Uncertainty Weighs Heavily Over Industry's Fourth Quarter Outlook

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Uncertainty Weighs Heavily Over Industry's Fourth Quarter Outlook Powered By Docstoc
					        MARK HESCHMEYER, EDITOR                                             SEPTEMBER 30, 2010                                 WWW.COSTAR.COM


                                                                             IN THIS WEEK'S ISSUE:
Uncertainty Weighs Heavily Over Industry's Fourth Quarter Outlook ................................................................................................ 1
Blockbuster Files Chapter 11; Immediately Closes 145 Stores ....................................................................................................... 10
Rite Aid Looking for Savings Among its Brick & Mortar ................................................................................................................... 14
Ashley Stewart Parent Files Chapter 11, Seeks Buyer.................................................................................................................... 16
JPMorgan Packages Retail, Office Loans into a New CMBS .......................................................................................................... 16
Benihana Chain Goes Up For Sale ................................................................................................................................................. 17
More Banks Under the Gun To Raise Money, Be Sold, or Face a Worse Fate ............................................................................... 18
Syringa Bank in Boise Required To Raise Money, Jettison Bad Assets.......................................................................................... 18
Two More Banks in Florida, Washington Closed and Sold.............................................................................................................. 19
Starwood, Kaufman Jacobs and JPMorgan Reorganize Rubicon US REIT .................................................................................... 21
Real Money: Note Purchases & Sales............................................................................................................................................. 21
Under Investigation, Amedisys Consolidating Operations ............................................................................................................... 23
VeriSign Cancels 180,000-SF Lease............................................................................................................................................... 23
Local Closures & Layoffs ................................................................................................................................................................. 24
Loan Maturities: Mezz Loans Due in October.................................................................................................................................. 25
Watch List: Mezz Loans in Special Servicing .................................................................................................................................. 26

               Uncertainty Weighs Heavily Over Industry's Fourth Quarter Outlook
         Momentum Shifting, but Unease Over Near-Term Market Prospects and Light Deal Volume Causing
                                     Hand-Wringing by Investors, Lenders and Tenants
      Typically by October, the commercial real estate industry can see its way clearly through the end of the year,
      with a pretty good idea of what can be accomplished and how the rest of the year will play out. But these are not
      usual times. The loads of uncertainty and constantly shifting market conditions that characterize this fourth
      quarter are making it very difficult to muster any certainty over what the coming months will bring.

      Just a few weeks ago, the markets were abuzz with the specter of a double-dip recession. But those worries
      have largely subsided and replaced by signs that the capital markets may finally be loosening up. Then there are
      the upcoming politically charged elections and the prospects of a shift in the regulatory and legislative

      Want more uncertainty? Consider that buyers and sellers still can't seem to narrow the gap in their pricing
      expectations. Couple that with banks and loan servicers collectively having no clear strategy for dealing with
      problem assets and pending maturities, and what you get is much indecision on the part of investors, lenders
      and tenants resulting in a lot of hand-wringing over both the near-term and long-term by CRE folk.

      We queried a random sample of CoStar Group news readers about their outlooks and goals through the end of
      the year, asking what do they see that is standing in the way of accomplishing those goals, or, conversely,
      helping to achieve them.

      While their answers range from the extremes of depressing to upbeat, in general, there seems to be a sense that
      the markets continue to have momentum away from the past two years, but there is still very little deal flow or
      jobs to support that momentum.

      In addition, there may not be deal-flow going forward to support it either. Banks and loan servicers have been
      pushing their "problem loans" further out into the future and are only now getting around to taking them through
      the foreclosure process.

 THE WATCH LIST NEWSLETTER                                                                                                                                                                      1
  Meanwhile, there is an "astonishing, almost stupid" amount of money sitting around waiting to pick up deals. But
  sellers don't want to put bargain prices on their properties, according to one real estate consultant.

  And as one broker told us: "it is the toughest market I have ever seen in 30 years. I've just in the last few days
  given up on all of my goals of completing any new transactions this quarter. (Instead,) I'm going to exercise a
  great deal more, concentrate on getting off of the computer, away from the cable news, and lower my stress. I'll
  get back to real estate brokerage in January when at least some of the dust of the political world will have settled

  The comments we heard and received - and presented here - paint a very personal picture of the fourth quarter
  2010 market uncertainties and hopes from those who are actively engaged in the market right now.
  Tim Wang, Senior Vice President Research & Investment Strategy, ING Clarion, New York
  ING Clarion believes that we are in the early stage of the next upturn cycle. Many people will likely be surprised
  by the strength of rebound in commercial real estate fundamentals and pricing. The global search for yield is
  already putting rapid downward pressure on the cap rates of institutional quality properties. It is possible that the
  total return of NCREIF Property Index for 2010 could exceed 10% for the year.

  Despite the slow and uneven progress in the general economy, real estate capital markets have improved
  remarkably over the past year. Lenders, especially life insurers and foreign banks, have re-entered the
  commercial mortgage market, with increasing competition between lenders leading to lower mortgage rates and
  higher loan-to-value ratios for high quality assets.

  While risks remain, including ongoing business and consumer deleveraging, rising distress, and weak
  fundamentals, investors are beginning to recognize the intrinsic value of real estate assets and adjust their
  market outlook accordingly.
  Andrew R. Little, Principal, John B. Levy & Co., Richmond, VA
  The fourth quarter is a time to push for closings that can increase the bonus pool. This year, we are working hard
  to get several deals closed by year end and, in my best guess, 2010 production will surpass last year, which
  surpassed 2008. However, the market still does not feel healthy.

  Very few small- and mid-sized banks are able to put new money out and the big banks seem able, but entirely
  focused on the "bald-headed deal" (no hair). Life companies are also finding their footing and are more willing to
  stretch on dollars today versus the last 24 to 30 months. They are aggressively pricing solid deals in good
  markets and those life companies that are seeking yield are pushing LTV a little or going to secondary or tertiary

  While the market is getting more accustomed to the new levels of leverage and underwriting, the one area of
  business that continues to confound us is dealing with special servicers. We see absolutely no motivation to do
  anything at the special servicer level. A long negotiated deal with a special servicer (that seems fair to everyone
  involved) can meet rejection with no counter offer as soon as it is taken to "the guy down the hall that signs off on
  everything." Then you wait for another three months before anything more happens. Meanwhile, the property
  deteriorates, tenants go away, the sponsor's capital gets directed to another deal, etc.
  Jason S. Perlroth, Principal, Grand Run Capital LLC, New York
  While I never wish for things to sour, a general uptick may expand seller expectations beyond the already
  inflated levels. In general, the pricing spread between sellers and the market is still too wide, so coupled with a
  general uptick, the risk/reward profile may further deteriorate.

  I'm cautiously optimistic for the fourth quarter. I believe that things will continue to trend positively, but we can
  expect a seasonality effect and possible negative implications from government forces.

THE WATCH LIST NEWSLETTER                                                                                                 2
  Heading into the final quarter of 2010, my main goal is to close no less than one of the acquisitions currently
  under consideration and in negotiation. Outside of this, I'm hoping for deal flow to continue to increase, or at
  least certainly not decrease.
  Malay Bansal, Managing Director, NewOak Capital LLC, New York
  Regulators have tried to avoid forcing fire-sales by giving banks and other institutions more flexibility to extend or
  modify loans. Their actions have been criticized by many as extend-and-pretend or delay-and-pray, but reality is
  that forced selling would have depressed prices even more. But if prices are bottoming out, giving more time to
  borrowers will reduce losses on loans. Expected loss levels have indeed come down for most people in last few

  Problems in commercial real estate are not over. The volume of maturing CMBS and other CRE loans ramps up
  in 2011 and 2012. There is a value gap that the borrowers will have to deal with once loans mature or are at the
  end of extension. Borrowers will have to put in additional capital, find partners, or lose the property. Next year,
  we will see more of these instances.

  For CMBS investors, deal analysis will become more complicated. Deals with high delinquencies may be left with
  better collateral after weaker loans have defaulted than deals where weaker loans are yet to default. Careful
  loan-by-loan analysis will be necessary.

  Multifamily sector will continue to do relatively better. Hospitality has suffered and is seeing a lot of interest from
  investors on good properties. Office sector will feel more pain as leases mature.
  Kenneth A. Cohen, Chairman and CEO, TMAC, San Francisco
  We anticipate that the fourth quarter will be extraordinarily active for non-performing loan sales. In some ways,
  we see this market at similar to the residential home sales market. Only those sellers who conclude that they
  absolutely do not want to continue working the same number of non-performing loans in 2010 (and therefore
  accept the pricing levels of buyers who can perform) will be likely to complete transactions. We look to complete
  several large portfolio acquisitions as well as one off sales.
  Richard C. MacDonough Jr., Vice President, The J Street Cos., Washington, DC
  The market is better. With some predictability in home pricing having returned in a number of areas, financing
  arrangements for development are available. The spigots aren't open full bore, and they shouldn't be.
  Nevertheless, a lot of my clients are willing to underwrite, offer and close on deals again. That is particularly the
  case with multifamily deals and development sites in areas with solid schools and high barriers to entry. BRAC's
  importance cannot be understated in terms of the Maryland suburban markets, in particular.

  Our goals in the fourth quarter are to generate 10 solid deal leads per month with each having a seven -figure
  minimum value, then getting at least one per month into substantive contract negotiations.

  Consequently, our land sales team has begun an energetic expansion into all suburban markets in Maryland and
  Northern Virginia. We also are in the process of hiring highly experienced professionals, and we have committed
  to doubling our land sales opportunities and downstream relevant leasing engagements.
  John L. Morrissey, Senior Commercial Associate, MGR Real Estate, Upland, CA
  I think [the fourth quarter] looks better but not good by any means. Homebuilders want to build bu t construction
  financing is hard to find at best. Investors have cash on the sidelines but want unreasonably low prices to make
  a purchase. SBA owner occupied deals are getting done. I don't see things getting better until we get new
  housing going, which is where we get our jobs back. Then everything else will come back.
  (please continue reading on page 5)

THE WATCH LIST NEWSLETTER                                                                                                   3

  (continued from page 3)
  Marty Busekrus, Senior Associate - Investment Sales, NAI Rauch Weaver Norfleet Kurtz & Co., Fort
  Lauderdale, FL
  Goals for the end of the year are just survival in the investment sales brokerage business. Every single deal has
  something about it that buyers and their borrowers don't like. The trophy assets are moving again, but on the
  deals under $20 million and into the class B/C category there is almost no movement.

  From the brokerage standpoint it's a dangerous game because you have to hitch your wagon to the right horse if
  you want to win any deals. I've found there's still dumb money out there paying prices that just seem too high for
  99% of the buyers I deal with.

  What's helping is that at least transaction volume is increasing. It's not great, but there have at least been a few
  deals that we can work comps off of.
  Neil K. Sethi, Executive Vice President, Landis Properties, Worthington, OH
  We are just starting to see some recovery these past few months with our [multifamily] occupancies, etc. So
  hopefully we will be able to get some traction on increasing our revenues to bring our budgets into balance. It is
  still a tough environment. As of now the fourth quarter is looking pretty decent at our B-Class properties in more
  favorable areas, but our B-Class property in a less favorable area continues to struggle.
  Adelaide Polsinelli, Associate Vice President Investments, Marcus & Millichap, New York
  They used to say that the three main rules of investing in real estate were: location location location. Today it's
  more like: timing timing timing. You can buy the best location but if you bought it at the wrong time, you can be
  left with a mess - just ask the big name game players of the past three years.

  I have been working harder than I can remember in my entire 26 years in this business. I am happy to say that I
  am reaping the rewards and closing many of the deals I have been working on. I would be satisfied if all the
  deals I have in contract close with minimal problems. I currently have over $100 million in expected closings this

  Any additional game-changing regulations, or unexpected tragedies, could upset the market and cause lenders,
  and investors to re-evaluate. Market conditions have forced me to be more disciplined and patient.
  Joel Owens, Broker, All World Realty, Canton, GA
  This year has been great for the Atlanta, GA, investor market. Our main emphasis has been on distress and
  income producing properties. Land is not moving unless it is selling for a liquidation value. Many feel apartments
  will recover first and that is where most purchase activity is happening. Retail in our markets has a long way to
  go to recover.

  Investors are active in the market and buying up deals where before the bid-ask gap was too broad.

  I have met my goals and 2011 will be the best yet. You have to focus on what is selling in the market and go
  over those properties for listings or purchases with your buyers.
  Steve Tutt, Commercial Realtor, KW Commercial, Fremont, CA
  Market activity for the rest of the year rests largely on the outcome of the election,

  The confidence of the investors I am working with and the direction they take depends in great part on the
  election and the creation of sustainable recovery. We won't see sustainable recovery until unemployment
  numbers show substantial change. We won't see this until economic policy changes direction and the Robin
  Hood threat is eliminated.

THE WATCH LIST NEWSLETTER                                                                                                5
  I am exceeding my goals for the year, but then anything is better than nothing. I have learned that a market
  always exists and one's success in the market of the moment depends upon one's ability to adapt and to make
  one's clientele aware of current market conditions and opportunities, as well as the short- and long-term

  I started the year looking for long term opportunities for my clients. During the second and especially third
  quarters, some focus has been transferred to short-term opportunities. Going into the third quarter I have
  abandoned, at least temporarily, short-term objectives, waiting on the outcome of the election to dictate direction.
  Charles Swope, Broker of Record & Chairman, Swope Lees Commercial Real Estate, Westchester, PA
  We have a good pipeline going into the fourth quarter - some of that activity will translate into deals in the first
  quarter of 2011. Our goals for end of the year are to position for 2011.
  Alex J. Beachum, Income Property Organization, Bloomfield Hills, MI
  Like almost everybody else, our firm has been forced to continually adapt and refine our business model since
  the downturn really solidified after Lehman tanked in the fourth quarter of 2008. It has been a constant process
  of assessing and reassessing trends in the disposition of distressed assets, and learning to identify the various
  protocols and strategies lenders-from portfolio lenders, to CMBS special servicers, to GSE's- will utilize when
  attempting to resolve a default.

  To paraphrase Rockefeller, "family fortunes are made in depressions", and implicit in that statement is the
  acknowledgement that any significant downturn affords savvy investors and businesses ample opportunity to
  capitalize. Which is precisely what our firm has aspired to do and the results have become more encouraging as
  each quarter passes.
  David Schoenemann, Broker, CRES Inc., Austin, TX
  I think the year will end up somewhat gray, not dark or bright light, but gray. I say this because I think the lenders
  here in my trade area have started to loosen up and are at least talking about and structuring deals that make
  sense. This is a change from the first quarter were they weren't even talking.

  I have three deals that were scheduled to close in the third quarter, they required financing to move forward. I
  have one deal closed and the other deals real close and will close in the fourth quarter. They have been a result
  of the loosening of financing for commercial deals. All of the financing has been done with local banks that know
  the landscape here in Austin, Texas.
  Nicholas E. Ledvora, Managing Director, Equity Investment Services, Orlando, FL
  2010 has been a rollercoaster for commercial real estate in general. Our leasing and management team has
  grown. There has been a need to find aggressive brokers to fill holes and stabilize assets. Rents in the Central
  Florida market have fallen anywhere from 20-40% based on class of asset and specific market. It looks like
  vacancy has stabilized at plus or minus 12% based on our research.

  Our fourth quarter looks very strong. We have a dedicated real property tax appeal team that filed approximately
  500 appeals across Florida and sales are finally picking up. Banks are pretty close to "marking to market" and
  deal flow looks promising.

  We expect to close 25 to 30 leases in the fourth quarter. Based on our activity reviews and past performance this
  looks good. Landlords are also realizing that they need tenants and income to "float" debt and cash flow. They
  are realizing that this recession is going to be a longer dip than originally expected.
  Aasif M. Bade, President, Ambrose Property Group, Indianapolis, IN
  The fourth quarter of 2010 will see increased sale activity prompted by tax change worries and a tiny easing of
  credit. Banks have clearly increased their interest in dumping REO assets and we only expect that to become
  more prevalent during the fourth quarter.

THE WATCH LIST NEWSLETTER                                                                                                  6
  Leasing activity seems at the strongest of the year, and most of this activity will result in completed first and
  second quarter 2011 deals.

  We've become more focused on 2011-2014 acquisitions vs. 2010 acquisitions. The market remains unstable,
  assets are priced too high, and for trophy deals, there is 2003-2005 "stupid money" circling. Foreign investors
  are troubled by the substantial bad news that poured out during the early part of third quarter 2010, and seem
  much less sensitive to the good news that has been hearty during the last 30 days.
  Richard Egitto, Senior Managing Director, Crimson Services LLC, Littleton, CO
  Leasing activity has been strong this year compared to last year (not much to compare it to I realize) but
  nonetheless it has been consistent throughout the year in Class A office space here in Denver.

  Clearly from an investment sales point of view, the market is seeing more assets come to market as we move to
  the fourth quarter and financing is easing for better quality, better located product (it is still not readily available,
  but it is easing). Early this year it seemed the only assets that were trading were core properties in core (Top 5)
  U.S. office markets and a foreclosure or two here and there.

  As we moved into the second and third quarters it has become clear that the pent up money on the sidelines is
  now looking at a wider range of assets and for lower returns, and the banks are now starting to proactively
  foreclose on assets -- thus I believe we will see greater deal flow as we move into 2011.
  Jim Gulley, Principal, James Gulley Ltd., Baltimore, MD
  The one trend that seems to be coming back is the "value-add" play. A bellwether here in Baltimore will be the
  Loch Raven Village deal. Foreclosed upon a month ago by The Principal Financial Group, this 500-unit plus,
  Class C (60 years old), asset traded in 2006 for $32 million plus. Principal bought it at auction for $18.6 million. I
  produced one of three offers in the $18.6 million to $20 million range, which Principal rejected. It is now being
  marketed as a "value-add" play. What's interesting is that the buyer in 2006 bought it as a value-add deal and
  was unable to create any value. So whether the Greater Fool theory is back in play remains to be seen.
  Leigh C. Bower, Vice President, NAI Brannen Goddard, Atlanta
  The last quarter of the year may pick up slightly because companies with leases expiring in early 2011 will be
  focused on making their decisions before year end so they can adequately budget for next year. Oftentimes
  these tenants will be "kicking the tires" to compare their current landlords' offer on a renewal against a relocation.
  And then there are those tenants wanting to "upgrade their image" via taking advantage of the "tenants' market"
  and move to a nicer building.

  The entire 2010 year has been an extremely slow one. My goals were set low for this year to adjust to the low
  demand and struggling economy.

  In landlord representation, market conditions have indeed prompted changes or adjustments of objectives
  throughout the year and will be on-going based on the numbers of owners of commercial real estate with assets
  in distress. With few exceptions, owners of real estate are in dire need of complete focus on their assets in order
  to meet debt obligations, stabilize their assets, adequately compete, retain tenants or otherwise raise occupancy
  levels to generate rental revenue.
  Fred Harllee, Review Appraiser for Special Servicer, Ponte Vedra, FL
  For the fourth quarter I see continued downward price pressure in any properties other than Class As. Class C
  and D apartments continued on a downward trend with the Midwestern states being hit hard by the troubles in
  the auto sector. There are buyers now entering the market aggressively wanting high equity dividend rates and
  loans becoming more available at historic high DCRs.
  (please continue reading on page 9)

THE WATCH LIST NEWSLETTER                                                                                                     7

  (continued from page 7)
  Blanche Horst, Jones Lang LaSalle Americas Inc., GSA National Broker Contract, Washington, DC
  There seems to be a run of large government deals that is sustaining a decent leasing market in downtown
  Washington, DC and other metro areas. However, the deficit and runaway spending ultimately will trigger re-
  evaluation and belt-tightening.

  Market conditions prompted conservative 2010 targets this time last year. Targets have been raised modestly but
  remain achievable. While the market has been resilient in DC despite national trend, recovery and growth are
  elusive. Cautious optimism will continue for at least three to five years. Bailouts and stimulus spending are a
  hindrance to meaningful vibrancy, but opportunities exist.
  Rachel K Maman, Consulting Broker, Hera Development Corp., Brighton, MA
  Things look better than this time last year overall. The reality check is officially in effect.

  Market conditions have changed our perspective. Once reality set in (global devaluation) we exercised more
  caution than 12 months ago. We understand this is a high-risk, high-reward environment that requires enormous
  restraint, conservatism, and due diligence to prevail.

  It is a counter intuitive environment, like short trading. You want to get in there and day trade like there is no
  tomorrow. Instead you rein it in, watch what the big boys are doing, do some shadow trading and read everything
  from the Wall Street Journal to the Orlando Business Journal to the Ladies Home Journal :)

  Widening the Field of Play in the Southeast

  Mac McCall, Senior Director, Franklin Street Real Estate Services, Atlanta

  The fourth quarter and into 2011 will continue to present challenges and we see a tremendous growth
  opportunity because property owners want to work with brokers who will partner with them and help them tackle
  issues with creative solutions.

  Our objective is to remain extremely active and continue to meet with new clients who own assets across the
  Southeast. We have been in an expansion mode in 2010 and have opened offices in Atlanta, Jacksonville and
  Fort Lauderdale with experts in investment sales, leasing, management, finance and insurance who are working
  together to help clients maximize their investment returns.
  Paul Katz, Principal, Nexxus Advisors LLC, Chicago
  As is well known, there are still enormous reserves of cash sitting on the sidelines and still hesitancy to invest as
  many buyers are not sure "the time is right." We have seen no widespread urgency to invest now, as many feel
  that prices may continue to drop or, worst case level out, as loans come due at an increasing rate and lenders try
  to resolve their REO and troubled loans-so no urgency to invest now.

  On the other hand, idle cash is earning next to nothing and we believe we'll see those opportunistic investors
  who are not concerned about timing the absolute market bottom and have substantial cash, continue to buy.
  Unfortunately, there are certainly not enough of them to lift the markets nationally, but we are seeing more
  transactions completed than last year.
  Joseph Gabbaian, Senior Vice President, Grubb & Ellis Co., Los Angeles
  I believe that after a bit of tightening at the beginning of the year (which could have been caused by the
  government stimulus package), the market has slowed down through the third quarter, with the slowdown
  continuing through the end of the year.

  I further believe that until and unless the local economy starts creating jobs in substantial numbers and on a
  sustained basis, the underlying fundamentals will not improve in any appreciable manner.

THE WATCH LIST NEWSLETTER                                                                                                 9
  Another point that usually gets overlooked is the "shadow space" that exists in the market (surplus space that for
  some internal reason is not being marketed for sublease). By some accounts, the size of this category of space
  could be as large as the sublease space. Therefore, even when the economy starts creating jobs thereby
  creating demand for space, this shadow space will get absorbed first before the market will get to absorb the
  available sublease and direct spaces, thereby postponing the time landlords may realistically expect to be able to
  raise rents.

  The goals are keeping the lease deal flow going with any eye towards owner/user sales if possible.
  Chuck Paxton, Carolina Homes & Land Realty, Harrisburg, NC
  For me, market conditions appear to have changed. I am in a niche market of student housing development. The
  first part of the year my business was booming. Today it appears fear has taken over this industry. Developers,
  those that are left, look in the fourth quarter and buy in the first quarter of the new year. The deals must be
  superior to even get them to take a second look.

  Everybody is looking for distressed properties, however, these possible buyers are not being realistic. Today
  possible sellers are holding out waiting for a turnaround that may never happen. Buyers are waiting for the next
  price drop that may never occur. That leaves the real estate broker looking but never able to seal the deal.
  Determining a good deal has never been harder, due to this attitude.
  Jag Grewal, Commercial Realtor, Ian Black Real Estate, Sarasota, FL
  In general, our outlook for the remainder of the year is one of caution. It seems like the buyers that we have are
  holding off from making a decision until after the election. One of the main indicators of this trend, to me, is that
  Walgreens and other blue chip NNN assets have been sold off, to the point that cap rates on that asset class
  have been trending to almost below 7. That would indicate investors believe that we are going to be in a holding
  pattern for some time and they better find a spot top park the cash than a CD. The money on the sidelines
  seems to be restless but not reckless!

  I can’t tell you how many emails I have received from brokers with buyers looking for WAG’s or any decent NNN
  investments. I can’t seem to find a WAG for around 7.2 cap to save my life!
  Nicholas L. Miner, Vice President – Investments, Commercial Properties Inc., Scottsdale, AZ
  My goals are to finish the year strong. I had the opportunity of closing 2 sale deals at the end of the 3rd quarter
  and I am currently working on a couple more that would try to close by year end. The biggest hurdle is still
  financing. Cash is king, but cash is also very patient.

  I believe that more transactions are going to occur in the second half of 2010 than all of 2009 and first half of
  2010. I am starting to see larger transaction trading at very affordable prices. Recently, a larger grocery-
  anchored center that I had in escrow two different times with the last time being in escrow at $75/SF just closed
  to with the owner of the center on the adjacent corner purchasing it for cash at $48/SF.

            Blockbuster Files Chapter 11; Immediately Closes 145 Stores
  Blockbuster Inc., a Dallas-based global provider of rental and retail movie and game entertainment through
  3,306 stores in the U.S., filed voluntary Chapter 11 petitions with the U.S. Bankruptcy Court for the Southern
  District of New York. And store closings have already started.

  "After a careful and thorough analysis, we determined that [bankruptcy reorganization] provides the optimal path
  for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our
  business model to meet the evolving preferences of our customers," said Jim Keyes, chairman and CEO of
  Blockbuster. "The recapitalized Blockbuster will move forward better able to leverage its strong strategic

THE WATCH LIST NEWSLETTER                                                                                                 10
  Under the terms of the proposed plan of reorganization, the company's 11-3/4% senior secured notes will get to
  exchange their holdings for the equity of a reorganized Blockbuster. The only debt expected to remain on the
  company's balance sheet upon its emergence from Chapter 11 would be the amounts drawn under Blockbuster's
  $125 million DIP financing, which will convert to an exit loan facility upon consummation of the plan, and a new
  exit revolving credit facility of up to $50 million. Under the proposed plan, there would be no recovery by the
  holders of the company's outstanding subordinated debt, preferred stock or common stock.

  As part of the recapitalization process, Blockbuster said it would evaluate its U.S. store portfolio with a view
  towards enhancing the overall profitability of its store operations.
  As of Aug. 29, Blockbuster operated 2,924 of its U.S. stores; the rest were operated by franchisees.

  Prior to filing Chapter 11, Blockbuster closed 145 stores and as part of its filing, the company is looking to cancel
  the unexpired leases on those stores. By rejecting the leases, Blockbuster estimates that it will be able to save
  $19 million in rent and other related obligations over the remaining term of the leases.
                                 BLOCKBUSTER STORE LEASE CANCELLATIONS
                                               Monthly                                                      Monthly
                                               Rent;                                                        Rent;
                                               Current                                                      Current
   Store Address        Lessor                 Exp. Date       Store Address         Lessor                 Exp. Date
                                                               9227 E Lincoln
   8511 126th St Kew    126-01 Hillside Ave.   $12,956;        Ave #700 Lone          Lincoln & Yosemite         $7,430;
   Gardens, NY          Assoc.                 12/31/2011      Tree, CO                             Co.        1/31/2011
                                                                                        L-M Development
   1036 2nd Street      ABGS School            $9,416;         7161 S 76th St            Company,L.P. &        $11,196;
   Pike Richboro, PA    House Associates       10/31/2010      Franklin, WI                      Lenette     11/30/2010
   9110 S Stony         Amalgamated Bank
   Island Rd Chicago,   of Chicago as          $9,456;         1595 International        Local Shops at        $13,748;
   IL                   Trustee                7/31/2011       Blvd Norfolk, VA      Super K Norfolf, VA     11/30/2011
   14602 Huebner
   #100 San Antonio,    AmREIT Olmos           $10,703;        6170 Grand Ave                                   $5,001;
   TX                   Creek                  1/31/2012       Ste 131 Gurnee, IL    Mall at Gurnee Mills     1/31/2011
   445 Putnam Pike                             $7,787;         6273 Wilson Grove         Margate Capital        $5,720;
   Greenville, RI       Apple Valley Mall      6/30/2012       Rd Charlotte, NC                 Holdings      3/31/2011
   3333 Arapahoe Rd     Arapahoe Ridge         $7,676;         581 Roosevelt Rd                                $14,000;
   Erie, CO             Retail Center          3/31/2011       Glen Ellyn, IL          Market Plaza 450      12/31/2011
                                                               1401 Pulaski Hwy
   314 Pond St                                 $8,850;         Ste F Edgewood,         Mars Woodbridge         $10,444;
   Ashland, MA          Ashland Pond           3/31/2012       MD                            Center Inc.      9/30/2010
   200 Oregon Ave       Axelrod-Giannascoli    $7,623;         754 Grapevine                                   $11,214;
   Philadelphia, PA     Realty Group           12/31/2010      Highway Hurst, TX         Mayfair Station      3/31/2012
   4111 Durand Ave                             $4,989;         8515 NW 186th St          Miami Gardens         $11,011;
   Racine, WI           Badger Plaza           10/31/2010      Hialeah, FL                   Associates       6/30/2011
   630 W Ventura St     Balden Towne           $6,009;         312 Mystic Ave            Mystic Property       $11,952;
   Fillmore, CA         Plaza                  9/30/2011       Medford, MA                   Associates      11/30/2011
   7451 N Beach St
   #140 Fort Worth,                            $6,284;         1060 State Route                                 $14,238;
   TX                   Basswood Crossing      7/31/2011       35 Middletown, NJ      New Monmouth/35          3/31/2011
                                                               2290 E College
   109 Heritage Drive                          $10,095;        Ave State College,                               $3,364;
   Newberry, SC         Bauer Development      4/30/2013       PA                      Nittany Commons       10/31/2010
                                                               103 N Baltimore
   169 Pine Hollow                             $10,149;        Pike Springfield,         North Baltimore        $13,004;
   Rd Oyster Bay, NY    Bay Auto Mall Corp.    10/31/2010      PA                      Realty Associates       2/29/2012
   4351 Washington      Beachrose Evans        $8,694;         1802 N Jackson St                                 $4,360;
   Rd Evans, GA         and Plaza Evans        10/31/2010      Tullahoma, TN              Northgate LLC        3/31/2011
   2410 N Federal
   Hwy Lighthouse       Beacon Light           $9,089;         33523 8 Mile Rd                Northridge        $10,583;
   Point, FL            Partners               6/30/2012       Livonia, MI                    Commons          2/28/2011
   35 Beck Lane Ste                            $10,400;        266 E Main St                                     $4,568;
   C Lafayette, IN      Beck BBV Seven         3/31/2014       Clinton, CT                        NPNC         3/31/2011

THE WATCH LIST NEWSLETTER                                                                                                  11
                                             Monthly                                                  Monthly
                                             Rent;                                                    Rent;
                                             Current                                                  Current
   Store Address        Lessor               Exp. Date    Store Address        Lessor                 Exp. Date
                                                          6600 Old Winter           Oakhill Village
   3812 E Belknap St                         $10,950;     Garden Rd             Associates Limited         $8,500;
   Fort Worth, TX       Belknap-Beach,       6/30/2012    Orlando, FL                 Partnership        7/31/2011
                                                          4060 Pendleton
   750 Young St                              $8,987;      Way Indianapolis,                               $6,694;
   Tonawanda, NY        BG GMT III           9/30/2010    IN                   Pendleton/ Parkside     10/31/2010
   1415 Opelika Rd      Blockbuster          $8,027;      217 W Lancaster                                $16,100;
   Auburn, AL           Investors            9/30/2012    Ave Ardmore, PA               Pennsville      6/30/2011
   15437 W National                                       16033 Tampa
   Ave New Berlin,                           $9,113;      Palms Blvd              PERA City Plaza         $11,082;
   WI                   Bradley Operating    1/31/2012    Tampa, FL                       Tampa          3/31/2011
                                                          25252 Jeronimo
   5079 Broadway        BRO-PEN              $7,699;      Rd Ste B3 Lake                                  $21,390;
   Ste 100 Depew, NY    Associates           9/30/2015    Forest, CA               Perricone, Sam        1/31/2011
                                                          4798 Caughlin
   870 W Williams                            $17,269;     Pkwy Ste B Reno,          PK III Caughlin       $10,343;
   Ave Fallon, NV       C & M Sallon         12/31/2011   NV                                 Ranch       4/30/2012
   2003 N Atlantic                                        2429 N Atlantic
   Ave #A Cocoa         C.B. Group Of        $4,854;      Ave #42 Daytona                                 $11,333;
   Beach, FL            Brevard              12/31/2010   Beach, FL                  PMAT Bellair        5/31/2011
   31834 N Castaic                           $6,887;      19767 Rinaldi St                                $13,817;
   Rd Castaic, CA       Castaic Village      2/28/2011    Northridge, CA                     PRTC        6/30/2011
   1074 Kings                                             4017 W
   Highway New                               $10,485;     Commercial Blvd      Ramco Gershenson           $6,007;
   Bedford, MA          Cedar-Kings          7/31/2011    Tamarac, FL                 Properties       12/31/2010
   2300 Center Point
   Pkwy Center                               $7,653;      4054 E 22nd St                                   $5,124;
   Point, AL            Center Point LP      1/31/2014    Tucson, AZ             Randolph Plaza II       8/31/2013
   584 Centerville Rd   Centerville          $6,628;      1501 London Blvd       RCC Olde Towne            $6,855;
   Lancaster, PA        Development Co.      10/31/2011   Portsmouth, VA             Marketplace         8/31/2011
   10954 N Pt
   Washington Rd        Centro Bradley SPE   $11,053;     7150 Leetsdale Dr                               $11,275;
   Mequon, WI           1                    1/30/2012    Denver, CO             Regency Centers         4/30/2012
                                                          8465 Holcomb
   4153 State Route     Cleves Land          $9,217;      Bridge Rd #1000                                $14,389;
   128 Cleves, OH       Holdings             11/30/2012   Johns Creek, GA       Regency Centers        11/30/2011
   4595 Broadmoor       CORE Realty                       7111 E Tanque          Reseda Colonia
   Ave #170             Holdings             $2,359;      Verde Rd Tucson,       Lincoln Colonia,         $15,605;
   Kentwood, MI         Management           8/31/2011    AZ                               Arneill       1/31/2011
                                                                               Ronald Benderson,
                                                                                Randall Bendrson
   1639 P Street NW                          $8,188;      2352 Delaware             and David H.           $8,924;
   Washington, DC       CVS of DC and VA     11/30/2010   Ave Buffalo, NY                Baldauf,        1/31/2012
   1676 General
   Booth Blvd           Dam Neck             $9,483;      1358 Poplar Street                              $6,496;
   Virginia Beach, VA   Properties           6/30/2012    Pittsburgh, PA                 S Square      12/31/2011
   3836 Union                                             2115 E
   Deposit Rd           Dauphin Plaza        $9,965;      Hillsborough Ave      S-B Properties No.        $9,723;
   Harrisburg, PA       Associates           8/31/2012    Tampa, FL                              7     12/31/2011
   2222 Francisco Dr                                      1811 S Crain
   Ste 240 El Dorado                         $5,573;      Highway Glen                 Southgate              $0;
   Hills, CA            DC Management        10/31/2010   Burnie, MD                  Marketplace       3/31/2014
   1095 Kennedy Rd      DDR Southeast        $8,708;      919 E Fort Ave               Southside          $8,186;
   Windsor, CT          Windsor              12/31/2010   Baltimore, MD               Marketplace      10/31/2010
   629 Highway 28
   Bypass Ste H1        DDRTC Anderson       $4,963;      909 Randolph St      Southstar Holdings-         $3,564;
   Anderson, SC         Central              9/30/2010    Thomasville, NC             Thomasville        1/31/2012

THE WATCH LIST NEWSLETTER                                                                                            12
                                               Monthly                                                    Monthly
                                               Rent;                                                      Rent;
                                               Current                                                    Current
   Store Address        Lessor                 Exp. Date    Store Address         Lessor                  Exp. Date
                                                            35125 US Highway
   21 Jones Rd Ste 3    Demoulas Super         $5,676;      19 Palm Harbor,                                    $8,920;
   Milford, NH          Markets                10/31/2010   FL                     Springhill Partners       2/28/2011
   25 Storey Ave        Demoulas Super         $7,682;      1340 Pennsylvania            Starrett City        $15,296;
   Newburyport, MA      Markets (DSM)          2/28/2011    Ave Brooklyn, NY              Associates         7/31/2011
   3035 W New                                                                            Stephen R.
   Haven Ave West       DMB-Newey Joint        $12,333;     1224 N Main St          Lewinstein d/b/a          $8,316;
   Melbourne, FL        Venture                1/31/2012    Providence, RI         North Main Realty        12/4/2012
   5221 Mission Oaks    Donahue Schriber       $8,433;      22330 Sterling             Sterling Plaza        $11,286;
   Blvd Camarillo, CA   Realty Group           12/31/2010   Blvd Sterling, VA       Shopping Center        11/30/2011
   812 E Pittsburgh     East PGH Street        $6,183;      8917 N Indian Trail                               $8,870;
   St Greensburg, PA    Development Co.        12/31/2010   Rd Spokane, WA           Sundance Plaza         1/31/2013
   4279 S Highway
   27, Suite 1,         Eden Kings Ridge       $13,271;     3934 N Druid Hills                                $7,170;
   Clermont, FL         Village                10/31/2012   Rd Decatur, GA        T. C. Holmes & Son       10/31/2011
                                                            6320 US 287 Hwy        Tabani Kilgore and
   184 W 231st St                              $13,548;     Ste 112 Arlington,           Tabani Apple        $10,853;
   Bronx, NY            Elini Properties       11/30/2010   TX                            Woodhaven        10/31/2013
                                                            1135 Oakridge
   906 Erskine Plaza    Erskine Plaza          $10,098;     Turnpike                                          $8,232;
   South Bend, IN       Associates             9/30/2010    Oakridge, TN          Tenneva Properties       10/23/2011
   760 Academy Dr
   Ste 110 Bessemer,    Forest View            $10,341;     625 Montana                The Cherouge          $31,298;
   AL                   Apartments             12/31/2012   Santa Monica, CA             Corporation       10/31/2012
   1640 Schlosser St                           $14,928;     5123 Moffett Rd           The Commerce            $5,324;
   Fort Lee, NJ         Fort Lee Plaza         11/30/2012   Mobile, AL                      Building        5/31/2011
   6869 Pearl Rd
   Middleburg                                  $8,514;      164 Summer St           The Stop & Shop            $9,958;
   Heights, OH          Galileo Southland      3/31/2012    Kingston, MA                Supermarket          4/30/2011
                                                            190 Columbus
   365 Hamilton St      Geneva Shopping        $4,160;      Blvd New Britain,       The Stop & Shop          $10,924;
   Geneva, NY           Center                 9/30/2010    CT                          Supermarket        11/30/2010
   15250 N. Oracle      Golder Ranch           $10,046;     151 VFW Pkwy            The Stop & Shop          $11,944;
   Road Tucson, AZ      Retail Center          10/31/2011   Revere, MA                  Supermarket         7/31/2011
   400 Huntington
   Pike Rockledge,      Good Rock Realty       $6,730;      4536 Buena Vista        Thompson Place            $7,515;
   PA                   Partners               10/31/2010   Rd Columbus, GA             Associates         12/31/2012
   1023 First Ave       Greenwich              $19,167;     9648 Transit Rd                                   $9,636;
   New York, NY         Associates             4/29/2012    Amherst, NY                      Trancom       12/31/2010
   2929 K St Ste 100    GREIT-Sutter           $20,616;     5200 Route 42 Ste              Turnersville      $10,519;
   Sacramento, CA       Square                 2/29/2012    15 Turnersville, NJ               Partners      1/31/2012
   738 Islington St
   Ste G Portsmouth,                           $7,050;      476 Union Blvd                                   $12,656;
   NH                   Griffin Family Corp.   9/30/2010    West Islip, NY         Union Blvd Realty       12/31/2011
   6001 W Parmer                               $12,575;     7050 N Shiloh Rd      US Regency Retail           $9,441;
   Lane Austin, TX      HEB Grocery Co.        9/30/2012    Garland, TX                             I      10/31/2012
                                                            7001 Manchester
   951 Male Drive                              $7,462;      Blvd Ste F                                       $18,349;
   Wind Gap, PA         Henry's Joy            11/30/2010   Alexandria, VA                     USRP I       9/30/2010
   3 Traders Way        Highlander Plaza       $11,947;     2395 York Rd (Rte                                 $8,860;
   Salem, MA            Realty Trust           9/30/2012    263) Jamison, PA                  USRP II      11/30/2011
                                                            318 Village Center
   2320 Hanover Pike                           $7,172;      Dr Logan                                         $12,347;
   Hampstead, MD        HM Mall Associates     11/30/2011   Township, NJ               Village Block        9/30/2010
   1309 NW 23rd Ave                            $7,013;      8416 N Armenia           Waters-Armenia           $9,399;
   Portland, OR         HMP                    4/30/2011    Ave Tampa, FL                      Plaza       12/31/2011

THE WATCH LIST NEWSLETTER                                                                                                13
                                             Monthly                                                        Monthly
                                             Rent;                                                          Rent;
                                             Current                                                        Current
   Store Address        Lessor               Exp. Date         Store Address         Lessor                 Exp. Date
                                                               7453 Watt Ave
   8970 Knott Ave       Imedra 8888 Family   $11,624;          #111 North                      Watt North       $13,525;
   Buena Park, CA       Limited Partners     1/31/2011         Highlands, CA                   Highlands       2/28/2011
   3737 E
   Washington St        Indy Management      $5,361;           5839 Weber Rd            Weber Shopping          $12,078;
   Indianapolis, IN     Group                9/30/2010         Corpus Christi, TX               Center         4/12/2012
   1279 Rickert Dr      Inland Hartford      $12,924;          13085 W McDowell                                  $8,907;
   Naperville, IL       Plaza                2/28/2014         Rd Avondale, AZ        Weingarten Nostat        8/31/2013
   4100 S Lake          Inland Western
   Forest Dr #330       McKinney Lake        $9,500;           3434 W Greenway                                   $9,592;
   McKinney, TX         Forest               10/31/2011        Rd Phoenix, AZ         Weingarten Nostat        1/31/2011
   115 Fairview Rd                                             8156 S Tryon St
   Ste 100              IRT Property         $10,347;          Ste A Charlotte,       Weingarten Realty        $10,722;
   Ellenwood, GA        Company              9/30/2011         NC                             Investors      11/30/2011
   3975 Alton Pkwy      Irvine Retail        $27,535;          5192 Avenue H          Weingarten Realty         $8,162;
   Irvine, CA           Properties Co.       11/30/2010        Rosenberg, TX                  Investors      11/30/2010
   340 Rhode Island                          $10,289;          174 Littleton Rd        Westford Valley         $12,101;
   Ave Fall River, MA   Island Associates    12/31/2011        Westford, MA                Marketplace        8/31/2011
   3001 Stanford
   Ranch Rd Rocklin,                         $14,340;          15101 Lorain Rd                                   $5,232;
   CA                   JJD-HOV Rocklin      8/31/2012         Cleveland, OH              Wm. E. Asplin        9/30/2010
   314 S Henderson                                             10016 W Oakland
   Rd King of           K-1 Henderson        $10,014;          Park Blvd Sunrise,          Wood Florida          $9,358;
   Prussia, PA          Square Associates    8/31/2011         FL                           Investments        9/30/2010
                                                               1365 Worthington
   104 Main St                               $15,825;          Centre Dr                                         $8,650;
   Gaithersburg, MD     Kentlands Retail     8/31/2012         Worthington, OH         Worthington Park        6/30/2011
                                                               3999 Austell Rd
   4650 W Diversey      Klairmont            $11,984;          Ste 901 Austell,         WRI Brookwood          $13,353;
   Ave Chicago, IL      Enterprises          1/31/2011         GA                              Square        11/30/2011
                                                               267 Grande
   2055 NE Burnside                          $9,250;           Heights Dr Cary,                                 $7,794;
   Rd Gresham, OR       KRC Oregon Trail     3/31/2012         NC                             WRI/Raleigh    10/31/2010
   22621 Lakeforest                                            7243 N Federal
   Drive D1             Lake Forest Town     $18,881;          Blvd #1200                    WRI-Miller          $9,741;
   Lakeforest, CA       Center Associates    10/31/2010        Westminster, CO             Westminster I       2/28/2011
   1208 Garth Brooks                         $7,650;           1290 E Highway                                    $9,508;
   Blvd Yukon, OK       Larry Rhodes         9/30/2012         193 Layton, UT           Wyndom Square          6/30/2012
   340 Pompton Ave      Leonard Diener       $15,580;
   Verona, NJ           Investment Co.       1/31/2012

                   Rite Aid Looking for Savings Among its Brick & Mortar
  Faced with mounting losses, slumping sales and declining stock price, Rite Aid Corp. continues to cut its brick
  and mortar expenses and revamp its store line up. The drug store company discussed some of its initiatives at its
  quarterly earnings conference call this past week.

  For starters, the company with 4,700 stores across the country said it was continuing to rationalize its distribution
  center network. That included the announcement that it was closing its distribution center at 5865 Success Drive
  in Rome, NY. The leased and owned facilities will be closing by the end of the year. 388 people work at the main
  building and satellite facilities there.

  The size, age, condition and infrastructure of the 38-year-old Rome facility were a key factor in its decision. Rite
  Aid leases two of the buildings it occupies there and owns the third. The company estimated that the owned
  facility "is probably worth $4 million to $5 million" and has put it up for sale.

THE WATCH LIST NEWSLETTER                                                                                                  14
  The company added that is continuing to evaluate its distribution network for possible additional savings. Last
  year, Rite Aid closed distribution centers near Atlanta, GA, and Bohemia, NY.

  Rite Aid is also evaluating its options for its under-performing stores. In this case, though, the company is "kind
  of marching down a couple of different roads," John Standley, president and CEO of Rite Aid said.

  Closures are one road. The company has "probably a couple of 100 stores" that are not profitable and that it has
  decided to close about 40 of them this year. That would bring total store closures to about 80 for the year.
  However, Rite Aid is also looking at revamping some of its lower volume stores to "value stores." These stores
  offer about 9,000 fewer products than its traditional drug stores. The products are also offered at lower prices.

  Standley said that these stores are showing strong front-end sales growth.

  "Our goal is to improve the productivity in these stores by combining the new merchandizing program with a
  modified distribution model, and if successful, evaluate whether the model can be expanded to other low-
  volumes stores in the chain," he said.

  A third initiative that Rite Aid is working on is testing combo stores. The first such arrangement is a 10 -store deal
  with Sav-A-Lot in Greenville, SC. There it has a licensing agreement with Sav-A-Lot to add its limited assortment
  food-store concept to the front of those 10 existing Ride Aid stores. The front-end will carry about 1,300 Sav-A-
  Lot products, including prepackaged meat, produce and dairy.

  "We chose these stores in Greenville, because they have solid pharmacy business, but we need stronger sales
  on the front-end. This new co-branded concept presents a unique opportunity to increase front-end sales in this
  market," Standley said.

THE WATCH LIST NEWSLETTER                                                                                                  15
                  Ashley Stewart Parent Files Chapter 11, Seeks Buyer
  Urban Brands Inc., the owner of Ashley Stewart clothing stores in the U.S., sought bankruptcy protection in
  Delaware. The New York-based retailer filed for Chapter 11 protection citing debt of $100 million to $500 million
  and assets of $10 million to $50 million.

  Urban Brands is a leading specialty retailer of apparel for plus sized urban women under the brand name of
  Ashley Stewart. As of its Chapter 11 petition date, Urban Brands operated 210 stores in 26 states with
  approximately 2,100 employees, the majority of which are minority women. Until 2009, it also operated stores
  under the brand name of Marianne.

  The Ashley Stewart concept was founded in 1991 and has grown to become a nationally-recognized brand. It
  focuses primarily on the underserved urban market, particularly the African American and Hispanic consumer.

  According to its bankruptcy court filings, although Urban Brands significantly reduced its net losses from
  approximately $44.3 million in 2008 to $28.6 million in 2009, the business has continued to operate at a loss this
  year. Additionally, from fiscal year 2008 to fiscal year 2009, net sales decreased from $179.6 million to $174.6

  In April 2010, Urban Brands engaged Oppenheimer & Co. Inc. to assist in raising additional financing. During the
  course of the marketing effort, Oppenheimer contacted approximately 40 potential investors, but was unable to
  reach a definitive agreement with any. Urban Brands then determined that it was in its best to pursue a sale of all
  or substantially all of its assets.

  This month, Urban Brands entered into a "stalking horse asset purchase agreement" with an affiliate of Gordon
  Brothers Group. That deal provides for a going concern sale of substantially all of the Urban Brands' assets for
  $15 million.

  While it is anticipated that a significant number of the Ashley Stewart's store leases will be assumed and
  assigned to the stalking horse bidder at closing, the deal gives the buyer 120 days to assume or reject any
  current leases.

              JPMorgan Packages Retail, Office Loans into a New CMBS
  J.P. Morgan Chase Commercial Mortgage Securities Corp. is prepared to launch its second new CMBS of the

  The primary assets of J.P. Morgan Chase Commercial Mortgage Securities Trust 2010-C2 are 30 loans secured
  by 47 commercial properties having an aggregate principal balance of approximately $1.101 billion. The loans
  were originated by JP Morgan Chase Bank.

  As with most new CMBS deals coming to market, the deal is loaded primarily with retail properties backed by a
  major sponsor. Simon Property Group, via joint ventures, is among the sponsors of the largest and fourth-largest
  loans, which account for 23% of the pool. other sponsors, include Taubman Realty Group, Farallon Capital,
  Institutional Mall Investors and CTC Realty Associates.

  Retail properties represent the highest concentration of the pool at 67%. Office properties represent 16.5%. The
  retail concentration is composed of large regional malls, power centers, and local shopping centers.

  According to Fitch Ratings Service, this portfolio make up reflects weak pool diversity by property type. Retail
  has an average likelihood of default in the Fitch U.S. CMBS multiborrower rating model, and office properties
  have an average likelihood of default as well. In addition, high concentrations by property type can lead to
  increased volatility due to correlations.

  The largest loan in the pool is Arizona Mills, a 1.2 million-square-foot mall in Tempe, AZ. The $174.51 million
  loan, which is being used to refinance existing debt of $131.8 million, is sponsored by a joint venture between

THE WATCH LIST NEWSLETTER                                                                                               16
  Simon Property Group, Farallon Capital Management and the Taubman Realty Group. The interest rate on the
  loan is 5.76% and the loan matures in July 2020.

  The property, which was built in 1997, is anchored by J.C. Penney Outlet, Burlington Coat Factory, and Sports
  Authority. J.C. Penney Outlet leases 104,697 square feet, expiring in November 2012; Harkins Theaters 93,320
  square feet, expiring in November 2012)\; Burlington Coat Factory 80,426 square feet, expiring in November
  2012, and Sports Authority 65,013 square feet, expiring in January 2013.

  Other major tenants include: Gameworks leasing 3% of net rentable area, expiring in November 2017; Off 5th
  Saks Fifth Ave, 3% of NRA, expiring in November 2012; and Marshalls 3% of NRA, expiring in January 2013.

  The Master Servicer and Special Servicer will be Midland Loan Services, Inc.

                                Benihana Chain Goes Up For Sale
  Benihana Inc., the Miami-based operator of the nation's largest chain of Japanese theme and sushi restaurants,
  hired Jefferies & Company Inc. as its exclusive financial advisor in pursuing a sale of the company.

  "In July, as part of our board's commitment to exploring all avenues for maximizing shareholder value, we
  announced that we would be conducting a formal review of strategic alternatives including a possible sale of the
  company," said Richard Stockinger, president and CEO of Benihana. "At the same time, we remain focused on
  our operating strategies for strengthening the company."

THE WATCH LIST NEWSLETTER                                                                                            17
  Benihana operates 97 restaurants nationwide, including 63 Benihana Teppanyaki restaurants, nine Haru sushi
  restaurants, and 25 RA Sushi Bar restaurants. In addition, 20 franchised Benihana Teppanyaki restaurants are
  operating in the U.S., Latin America and the Caribbean.

  More Banks Under the Gun To Raise Money, Be Sold, or Face a Worse Fate
  Federal regulators have issued prompt corrective actions against five banks across the country putting them on
  the clock to raise money or face closure.

  Prompt corrective actions (PCAs) give banks a specified number of days to raise money immediately or enter
  into a merger or sale. While it is not stated in the PCA, the underlying understanding is if the bank does not
  comply, then federal regulators could close or sale them.

  Peoples State Bank in Hamtramck, MI, was deemed to be significantly undercapitalized after failing to submit
  acceptable capital restoration plans and was issued a PCA requiring immediate raising of capital or executing a
  sale or merger.

  As of June 30, 2010, Peoples State Bank reported total assets of $446 million and a year-to-date loss of
  $777,000 million. The bank had total distressed commercial real estate assets (including construction and
  development, nonresidential and multifamily loans 90-plus days past due or restructured and foreclosed
  properties) of $73 million or 16% of assets.

  LandMark Bank of Florida in Sarasota, FL, was deemed to have failed to comply with a federally approved
  capital restoration plan and was given a 90-day deadline to comply with a PCA.

  As of June 30, LandMark Bank of Florida reported total assets of $320 million and a year-to-date loss of
  $466,000. The bank had total distressed CRE assets of $20 million or 6% of assets.

  Western Commercial Bank in Woodland Hills, CA, was deemed to have inadequate capital levels and be in
  deteriorating condition and that management has been unable to return it to a safe and sound condition. The
  bank was given 90 days to raise capital, be merged or sold.

  As of June 30, Western Commercial Bank reported total assets of $110 million and a year-to-date loss of $3.7
  million. The bank had total distressed CRE assets of $11.5 million or 10% of assets.

  American Patriot Bank in Greeneville, TN, was deemed to be significantly undercapitalized and was given until
  Aug. 31 to submit a capital restoration plan. If it did not meet that deadline, then the PCA requiring a merger or
  sale would kick in. It could not be determined whether the bank met the Aug. 31 deadline.

  As of June 30, American Patriot Bank reported total assets of $108 million and a year-to-date loss of $1.3 million.
  The bank had total distressed CRE assets of $11 million or 10% of assets.

  Idaho First Bank in McCall, ID, was deemed to have inadequate capital levels and be in deteriorating condition
  and that management has been unable to return it to a safe and sound condition. The bank was given 30 days to
  raise capital, be merged or sold.

  As of June 30, Idaho First Bank reported total assets of $82 million and a year-to-date loss of $1.5 million. The
  bank had total distressed CRE assets of $3.7 million or 5% of assets.

      Syringa Bank in Boise Required To Raise Money, Jettison Bad Assets
  Syringa Bank in Boise, ID, entered into an agreement with the FDIC and Idaho Department of Finance to
  improve its financial strength by raising additional capital and further reducing problem loans.

  "The current economic environment has impacted Syringa Bank's level of provisions for non-performing loans
  and has resulted in sharp declines in the value of underlying commercial and residential real estate collateral,"

THE WATCH LIST NEWSLETTER                                                                                               18
  said Scott Gibson, president and CEO of Syringa. "As the economy has continued to struggle to recover, Syringa
  Bancorp and Syringa Bank have done everything possible to reserve for potential losses by writing off non -
  performing loans. While such actions have negatively impacted capital, these actions have been critically
  important to Syringa Bank's conservative outlook and establishment of a stronger bank for the future. The
  foregoing actions, in conjunction with raising additional capital, will poise Syringa Bank to take advantage of
  various opportunities as the economy strengthens and returns."

  As of June 30, Syringa Bank reported total assets of $235 million and a year-to-date loss of $1 million. The bank
  had total distressed CRE assets of $14.6 million or 6% of assets.

                Two More Banks in Florida, Washington Closed and Sold
  First Southern Bank in Boca Raton, FL, acquired all of the assets and assumed substantially all of the deposits
  of Haven Trust Bank Florida in Ponte Vedra Beach, FL, from the Federal Deposit Insurance Corp. (FDIC). Haven
  Trust Bank Florida was closed by the Florida Office of Financial Regulation, which appointed the FDIC as

  The deal is First Southern Bank's first acquisition since its parent company raised $400 million earlier this year to
  grow the company in Florida and elsewhere through strategic merger and acquisition opportunities.

  Haven Trust Bank Florida had $148.6 million in total assets and $133.6 million in total deposits as of June 30,
  2010. The bank had two locations – one in Ponte Vedra Beach and one in St. Augustine. It had lost $3.2 million
  through the first two quarters of this year. It reported having $41 million in total distressed CRE assets or 28% of

THE WATCH LIST NEWSLETTER                                                                                                 19
  The FDIC and First Southern Bank entered into a loss-share transaction on $127.3 million of Haven Trust Bank
  Florida's assets. First Southern Bank will share in the losses on the asset pools covered under the loss-share

  The FDIC estimated that the cost to its Deposit Insurance Fund (DIF) will be $31.9 million.

  Separately, The FDIC entered into a purchase and assumption agreement with Whidbey Island Bank in
  Coupeville, WA, to assume all of the deposits of North County Bank in Arlington, WA. The bank was closed by
  the Washington Department of Financial Institutions, which appointed the FDIC as receiver.

  As of June 30, North County Bank had approximately $288.8 million in total assets and $276.1 million in total
  deposits and four branches. It had lost $2.9 million through the first two quarters of this year. It reported having
  $48 million in total distressed CRE assets or 17% of assets.

  Whidbey Island Bank will pay the FDIC a premium of 2% to assume all of the deposits of North County Bank. In
  addition to assuming all of the deposits of the failed bank, Whidbey Island Bank agreed to purchase essentially
  all of the assets.

  The FDIC and Whidbey Island Bank entered into a loss-share transaction on $221.9 million of North County
  Bank's assets. Whidbey Island Bank will share in the losses on the asset pools covered under the loss-share

  The FDIC estimated that the cost to its DIF will be $72.8 million.

THE WATCH LIST NEWSLETTER                                                                                                20
    Starwood, Kaufman Jacobs and JPMorgan Reorganize Rubicon US REIT
  Starwood Capital Group, Kaufman Jacobs LLC and JPMorgan Chase & Co. successfully completed the
  reorganization of Rubicon US REIT Inc., a Chicago-based real-estate investment trust (REIT) consisting mainly
  of properties leased to the U.S. General Services Administration (GSA). Rubicon US REIT had been under
  Chapter 11 bankruptcy protection since January 2010.

  Per terms of the reorganization, approximately $80 million in bonds were exchanged for 100% of the common
  stock of Rubicon US REIT and the issuance of new corporate debt of $50 million, which ensures adequate
  solvency for Rubicon US REIT. Class A preferred stockholders will retain their equity through the bondholders'
  plan. Unsecured creditors will also be paid in full, totaling approximately $1 million.

  Affiliates of Starwood Capital., Kaufman Jacobs, and JPMorgan together own 100% of the corporate bonds of
  Rubicon US REIT. Kaufman Jacobs is taking over day-to-day management of Rubicon US REIT.

  "Through active management of the portfolio and the lease renewal process, we expect to increase the
  underlying value and NOI (net operating income) of Rubicon's properties," said Christopher Graham, managing
  director of Starwood Capital Group, the Greenwich, CT-based global real-estate investment firm. "We plan a
  multi-year, targeted disposition strategy following our value-accretive efforts on behalf of our affiliated funds."

  "We are pleased to have saved Rubicon from a forced liquidation and kept the REIT intact, preserving
  stakeholder value and allowing us to undertake a variety of value-creating activities," said Jeremy Kaufman,
  managing partner of Kaufman Jacobs, a Chicago-based investor, developer and manager of real estate that
  specializes in government-tenanted property and complex real-estate transactions. "This is an excellent portfolio
  with a rock-solid base of government tenancy. The REIT should enjoy high renewal rates as its core holdings are
  build-to-suit facilities leased to the United States government."

  Rubicon US REIT's primary holding is the GSA II Portfolio, totaling more than 1.8 million square feet in nine
  states. Leases administered by the GSA generate approximately 72% of GSA II's rental income, with state and
  municipal leases accounting for the remainder. Tenants include the FBI, U.S. Secret Service, and agencies
  within the Department of Homeland Security, all of which have expanded in personnel and mission scope in
  recent years.

  Rubicon US REIT also has investments in Overtown Transit Village Phase II, a development project in Miami,
  FL, and three joint ventures, aggregating almost 1.5 million additional square feet. The total value of Rubicon US
  REIT's assets is estimated at approximately $550 million.

                               Real Money: Note Purchases & Sales
  Mariner Real Estate Management LLC in Leawood, KS, purchased a 40% interest in a portfolio consisting of
  $760 million in real estate loans, including 1,062 residential and commercial acquisition and development loans
  of which more than 80% are delinquent. The loans come from 20 banks and the backing collateral is in
  approximately 24 states. All of the loans were from banks that failed during the past 25 months. MREM paid $52
  million (net of working capital) in a limited liability company created by the FDIC to hold all of the loans and REO
  assets. The price paid is about 30.93% of the unpaid principal balance. The FDIC is retaining the remaining 60%
  equity interest. The FDIC provided the newly formed entity 1:1 leverage, through the issuance of approximately
  $105 million in nonrecourse, 0% interest financing and a $25 million advance facility for working capital needs.
  MREM funded the money needed for this project though two of its funds, Mariner Real Estate Partners LLC
  (MREP) and Mariner Real Estate Partners II LLC (MREP2).

  Waterton Residential in Chicago acquired $109.5 million of debt secured by four prime multifamily properties in
  North Carolina and California. The acquisitions include mortgages secured by the Exchange at Brier Creek, a
  274-unit property in Raleigh, NC; Skyline Terrace Apartments, a 139-unit property in Burlingame, CA;
  Waterstone Corona Pointe Apartments, a 628-unit property in Corona, CA; and Copper Canyon Apartments, a
  296-unit property in Riverside, CA. So far this year, Waterton has acquired $179.2 million in distressed debt
  secured by multifamily assets and expects to acquire another $150 million in debt and/or multifamily properties

THE WATCH LIST NEWSLETTER                                                                                                21
  by the end of 2010. All four
  properties were acquired as
  part of Waterton Residential
  Property Fund X, a $222
  million          discretionary
  multifamily investment fund.

  Bank           of         the
  Commonwealth in Norfolk,
  VA, sold Monterey I Holdings
  LLC           non-performing
  commercial and construction
  and development loans,
  without recourse, for $19.2
  million, with no loss to the
  bank. On the same day, the
  bank purchased a pool of
  performing         residential
  mortgage home equity loans,
  without recourse, for the
  estimated fair value of $71.3
  million. The pool of loans
  purchased has a book value
  of $73.3 million. As part of
  this loan purchase, Monterey
  also paid the bank $2.9
  million, representing 4% of
  the loan pool, as a non-
  refundable reserve for any
  future losses on the pool of

  KBS Strategic Opportunity
  REIT Inc. purchased three
  separate non-performing first
  mortgage loans on the
  Roseville Commerce Center
  from Heritage Bank of
  Commerce. The first loan
  with an outstanding unpaid
  principal balance of $8.5
  million is secured by three
  industrial    flex   buildings
  containing 68,431 rentable square feet and was acquired for $4 million plus closing costs. The second loan with
  an outstanding unpaid principal balance of $4.7 million is secured by two industrial flex buildings containing
  44,910 rentable square feet and was acquired for $1.7 million plus closing costs. The third loan with an
  outstanding unpaid principal balance of $1.5 million is secured by four parcels of partially improved land
  encompassing 6 acres and was acquired for $200,000 million plus closing costs. The borrowers under each of
  the three loans in the Roseville Commerce Center Mortgage Portfolio are affiliates of Mac Millan Partners Inc.
  The collateral securing the loans is at 10556-10612 Industrial Ave. in Roseville, CA. The buildings are
  collectively 38% leased. Each of the loans bears interest at 5.5% and matures in September 2011.

  KBS Strategic Opportunity REIT also purchased, at a discount, a non-performing first mortgage loan for $2.8
  million plus closing costs from Wells Fargo Bank, as trustee for the registered holders of J.P. Morgan Chase
  Commercial Mortgage Security Corp. Commercial Mortgage Pass-Through Certificates Series 2001-C1. The
  borrower under the Academy Point Atrium I First Mortgage is Peridot Properties I LLC. The property securing the
  loan is Academy Point Atrium I, a two-story office building constructed in 1981. The office building contains
  92,099 rentable square feet and is part of a two building campus on 7.22 acres at 1250 Academy Park Loop in

THE WATCH LIST NEWSLETTER                                                                                           22
  Colorado Springs, CO. The building has been vacant since December 2009. The maturity date of the Academy
  Point Atrium I first mortgage is Nov. 1, 2011 and bears interest at a fixed rate of 7.125% and monthly payments
  include interest and principal with principal calculated using an amortization of 30 years.

  Winthrop Realty Trust acquired for $250,000 a performing mezzanine loan which had an original principal
  balance of $1.5 million. The note is indirectly secured by a 129,660-square-foot warehouse building in Shirley,
  NY, net leased to Rockwell Automation. This loan bears interest at 12%, requires monthly payments of interest
  and principal in the amount of $15,429.19 and is scheduled to mature on May 1, 2016. The loan is junior in
  payment priority to a first mortgage loan with a current principal balance of $17 million, which bears interest at
  6.138% per annum and also matures on May 1, 2016.

  Winthrop Realty Trust also acquired for $550,000 a non-performing $3.5 million mezzanine loan, which is
  indirectly secured by a 180-unit apartment building in Meriden, CT. The loan, which bears interest at 12% per
  annum, is currently in default. The loan is junior in payment priority to a first mortgage loan, which is not in
  default and which bears interest at 5.83% and has a current principal balance of approximately $23.9 million.

               Under Investigation, Amedisys Consolidating Operations
  Amedisys Inc., a Baton Rouge, LA-based home health and hospice company, will be closing 13 agencies (nine
  home health and four hospice) and consolidating another 26 locations (23 home health and three hospice) into
  existing locations. The company currently operates 601 locations in 45 states.

  The company also plans to reduce its start-up program, discontinuing the start-up process currently in progress
  associated with 28 prospective home health agencies and reducing its planned pipeline. As a result, the
  company expects to open five to 10 home health start-ups in 2011, down from the total 40 start-ups expected to
  be opened in 2010.

  "The tremendous growth Amedisys has experienced over the last few years inevitably led to markets that could
  benefit from consolidation," said Michael Snow, COO of Amedisys.

  Not mentioned in the explanation of the consolidation is that Amedisys also announced this past week that it
  received a civil investigative demand issued by the U.S. Department of Justice pursuant to the federal False
  Claims Act. The demand requires the delivery of a wide range of documents and information to the U.S.
  Attorney’s Office for the Northern District of Alabama, relating to the company’s clinical and business operations,
  including reimbursement and billing claims submitted to Medicare for home health services, and related
  compliance activities. The demand generally covers the period from 2003 through the present. The company
  said intends to cooperate with the Department of Justice with respect to this investigation.

  As a result of its consolidation actions, the company expects to incur non-recurring charges in the range of $6
  million to $8 million in the third quarter and approximately $1 million in the fourth quarter of 2010. These charges
  include lease terminations of approximately $4 million to $5 million and other charges, including severance
  payments, of approximately $3 million to $4 million.

                                VeriSign Cancels 180,000-SF Lease
  VeriSign Inc., the major tenant of Lakeside at the Loudoun Tech the Lakeside complex at 21345-55 Ridgetop
  Circle in Dulles, VA, intends to exercise its first option to terminate its lease effective November 2012. VeriSign
  occupies 180,476 square feet in the three-building complex owned by Tishman Speyer Office Fund in Sydney,
  Australia. Upon termination of its lease at the Lakeside complex, VeriSign will be subject to a termination penalty
  of approximately $3 million. VeriSign Inc. had also leased all 221,326 square feet in Sallie Mae's former
  headquarters at 12061 Bluemont Way also in Reston. The company, which oversees much of the Internet
  domain registration and naming services and a growing business in managed security and authentication, is in
  the process of relocating its corporate headquarters from Mountain View, CA, to Reston.

THE WATCH LIST NEWSLETTER                                                                                                23
                                       Local Closures & Layoffs
                                                             Closure or    Owned or
   Company                 Address                           Layoff        Leased       # Impacted    Impact Date
   A&P                     1060 W. Main St., Branford, CT        Closure       Leased           156      11/1/2010
                           820 Washington St., Middletown,
   A&P Food Mart           CT                                    Closure      Leased            77       11/1/2010
   A&P Food Mart           90 Halls Road, Old Lyme, CT           Closure      Leased            88       11/1/2010
   A&P Food Mart           179 Stonington Road, Mystic, CT       Closure      Leased            95       11/1/2010
   Albertsons'             2401 Saviers Road, Oxnard, CA         Closure      Leased            86      10/15/2010
                           4644 E. Avenue South,
   Albertsons'             Palmdale, CA                          Closure      Leased            66      10/15/2010
   American Bottling Co.
   dba Seven-Up Bottling
   Co.                     425 Chestnut St., Vallejo, CA          Layoff      Owned             93      10/18/2010
   Angeles Welding &       9747 Norwalk Blvd., Santa Fe
   Mfg., Inc.              Springs, CA                           Closure      Leased            63      10/16/2010
   Asistencia Villa
   Rehabilitation & Care
   Center                  1875 Barton Road, Redlands, CA         Layoff     Unknown           119      10/30/2010
   BD Medical              4665 North Ave., Oceanside, CA        Closure      Leased            35       10/7/2010
   Benefit Cosmetics       725 85th Ave., Oakland, CA            Closure      Leased            52      10/15/2010
   Bob Baker
   Chevrolet/Subaru        1000 Arnele Ave., El Cajon, CA        Closure      Leased            80      10/31/2010
   Bristol-Myers Squibb
   Company R & D           6000 Thompson Road, East
   Facility                Syracuse, NY                          Closure     Unknown            48      12/31/2010
                           10020 Pacific Mesa Blvd., San
   Carefusion Resources    Diego, CA                              Layoff      Leased            77      10/15/2010
                           3750 Torrey View Court, San
   Carefusion Resources    Diego, CA                              Layoff      Owned             67      10/15/2010
                           9868 Scranton Road, San Diego,
   Carefusion Resources    CA                                     Layoff      Leased            25      10/15/2010
                           1100 Bird Center Drive, Palm
   Carefusion Resources    Springs, CA                            Layoff      Leased            16      10/15/2010
                           1660 Iowa Ave. Suite 100,
   Carefusion Resources    Riverside, CA                         Closure      Leased            14      10/14/2010
                            841 Chevron Way & 1450
   Chevron Products Co.    Marina Way, Richmond, CA               Layoff      Leased            21      10/26/2010
   Coldwell Banker         10450 San Jose Blvd.,
   Devonshire Realty       Jacksonville, FL                     unknown       Leased            41        9/3/2010
   Crothall Services       910 45th St., West Palm Beach,
   Group                   FL                                   unknown      Unknown            79      11/10/2010
                           4350 Executive Drive Suite 325,
   Cypress Bioscience      San Diego, CA                          Layoff      Leased           123       10/6/2010
   DC Entertainment - DC
   Comics                  1700 Broadway, New York, NY            Layoff      Leased            80      12/27/2010
   DMI Furniture           611 E. 8th St., Huntingburg, IN       Closure      Owned             62      11/19/2010
   Duro Bag
   Manufacturing Co.       486 Baer Drive, Hudson, WI            Closure      Owned             63      10/31/2010
                           2500 Grant Road, Mountain
   El Camino Hospital      View, CA                               Layoff      Owned            141      10/13/2010
   El Camino Hospital      815 Pollard Road, Los Gatos, CA        Layoff      Owned             40      10/13/2010
   Fiskars Brands Inc.     780 Carolina St., Sauk City, WI       Closure      Leased            65      10/29/2010
   GE Healthcare Patient   8200 W. Tower Ave., Milwaukee,
   Care Solutions          WI                                     Layoff      Owned             29        1/1/2011
   Grocery Haulers, Inc.   777 Brush Ave., Bronx, NY             Closure      Leased            61      11/20/2010
   Hilton Reservation
   Worldwide               3570 W. Florida Ave., Hemet, CA       Closure      Leased           295       10/6/2010
   IAC International
   Automotive              750 S. Fillmore Road,
   Components              Greencastle, IN                        Layoff      Owned            202      11/10/2010

THE WATCH LIST NEWSLETTER                                                                                            24
                                                                    Closure or     Owned or
   Company                   Address                                Layoff         Leased       # Impacted       Impact Date
                             500 W Orchard Drive,
   Icicle Seafoods           Bellingham, WA                             Closure     Unknown                71      10/18/2010
                             10332 W. Silver Spring Drive,
   J C Penny Outlet Store    Milwaukee, WI                              Closure       Leased              120       12/4/2010
   Lifescan Inc.             1000 Gibraltar Drive, Milpitas, CA          Layoff       Owned                27      10/15/2010
   Media Lithographics       6080 & 6032 Triangle Drive, City
   Inc.                      of Commerce, CA                            Closure       Leased               67      10/30/2010
   Mission Linen Supply,     550 Florida St., San Francisco,
   Plant 500                 CA                                         Closure       Leased               70      10/29/2010
                             4837 Watt Ave., North Highlands,
   Ocwen Loan Servicing      CA                                         Closure       Leased              452      10/31/2010
   Precision Dynamics        13880 Del Sur St., San
   Corp.                     Fernando, CA                                Layoff       Owned                19      10/22/2010
   Ross Network, Inc.        227 E. 45th St., New York, NY              Closure       Leased              164      10/15/2010
                             555 The Shops At Mission Viejo,
   Saks Fifth Avenue         Mission Viejo, CA                          Closure       Leased               62      10/23/2010
   Stanadyne Corp.           92 Deerfield Road, Windsor, CT             Closure       Owned                13      12/10/2010
   Systron Donner            2700 Systron Drive, Concord, CA             Layoff       Owned                22      10/29/2010
                             1300 Wible Road, Bakersfield,
   Target                    CA                                         Closure       Owned               165       10/5/2010
                             14748 W. Colonial Drive, Winter             Partial
   The Men's Warehouse       Garden, FL                                 Closure       Leased               58      11/12/2010
                             3985 70th Ave. E, Suite B, Fife,
   The Men's Wearhouse       WA                                         Closure       Leased               42      11/12/2010
   Valley Fresh Inc.         680 D St., Turlock, CA                     Closure       Owned               101      10/29/2010
                             455, 487, 675, 501, & 685 E.
                             Middlefield Road, Mountain View,
   Verisign                  CA                                           Layoff      Owned                53      10/11/2010
                             260 Glenwood Circle, Monterey,
   VI                        CA                                           Layoff    Unknown                83      10/19/2010
                             772 N. Main St., West Hartford,
   Waldbaum's                CT                                         Closure       Leased              195       11/1/2010

                            Loan Maturities: Mezz Loans Due in October
  The following information for these lead listings was provided by Investcap Advisors LLC, an industry leader in providing
  surveillance data on loan and commercial real estate performance underlying the CMBS market.
                                                      Property        Pymt Status; Curr.       Maturity         CMBS;
   Property Name              Address                 Type            Mezz. Bal.               Date             Servicer
   The Arbors Of Pleasant     2020 Hinson Loop,                                                                 MEZZ 2004-C1;
   Valley Apartments          Little Rock, AR         Multifamily     Current; $298,490         12/11/2010      Wachovia Bank
                              3100 Sweetwater
   Lake Sweetwater            Road, Lawrenceville,                    90+ Days Delinquent;                      MEZZ 2005-C3;
   Apartments                 GA                      Multifamily     $1,364,148                10/11/2010      Wachovia Bank
                              7409 Little River
                              Turnpike, Annandale,                    Less Than 30 days                         MEZZ 2005-C3;
   Little River Retail        VA                      Retail          Delinquent; $263,545       11/1/2010      Wachovia Bank
                                                                      Less Than 30 days
                              2001 Bryan Street,                      Delinquent;                               MEZZ 2006-C4;
   Bryan Tower                Dallas, TX              Office          $3,247,882                10/11/2010      Wachovia Bank

THE WATCH LIST NEWSLETTER                                                                                                       25

                           Watch List: Mezz Loans in Special Servicing
  The following information for these lead listings was provided by Investcap Advisors LLC, an industry leader in providing
  surveillance data on loan and commercial real estate performance underlying the CMBS market.
                                                   Property     Curr. Mezz.
   Property Name           Address                 Type         Bal.            Comment
                           4201 Pleasant Lake
   Saratoga Springs        Village Lane, Duluth,
   Apartments              GA                      Multifamily      $591,701 Forbearance negotiations are ongoing.
   Briarwood               1300 East Fort Lowell                                Loan is crossed with The Orchard and
   Apartments              Road, Tucson, AZ        Multifamily      $500,000 Cottages of Fall Creek.
   Harbor Pointe           4101 Nasa Road, El
   Apartments              Lago, TX                Multifamily      $576,105 Forbearance negotiations are ongoing.
   Landing                 400 Timbercreek                                      Transferred to special servicer in February
   Apartments              Drive, Clute, TX        Multifamily      $566,114 2010.
                           6802 East 56th
   The Cottages of         Street, Indianapolis,                                Loan is crossed with Briarwood and The
   Fall Creek              IN                      Multifamily      $800,100 Orchard.
   Lakeridge               6155 Plumas Street,                                  Counsel will be proceeding with a
   Apartments              Reno, NV                Multifamily      $797,293 foreclosure.
   The Orchard             5350 Cider Mill Lane,                                Loan is crossed with Briarwood and Cottages
   Apartments              Indianapolis, IN        Multifamily      $700,000 of Fall Creek.
                           1101 Grebe Court,                                    Loan transferred to special servicing because
   Pheasant Run            Martinsburg, WV         Multifamily      $697,169 borrower sent written notice of inability to pay.
                           11800 Braesview                                      Legal counsel has been engaged for
   Lincoln Green           Drive, San Antonio,                                  purposes of making demand and imitating
   Apartments              TX                      Multifamily    $1,499,802 foreclosure.

THE WATCH LIST NEWSLETTER                                                                                                        26
                                               Property      Curr. Mezz.
   Property Name        Address                Type          Bal.          Comment
   Colony Oaks By       18100 Nassau Bay,
   The Bay              Nassau Bay, TX         Multifamily      $495,346
                                                                           REO, as of 7/2/10, the property was 76%
                                                                           occupied. The property will be managed to
   Bear Creek        601 Del Paso Street,                                  stabilization at 80% at which point it will be
   Apartments        Euless, TX             Multifamily       $404,041     marketed for sale.
   Timmaron          9850 Whitehurst                                       The property was marketed for sale. Offers
   Apartments        Drive, Dallas, TX      Multifamily       $385,000     have been received and are being evaluated.
   Carriage Hills    5601 Calmar Drive,
   Apartments        Montgomery, AL         Multifamily       $379,241
   Arizona Commons   2040 North First
   II                Avenue, Tucson, AZ     Multifamily       $348,649
   2030 East         2030 East Broadway,
   Broadway          Mesa, AZ               Multifamily       $121,367 Trustee sale has been scheduled.
   1298 - 1400       1298 - 1400
   Worthington       Worthington Woods,                                  Forbearance agreement in place on the A-
   Woods             Worthington, OH        Multifamily        $90,484 Note; negotiating B note.
                     1727 Main Street,
   1727 Main Street  Lamarque, TX           Multifamily        $93,825 REO
                     1700 Weatherly                                      Special servicer filed for foreclosure but
   Weatherly         Drive, Stone                                        borrower deposited funds to delay foreclosure
   Apartments        Mountain, GA           Multifamily       $333,793 and negotiate a discounted payoff.
   CMBS: MEZZ 2006-C4; Special Servicer: Wachovia Bank; all loans are 90+ days delinquent


THE WATCH LIST NEWSLETTER                                                                                                   27

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