team if you’re going to do this,” he said. “We       report to Charles Spero, another former Lehman executive
recently got over a thousand pages of due-diligence informa-        who was named head of the trading desk at Barclays.
tion on a particular deal. A small investor operation wouldn’t
know where to begin.”                                               An Oct. 10 article, “Florida Condo Loan Goes on Block,” incor-
   Sharp is seeking to capitalize on his background in the          rectly described Coconut Grove Residences, at 1200 Holiday
securitization industry. He was a loan originator at ABN Amro       Drive in Fort Lauderdale, Fla., as a condominium-conversion
until 2005 and previously served as an analyst at S&P. Wolpert,     project. The property was actually newly constructed. O
October 24, 2008                              Commercial Mortgage                                 ALERT                                                                                      11


                                                                                Trepp site,” said Stacey Berger, Midland’s executive vice
Trepp Integrating Midland Data                                                  president.
   Trepp has added a feature to its Internet-based service                         So far, his shop is the only CMBS master servicer to pro-
that is aimed at helping investors, traders, analysts and                       vide this kind of detailed data through Trepp. Midland com-
researchers get easier access to more-detailed information                      piles performance-related data on 16,767 loans backing 320
on loans supporting commercial MBS.                                             CMBS issues. The Overland Park, Kan., firm was the second-
   The New York provider of CMBS data and analytics                             largest servicer of commercial and multi-family mortgages
recently beefed up its fee-based Web site, trepp.com, with a                    at midyear, with $273.7 billion of master- and primary-serv-
hyperlink that enables subscribers to automatically access                      icing contracts, following Wachovia ($434.3 billion), accord-
additional information compiled by master servicer Midland                      ing to the Mortgage Bankers Association. O
Loan Services.
   Trepp tracks 100,000-plus
commercial mortgages collater-
alizing more than $1 trillion of
outstanding       securitizations.
That includes many loans sup-                    DEBTX IS PLEASED TO ANNOUNCE
porting $154 billion of CMBS                       THE FOLLOWING LOAN SALES
deals serviced by Midland,
which gleans its information
from loan documents and prop-
erty reports.
   It has long been possible for
                                             BIDDING SOON
registered users to access and
analyze performance data via
Midland’s         Web         site,
midlandls.com. But now analysts                        $280        MILLION                                                       $250         MILLION
can access and integrate it more
efficiently with analytical                                 Varied performance                                                      Varied Performance
research they already conduct on                       CRE, C&I and residential loans                                Acquisition & Development and Construction loans
Trepp’s site.                                           located primarily in Kansas                                               located in S. California
   The added feature, which was
                                                       Bid Date: December 2, 2008                                               Bid Date: November 24, 2008
made possible after Midland
revamped its Web site earlier
this year, costs nothing extra for
Trepp customers. Users can tap
Midland’s deal-specific data,
consisting of loan set-up files,
property files and financials.
                                                       $148        MILLION                                                       $100         MILLION
They can also get hold of loan-
level information from borrower
financial statements, cashflow                              Varied performance                                                  Performing and Non-Performing
worksheets, rent rolls and prop-                       CRE, C&I and residential loans                                           CRE, C&I and residential loans
erty-inspection reports.                                     located in Florida                                                       located in Michigan
   Midland’s deal with Trepp                           Bid Date: November 10, 2008                                              Bid Date: November 19, 2008
demonstrates how the ongoing
credit crunch is putting pressure
on servicers to disclose more
information about the perform-
ance of securitized loans.                   F O R M O R E D E TA I L S C O N TAC T:
   “We looked at it from the                 Ken Daley at 617-531-3428 or
                                             D a v i d L e B l a n c a t 6 1 7 - 5 3 1 - 3 4 2 2 o r v i s i t w w w. d e b t x . c o m
investor’s standpoint and tried to
figure out what would be the
                                          B O S TO N       AT L A N TA        CHICAGO           NEW YORK           SAN FRANCISCO            F R A N K F U RT        BIRMINGHAM
most-effective tool we could add
                                         617.531.34 00    770.500.3836      630.820.1410        212.835.9480         650.794.2660         +49.6975.93.8414 + 4 4 . 2 4 7 6 . 6 4 1 . 3 1 6
without duplicating any infor-
mation that was already on the
October 24, 2008                                                                                                     Commercial Mortgage                          ALERT                                                      12


                                                                                                                                                       research firm RealPoint, which noted vacancies at the proper-
Antares Says CMBS Loan Is Solid                                                                                                                        ty. Since then, Antares and the $708 million Goldman fund,
    Antares Investment Partners says it has addressed the issues                                                                                       Goldman Sachs Real Estate Partners, have fully leased the
that landed a $67 million securitized office mortgage on a ser-                                                                                        property, according to Antares partner and co-founder James
vicer watch list.                                                                                                                                      Cabrera. The tenants are Plainfield Asset Management (61,000
    The floating-rate mortgage, the senior portion of a $160                                                                                           sf), Strategic Value Partners (43,000 sf) and Duff Asset
million financing package that was arranged by Credit Suisse,                                                                                          Management (43,000 sf). Duff is led by former Morgan Stanley
is backed by the office complex at 100 West Putnam in                                                                                                  chief financial officer Philip Duff.
Greenwich, Conn.                                                                                                                                           The property will begin producing cashflow in May, after
    Antares teamed up with a Goldman Sachs fund in March                                                                                               leasing concessions expire, Cabrera said. At that point, he said,
2007 to buy the 147,000-square-foot property for $130 million                                                                                          the debt-service-coverage ratio would approach 2 to 1. The
from UST, the tobacco and wine company, which had used it as                                                                                           projected annual net operating income is $15.6 million.
its headquarters. UST, as expected, vacated the property six                                                                                               Antares, which is based in Greenwich, is controlled by
months later. The Antares team then embarked on a renova-                                                                                              Cabrera and Joseph Benianti, who founded the firm in 1996.
tion to make the property suitable for multiple tenants, with a                                                                                        The firm went on an aggressive buying and building spree over
scheduled completion date of March 2008. The borrowers put                                                                                             the past several years.
up a $16.5 million letter of credit and a $16.5 million equity                                                                                             Rumors that Antares may have bitten off more than it could
reserve to protect the lender against possible loan-payment                                                                                            chew surfaced early this year, when Lehman Brothers fore-
shortfalls.                                                                                                                                            closed on two of the firm’s residential projects in Greenwich.
    Credit Suisse structured the 2-year debt package, which has                                                                                        Also, Antares’ interest in the massive Harbor Point redevelop-
three 1-year extension options, as a $67 million senior loan, a                                                                                        ment project slated for Stamford, Conn., was bought out in
$63 million B-note and a $30 million mezzanine loan. It secu-                                                                                          September by the company’s partner, Building and Land
ritized the senior loan via a $1.5 billion pooled offering (Credit                                                                                     Technology of Norfolk, Conn. Antares was the subject of a pro-
Suisse Mortgage Capital, 2007-TFL2).                                                                                                                   file in the New Yorker magazine on Aug. 25 that portrayed the
    The senior loan, which is pegged to Libor plus 117 bp, was                                                                                         firm as somewhat overextended on its development projects in
put on a watch list by servicer KeyCorp in April, according to                                                                                         and around Greenwich. O



 NYU SCHACK
 INSTITUTE OF
 REAL ESTATE


                       41st Annual Conference on
                      Capital Markets in Real Estate
                        Creating Opportunities from the Chaos
                      of the Credit Crunch: A Practitioner’s Guide
         ursday, November 13, 2008 •                                                   e Waldorf=Astoria Hotel

   Keynote Address: Laurence D. Fink, chairman and CEO, BlackRock, Inc.
                                                                                                                                                           High powered and in-depth, MBA’s Accounting, Tax and Financial
                                                                                                                                                           Analysis Conference 2008 offers a unique opportunity for
   Conference Lunch and Panel—“Manhattan: Still the Golden Apple?”                                                                                         mortgage finance professionals to share perspectives on the
   Speakers Includes:                                                                                                                                      proper implementation of accounting and tax rules, as well as
   Dean Kenneth Patton, divisional dean, NYU Schack Institute of Real Estate                                                                               prudent financial analysis and risk management techniques.
   Michael D. Fascitelli, president, Vornado Realty Trust
   Marc Holliday, CEO, SL Green Realty Corp
                                                                                                                                                           New this year: Special Housing and Economic Recovery Act (HERA)
   William L. Mack, founder and senior partner, Apollo Real Estate Advisors                                                                                of 2008 Luncheon.
   Stephen M. Ross, chairman and CEO, Related Companies
   William C. Rudin, president, Rudin Management, Inc.                                                                                                     By attending this conference you earn up to 17 CPE credits
   Larry A. Silverstein, president and CEO, Silverstein Properties, Inc.                                                                                   and 2 points towards your CMB. Learn more and register today
                                                                                                                                                           at http://events.mortgagebankers.org/
        For more information or to register,                                                                                                               accounting2008/default.html.
           www.scps.nyu.edu/capital
               (212) 992-3338
                                                                                                                                                           8874
   New York University is an a rmative action/equal opportunity institution. ©2008 New York University School of Continuing and Professional Studies
October 24, 2008                                      Commercial Mortgage           ALERT                                                 13


                                                                         than average holdings in General Growth’s much-larger portfo-
Bankruptcy Looms Over Rouse Bonds                                        lio — indicating that Rouse can continue funding its operations.
    It’s looking more likely that holders of unsecured bonds                 But convincing a judge of the separation might be difficult
issued by Rouse will be in trouble if parent General Growth              because General Growth and Rouse were listed collectively this
Properties goes bankrupt.                                                year as guarantors of half of a $1.75 billion mortgage loan, said
    While investors still hold out hope that Rouse will remain           Marks, who oversees REIT ratings at Fitch.
an independent entity, Fitch analyst Steven Marks said both                  “It is difficult to guess whether Rouse should be consolidat-
Rouse and General Growth would almost certainly be forced                ed,” another analyst said. “The bankruptcy judge would have
into “substantive consolidation” if the Chicago-based parent             leeway in either direction.”
files for bankruptcy.                                                        General Growth bought Rouse in November 2004. Rouse’s
    That would lead to defaults among $1.8 billion of outstand-          bonds, which at the time had split ratings in the triple-B area,
ing Rouse bonds, since those securities would rank below                 were downgraded immediately to match the General Growth’s
holders of General Growth’s roughly $20 billion of commer-               sub-investment-grade ratings. O
cial-mortgage obligations and other secured debt. Some $400
million of Rouse securities mature in March, followed by $200
million in April.
                                                                         Babson Refinances Koll Portfolio
    Over the past three weeks, Moody’s, S&P and Fitch down-                  Babson Capital Management has originated a $42 million
graded the shopping-center REIT’s senior unsecured debt rat-             floating-rate loan on three office properties owned by a joint
ings to B/Ba3/B (from BB-/Ba2/BB+). The agencies cited con-              venture between Koll Co. and Idaho Public Employees.
cerns about General Growth’s ability to refinance maturing                   The Class-B buildings, which encompass 486,000 square
debt, including Rouse bonds.                                             feet, are in Arizona, Colorado and Texas.
    While General Growth’s struggles to survive the credit crisis            The interest-only loan has a 65% loan-to-value ratio and is
have been widely reported, the recent ratings actions escalated          pegged to Libor plus 275 bp. The term is three years, with two
fears that Rouse bondholders will eventually get burned.                 1-year extension options.
Those securities are now trading in the secondary market at 39               The Koll partnership used most of the proceeds to retire the
cents on the dollar, down from 65 cents in late September.               roughly $35 million balance of a maturing $39 million mort-
    The problem is that Rouse falls into a gray area of bank-            gage that RBS Greenwich Capital securitized in 2003 via a $1.7
ruptcy law. “Usually, if a company is self-managed it is hard to         billion pooled deal (Greenwich Capital Commercial Funding
consolidate” with a parent, an industry researcher said. “With           Corp., 2003-C2). No reserves for tenant rollover or capital
Rouse it is unclear whether it is self-managed. The company              expenditures were held back from the proceeds — a nod to
does not have its own management, but it does file separate              Koll’s strong sponsorship.
earnings statements.”                                                        Koll, a developer based in Newport Beach, Calif., teamed up
    Rouse bondholders had expressed hope that the Columbia,              with Idaho Public Employees to buy the properties in 2006
Md., company’s separate filing status would be enough to keep it         from AmeriVest Properties of Denver.
out of a bankruptcy court’s jurisdiction. The filings themselves             Cohen Financial represented the Koll team in arranging the
also show that many of its properties throw off more revenue             mortgage with Babson, a unit of Massachusetts Mutual. O


CALENDAR

Main Events
Dates              Event                                             Location            Sponsor            Information
Nov. 4-5           CMSA Europe Conference 2008                       London              CMSA               www.cmbs.org
Jan. 12-14, 2009   CMSA Investors Conference                         Miami               CMSA               www.cmbs.org
Feb. 8-11          CREF/Multifamily Housing Convention & Expo        San Diego           MBA                www.mbaa.org
June 8-10          CMSA Annual Convention                            New York            CMSA               www.cmbs.org

Events in US
Dates            Event                                                Location           Sponsor            Information
Oct. 28-29       Subprime Litigation & Enforcement                    New York           ACI                www.americanconference.com
Nov. 3-5         Hotel Default Conference                             Dallas             Prism Hotels       www.fishingforsolutions.com
Nov. 5           Evening of Monopoly                                  New York           NYU                www.scps.nyu.edu
Nov. 11          RELA Breakfast Meeting                               New York           RELA               www.rela.org
To view the complete conference calendar, visit The Marketplace section of CMAlert.com
October 24, 2008                                Commercial Mortgage           ALERT                                                14


                                                                    ty, is headed by Bruce Batkin, who founded the operation in
Capital ... From Page 1                                             2002. The company is a 50-50 joint venture between Batkin
being hurt by sagging real estate valuations and the limited        and New York-based Greenwich Group International. The mez-
availability of debt financing.                                     zanine fund is the first commingled vehicle with backing from
    Debt investments, on the other hand, can provide relatively     U.S. investors for Terra Capital, which previously operated sep-
attractive unleveraged yields. First mortgages can return Libor     arate accounts, joint ventures and several Australian-backed
plus 350-500 bp, or currently about 7-8.5%. Mezzanine loans         vehicles.
can provide unleveraged yields of 15-18% for stabilized prop-           Infinity Funding, which is based in the Long Island town of
erties and 20% or more for transitional properties.                 Bohemia, N.Y., will seek an unleveraged return of 15%-plus by
    So far, the new vehicles have had success at raising capital,   providing bridge loans, mezzanine loans and preferred equity
according to investors. Mesa West is on track to close its debt     to developers in the Midwest, Southwest and Southeast. One
fund by yearend with $500 million of equity, $100 million           person familiar with Infinity’s fund, called Ponte Capital, said
more than the original target. Terra Capital, which has set a       many loans in its initial pipeline involve hotel and multi-fami-
$500 million goal, is expected to have a first close in the first   ly developers that have been having trouble lining up loans
quarter with at least $100 million of equity. Infinity Funding      from traditional lenders or have been squeezed because
has lined up $300 million for its debut debt fund and has           lenders failed to follow through on loan commitments.
another $350 million of soft commitments, putting it within             Lodging Capital’s joint ventures will seek an 18% return by
reach of the $1 billion equity goal. And Lodging Capital recent-    providing mezzanine loans and preferred equity to transition-
ly completed raising $250 million of equity via a handful of        al and stabilized high-end hotels. They can also originate
joint ventures with unidentified U.S.-based opportunity funds.      whole loans, or buy mezzanine and preferred equity. Principal
    The lenders aim to focus on a category of borrower that         Steve Kisielica is overseeing the effort. Chicago-based Lodging
they see as especially hard hit by the credit crunch: owners of     Capital will hold up to a 20% equity stake in the joint ventures’
transitional properties. When the market was booming, secu-         investments and serve as operating partner. Market players
ritization shops and portfolio lenders typically underwrote         said that while Lodging Capital can use up to 50% leverage,
loans based on projected increases in property incomes. That        some investments may be unleveraged. O
enabled borrowers to qualify for larger loans. But now, tradi-
tional lenders — to the degree they are lending at all — are
limiting their analysis to current income. That is severely curb-
                                                                    Durst ... From Page 1
ing the amount of financing available for properties not yet        players out there thinking they can apply their area of expert-
stabilized.                                                         ise in this market,” said one loan servicer. The buzz is that
    The new players, by contrast, will consider projected           some loans have been acquired for as little as 30 cents on the
income when underwriting mortgages, weighing the potential          dollar.
for occupancy and rent increases following property improve-           Investors that buy distressed loans with an eye toward tak-
ments. But they won’t factor in rent increases based on broad-      ing over the collateral are nicknamed “loan-to-own” investors.
er market trends, as had generally been the case prior to the       If the borrower defaults, the buyer assumes a property or
crunch.                                                             development project at a steep discount. But even if the bor-
    Los Angeles-based Mesa West’s vehicle, Mesa West Real           rower pays off the loan, the buyer nets a substantial yield
Estate Income Fund 2, will seek an 11-13% return, primarily         because of the discounted purchase price.
by writing floating-rate first mortgages with terms of 2-4             Construction loans can be particularly tricky for potential
years. The vehicle, headed by Jeff Friedman and Mark Zytko,         loan-to-own investors. “It can be a rough business,” said an
will target transitional properties in the Western U.S. valued at   executive for a due-diligence firm. “You need a lot of expertise
up to $100 million. With leverage, it will have $2 billion of       and a lot of due diligence from a construction standpoint. You
lending power. Up to 20% of the capital could be invested in        need the background to be able to determine how much it’s
properties, preferred equity and mezzanine loans, but               going to cost to complete the project and how long to get it ten-
investors said that the Mesa West fund intends to focus almost      anted and on its feet.”
all of its efforts on originating first mortgages.                     Durst’s company, Durst Organization, and Sidney Fetner
    Terra Capital is seeking about a 15% return by making mez-      Associates are both family-owned development firms based in
zanine-loan and preferred-equity investments, primarily for         New York. O
transitional and development properties in the U.S. Its vehicle,
Terra Capital Partners Mezzanine Fund, will generally target
loans of $5 million to $25 million for a broad mix of property
types. New York-based Terra Capital has already begun writing         Planning Your Travel Schedule? Check out the most com-
                                                                      prehensive listing of upcoming conferences in real estate
loans, which it will hold on its balance sheet until the fund has     finance and securitization — in The Marketplace section of
its first equity close.                                               CMAlert.com. Just click on “Conference Calendar.”
    Terra Capital, which is contributing 10% of the fund’s equi-
October 24, 2008
 July 9, 2001                                                                                              Commercial MORTGAGE
                                                                                                          COMMERCIALMortgage ALERT                                                                                                                                 15
                                                                                                                                                                                                                                                                   1



MARKET MONITOR

WORLDWIDE CMBS                                                                                                                                                                                   CMBS SPREADS
320
                                                                                                                                                                                                 10YR, AAA SPREAD OVER SWAPS
300
280                Year-to-date volume ($Bil.)                                                                                                                                                    600
260
                                2008    2007                                                                                                                                                      550
240
                                                                                                                                                                                                  500
220                US            12.1 203.2
                                                                                                                                                                                                  450
200                Non-US        16.0    72.7                                                                                                                                                     400
180
                   TOTAL         28.1 275.9                                                                                                                                                       350
160
                                                                                                                                                                                                  300
140
                                                                                                                                                                                                  250
120
                                                                                                                                                                                                  200
100
                                                                                                                                                                                                  150
80
60
                               2007                                                                                                                                                               100
                                                                                                                                                                                                   50
40                                                                              2008                                                                                                                0
20
                                                                                                                                                                                                               M      J        J         A        S        O
 0
      J                F                   M            A                   M                   J     J              A                   S               O                N             D
                                                                                                                                                                                                                                                  Spread (bp)
                                                                                                                                                                                                  Fixed Rate                   Avg.                   Week 52-wk
                                                                                                                                                                                                  (Conduit)                     Life         10/22 Earlier    Avg.
US CMBS                                                                                                                                                                                                                            5.0       S+575    S+575       +230
                                                                                                                                                                                                  AAA
                                                                                                                                                                                                                               10.0          S+550    S+550       +204

 40
              MONTHLY ISSUANCE ($Bil.)                                                                    DEAL TYPE                                                                               AA                           10.0       S+1,200 S+1,200         +603
                                                                                                          Year to date                                                                            A                            10.0       S+1,600 S+1,600         +842
 35
                                                                                                                                                                                                  BBB                          10.0       T+2,541 T+2,558       +1,501
 30
                                                                                                                                                                                                  BB                           10.0       T+3,200 T+3,200       +1,958
 25                                                                                                                          Fusion                                                               B                            10.0       T+3,700 T+3,700       +2,306
 20                                                                                                                           88%
                                                                                                                                                                          Single                  Markit CMBX 05-1
 15                                                                                                                                                                      Borrower                 AAA                                         +208     +220       +157
 10                                                                                                                                                                        12%                    AA                                          +893     +874       +697
  5                                                                                                                                                                                               A                                          +1,305   +1,291    +1,047

  0                                                                                                                                                                                               BBB                                        +1,977   +1,937    +1,681
          A    S   O       N       D   J       F   M    A       M   J   J   A       S       O                                                                                                                                            Sources: Morgan Stanley, Markit



NON-US CMBS                                                                                                                                                                                      CMBS TOTAL RETURNS
 24           MONTHLY ISSUANCE ($Bil.)                                                                    COLLATERAL LOCATION                                                                    CMBS INDEX
 21                                                                                                       Past 12 months ($Bil.)
 18
                                                                                                                                                                                                                                              Total Return (%)
                                                                                                                 UK            0.5                                                                                             Avg.        Month      Year    Since
 15                                                                                                                                                                                               As of 10/22                   Life      To Date to Date 1/1/97
 12                                                                                                       Germany                                    4.7                                          Inv.-grade                       5.5         -4.6     -13.5      81.2
  9                                                                                                 Netherlands               0.2                                                                 AAA                              5.5         -4.6     -11.7      84.6
  6                                                                                                                                                                                               AA                               6.1         -8.3     -24.5      59.8
                                                                                                    Other Europe                                                                  9.7
  3                                                                                                                                                                                               A                                6.1         -7.9     -33.1      37.1
                                                                                                            Japan                                                             9.0
  0                                                                                                                                                                                               BBB                              6.2         -7.5     -37.8      18.8
          A    S   O       N       D   J       F   M    A       M   J   J   A       S       O               Other              0.6                                                                                                               Source: Lehman Brothers




REIT BOND ISSUANCE
              UNSECURED NOTES, MTNs ($Bil.)                                                           5         MONTHLY ISSUANCE ($Bil.)                                                    SPREADS
                                                                                                                                                                                                                             Rating           Amount Spread         CDS
 10
                                                                                                                                                                                             10/10                  Maturity (M/S)             ($Mil.)  (bp)        (bp)
  9                                                                                                   4
                                                                                                                                                                                             Kimco                        5/17 Baa1/A-            300 T+495         550
  8
  7                                                                                                   3
                                                                                                                                                                                             Simon Property               5/18 A3/A-              800 T+465         340
  6                                                                                                                                                                                          Equity Residential           6/17 Baa1/BBB+          650 T+525         445
  5
               2007                                                                                   2                                                                                      Prologis                     5/18 Baa1/BBB+          600 T+750         930
  4
  3                                                                                                                                                                                          AvalonBay                    9/16 Baa1/BBB+          250 T+475         435
                                                                                                      1
  2                                                                                                                                                                                          Duke Realty                  1/18 Baa1/BBB+          300 T+630         575
  1                                                    2008
                                                                                                                                                                                             Boston Properties            4/15 Baa2/A-            300 T+400         390
  0                                                                                                   0
      J        F   M           A       M       J   J        A       S   O       N       D                   A    S       O    N      D   J   F   M   A       M   J   J    A   S     O        Health Care Property         1/18 Baa3/BBB           600 T+750         475
                                                                                                                                                                                             Regency Centers              6/17 Baa2/BBB+          400 T+500

      Data points for all charts can be found in The Marketplace section of CMAlert.com                                                                                                      Liquid REIT Average               Baa1/BBB+          467 T+554         518
                                                                                                                                                                                                                                                        Source: Wachovia
October 24, 2008                                            Commercial Mortgage                   ALERT                                                                16


                                                         total-returns swaps linked to bond                        works alongside the managers of its
THE GRAPEVINE                                            indices run by either Bank of America or                  investment-grade, high-yield and equity
                                                         Lehman Brothers. Others are relying on                    real estate portfolios.
                                   ... From Page 1
                                                         credit-default swaps tied to individual
first quarter edged into the black in the                CMBS borrowers. Another option: Some                      Barry Olson has been promoted to chief
second quarter, with a 1.1% gain,                        investors are simply increasing their                     operating officer of Archon Capital, a
according to a Townsend Group report                     CMBX exposure, since spreads for the                      unit of Goldman Sachs. Olson, who was
released by San Diego City Employees,                    synthetic instruments are at roughly half                 formerly managing director at Archon,
which invests in the $1.1 billion vehicle.               the level of cash bonds.                                  has been involved in setting up and
But the fund, called Capmark Structured                                                                            managing several Goldman funds,
Real Estate Partners, was still down by                  Deloitte is positioning itself as an advisor              including Goldman Sachs Real Estate
35.5% for the 12 months ending June 30.                  for buyers of distressed CMBS and CDO                     Mezzanine Partners. Olson reports to
The vehicle invests in CMBS and other                    bonds. The accounting firm’s financial                    Goldman managing director Adam
debt instruments.                                        advisor services arm recently hired                       Brooks and Jim Lozier, chief executive of
                                                         Constantine “Tino” Korologos as a man-                    Archon Group.
KeyCorp sought to sell $340 million of                   aging director to focus on both corporate
residential construction loans in the                    finance and distressed debt. Korologos,                   Arbor Commercial Mortgage is recruiting
third quarter, but said the effort was                   who spent the past year as an independ-                   a senior analyst for capital markets. The
slowed by the inability of some potential                ent consultant to CMBS borrowers, pre-                    job, at the firm’s headquarters in
buyers to obtain financing. Key fetched                  viously headed a group that supported                     Uniondale, N.Y., involves the calculation
$135 million from loan sales, recognized                 Wachovia’s large-loan, CDO and securiti-                  of price quotes for originators and
$31 million of losses, foreclosed on $35                 zation teams. He has also worked for                      underwriters, among other duties.
million of loans and received $6 million                 Bear Sterns, GE Real Estate, Moody’s and
of loan payoffs. That left it with $133                  Equitable Life. Korologos reports to E.J.                 Situs Cos. raised $22,000 for Ronald
million of loans still to sell.                          Huntley, a Deloitte principal and national                McDonald House at its second annual
                                                         head of real estate consulting.                           benefit for the children’s charity, held in
The divergence in the spreads of cash                                                                              September. About 250 people attended
and synthetic CMBS is forcing investors                  BlackRock is seeking a real estate risk                   the party, which was held on the rooftop
to find hedging alternatives to the syn-                 quantitative analyst in New York. The                     of the Empire Hotel in Midtown
thetic CMBX index. Some are turning to                   fund’s real estate risk management team                   Manhattan.


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