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Financing | 3 Property Sales | 6 Builders & Buyers | 8 Views | 9 Buyside Funds | 12

The weekly issue from Real Estate Finance IntelligenceReal Estate Finance & Investment

Financing

Financing

Is Colliers Eyeing DTZ?Colliers International is said to be looking at acquiring DTZ, a property management company owned by Australia-based UGL Limited. A Colliers spokesman declined to comment while Ben Jarvis, a Sydney-based-spokesman for DTZ, dismissed the reports as mere rumors.

UGL acquired DTZ in 2011 for about $119 million when the property management company was struggling in the wake of the !nancial crisis. Since then, operations have improved and DTZ had annual revenues of about $2 billion at the end of 2012, according to published reports.

The news comes at a time when market players are (continued on page 16)

(continued on page 16)

Property Sales

(continued on page 16)

Moody’s Goes Off On S&P Again, Alleging Soft RatingFor the second time in six months, Moody’s Investors Service is taking aim at rival agency Standard & Poor’s in print over what it views as lenient ratings provided by S&P. This time Moody’s is blasting S&P for its rating of a Morgan Stanley single-asset commercial mortgage-backed securitization. An S&P spokeswoman declined to comment.

Moody’s claims the assigned ratings of Morgan Stanley’s MSC 2013-ALTM are four to six notches higher than what it would assign the deal, meaning the S&P-rated AAA class would at best

Starwood Secures Syndicated Loan To Fund Baccarat Starwood Capital Group has tapped a Bank of America-led syndicate to provide a $235 million !nancing package for its development of the !rst Baccarat-branded hotel in New York City. The planned development, on 53 Street between Fifth and Sixth Avenues, is located across the street from the Museum of Modern Art. According to deal watchers, the property has an expected completion time of about 30 months.

The loan is a positive signal for the syndicated loan market, which is seeing a resurgence in recent months. Indeed, the Alexico Group closed on a $350 million syndicated loan for the Jenga building at 56 Leonard Street in New York in January that

was also provided by a BofA-led syndicate (REFI, 1/11). “From 2008 to 2010, the market for syndicated loans took a bit of a break, but it’s getting pretty busy again,” said Chris Delson, partner at law !rm Morrison Foerster, which acted as counsel to BofA.

The planned 46-story property will include 61 residential units, a small retail component and a branch of the New York Public Library, which sold the site to Starwood. The lending syndicate includes CIT, Capital One, Emigrant Realty Finance and the Bank of East Asia. The 36-month loan is priced at LIBOR plus 375 and has two one-year extension options.

The loan may also illustrate a trend in foreign money coming into U.S. commercial real estate. Whereas European banks were the big foreign lenders pre-crash, Asian banks have recently begun

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2 © Institutional Investor, LLC 2013 VOL. XIX, NO. 12 / March 25, 2013


Real Estate Finance Intelligence

EDITORIALSteve Murray Editor

Tom Lamont General Editor

Peter Thompson Executive Editor [Chicago] (773) 439-1090

Samantha Rowan Managing Editor (212) 224-3996

Max Adams Senior Reporter (212) 224-3212

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ADVERTISINGPatricia Bertucci Associate Publisher (212) 224-3890

PUBLISHING

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CORPORATEJane Wilkinson Chief Executive Officer

FINANCING

3 | CMBS Spread Snapshot

5 | Atlantic City Retail Loan Fuels Super Senior Loss

PROPERTY

6 | Legacy Buys Pasadena Office

7 | Local Investor Closes On D.C. Office

BUILDERS & BUYERS

8 | United Realty Seeks Breakout Bankers

VIEWS

9 | Podcast: Matthew Kaplan, Almanac Realty Investors

10 | Guest Column: Will The Vacation Ownership Market Rise Again?

BUYSIDE FUNDS

12 | New Real Estate Private Equity Funds

DEPARTMENTS

15 | News in Brief

15 | Real World Offices

IN THIS ISSUE

EDITOR’S NOTE

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AT PRESS TIME

Our top story this week is Starwood Capital Group nailing down a big syndicated construction loan for its !rst Baccarat-branded hotel in New York. The loan, led by Bank of America, is also worth noting for the inclusion at least one Asian participant, an occurrence which may be trending. Max Adams has the particulars.

Max also has the scoop on Wells Fargo and UBS marketing the !rst non-performing loan deal of 2013, a roughly $213 million offering on behalf of Rialto Capital Management. The offering, has some structural differences compared to deals completed last year. Turn to page 4 for details.

After a few quiet months, it looks like Washington, D.C.’s office market is getting back on track. Eleanor Duncan has the goods on two big sales in the city as well as some analysis on why activity is rising. Read all about it on pages 6 and 7.

Finally, check out this month’s real estate private equity fund roundup for a full list of newly launched funds as well as an update on funds that are already out there. Full coverage starts on page 12.

Samantha RowanManaging Editor

Top Broker Leaves ColliersFred Cordova, a senior broker at Colliers in Los Angeles, has left the !rm. Brokers at Colliers declined to speculate on the reason for Cordova’s departure, or where he was headed. Cordova, consistently one of the top-producing brokers in the city, according to the Los Angeles Business Journal, has a number of high-pro!le client relationships and is also the chairman of Economic Development Committee of the Center City Association of Los Angeles.

A value-added specialist who is known for working on complex deals, Cordova has worked on transactions that include the disposition of 660 South Figueroa in Los Angeles. Cordova’s clients at Colliers included BlackRock, Cabi, LNR, TA Associates and ING Clarion.

Calls to Cordova were not returned.

VOL. XIX, NO. 12 / March 25, 2013 To sign up for email alerts and online access, call 800-437-9997 or 212-224-3570. 3


0

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3/20 1 Week Ago 3 Months Ago 6 Months Ago 1 Year Ago

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CMBS 1.0 CMBS 2.0

Real Estate Finance & Investment The weekly issue from Real Estate Finance Intelligence www.realestate!nanceintelligence.com

Financing CMBS Market Snapshot

CMBS 1.0Fixed Rate Avg Life Benchmark 3/20 1 Week Ago 3 Months Ago 6 Months Ago 1 Year Ago

AAA 5 S+ 77 78 71 109 140AAA 10 S+ 104 114 121 158 177AA 10 S+ 1,446 1,455 1,551 1,644 1,951A 10 S+ 2,060 2,069 2,160 2,254 2,528BBB 10 T+ 3,709 3,713 3,799 3,916 4,096BBB- 10 T+ 4,699 4,703 4,790 4,912 5,092

CMBS 2.0Fixed Rate (Conduit) Avg Life Benchmark 3/20 1 Week Ago 3 Months Ago 6 Months Ago 1 Year Ago

AAA 5 S+ 45 46 42 56 107AAA 10 S+ 80 82 83 118 123AA 10 S+ 137 138 177 209 264A 10 S+ 191 192 239 313 348BBB 10 T+ 323 319 410 478 562BBB- 10 T+ 367 363 468 586 619

Benchmarks as of March 20th: 10-year Treasury 1.959 10-year Swap 2.074 Source: Trepp, LLC

When the super senior structure was introduced several years ago, one market executive joked that the super senior bonds were like wearing a belt and suspenders: it would be as hard for the AAA-rated bonds from these deals to see losses as it would be

for someone’s pants to fall down. Several years later, investors in MSC 2007-HQ13 seeing interest shortfalls all of the way up to the deal’s seven-year, A-1A class. Although these are the first interest shortfalls to hit an AAA-rated super senior tranche, investors are still concerned about losing their shirts on legacy deals from this era. Read the full story on page 5.

CMBS 1.0 comprises transactions through 2007 while CMBS 2.0 re"ects deals completed after that date.

CMBS SPREADS SNAPSHOT—MARCH 20

TREPP’S CMBS SPREADS MATRIX—MARCH 20

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Financing

UBS and Wells Fargo are in the market with the year’s !rst non-performing securitization and plan to sell the bonds on behalf of Rialto Capital Management in the next week. The deal, Rial 2013-LT2, is slightly longer in duration and bigger than NPL deals seen last year. The offering is sized at $213.6 million and has a weighted average life 1.3 years.

The deal is similar in collateral and structure to distressed offerings. It is backed by a mixed bag of commercial real estate, multifamily properties and land. Of the loans, 1,073 are non-performing, 147 are real-estate-owned and 252 are performing. The deal also features a similar fast-pay functions in which payments collected ahead of schedule are transferred immediately to pay down bond holders, shortening life of the deal. However,

unlike previous liquidating trusts, the deal’s payments can “bleed” or “leak” to the $132.1 million equity class. According to presale material from Kroll Bond Ratings, “the structure does not require that all cash be paid to the rated notes” and instead payments can go to the equity holder in the deal. Certain triggers, such as an event of default, would cause this to happen.

Also unlike the NPLs seen last year, this one is not being issued by JPMorgan. UBS issued a well-received "oating-rate mezzanine loan securitization on behalf of Redwood Trust last year, and investor thinking is that Rialto chose them to handle the deal due to the success of the Redwood offering. “UBS has really been an innovator in the CLO and CDO space,” said one investor in New York who is looking at the deal.

UBS, Wells Marketing First 2013 NPL Deal

Property Type Loan Name Deal ID City State Zip UPB Maturity date Date xferd to S/S

Hotel Comfort Inn Colorado Springs GCC07GG9 Colorado Springs CO 80906 $5,325,707.74 11/6/16 2/20/13Hotel TownePlace Suites - Mobile, AL CSF03C03 Mobile AL 36609 $4,076,137.98 3/11/13 3/6/13Hotel Best Western Anahiem Hills MLM98C02 Anaheim CA 92807 $894,225.65 2/1/18 2/25/13

Industrial Brown Deer Business Park BSC06P12 Brown Deer WI 53223 $21,677,651.56 12/5/15 2/14/13Industrial Breckenridge Park Portfolio MLCF0601 Tampa FL 33404 $17,098,323.40 12/8/15 2/5/13Industrial 9990 Empire Street (Hoist Fitness) CSM07C05 San Diego CA 92126 $11,560,000.00 6/1/14 1/18/13Industrial Ford - Princeton Park BACM0602 Princeton IN 47670 $9,932,762.30 3/1/13 2/25/13Industrial Mayhew Tech Center JPC06LD8 Sacramento CA 95826 $7,091,415.10 9/1/16 2/6/13

Multi-family Parkway Manor Apartments GMAC02C3 Carson City NV 89706 $11,782,175.23 12/1/12 2/15/13Multi-family Superstition Villas JPC06C17 Mesa AZ 85204 $9,835,855.43 10/1/16 2/13/13Multi-family Chatham Wood Apartment Complex WBC06C26 High Point NC 27265 $7,276,824.30 6/11/16 2/21/13Multi-family Briarwood Village MLCF0602 Baytown TX 77520 $4,941,023.09 5/8/16 2/12/13Multi-family Corder Crossing Apartments WBC03C04 Warner Robins GA 31088 $4,370,093.35 2/1/13 2/7/13

Office IBP BACM0801 Plano; Carrollton TX 75093 $74,663,120.96 10/1/17 2/21/13Office 90 Fifth Avenue JPC05C11 New York NY 10011 $62,342,608.17 1/1/15 1/8/13Office 801 Market Street GECC03C1 Philadelphia PA 19107 $37,407,140.42 2/1/13 2/6/13Office 791 Park of Commerce MSC07T27 Boca Raton FL 33487 $28,340,912.51 7/1/17 2/18/13Office 400 Columbus MLCF0705 Valhalla NY 10595 $19,700,699.09 12/11/16 2/11/13

Other Westcore Colorado Portfolio BSC07BB8 Various CO Various $80,182,703.53 3/10/15 7/15/11*Other Howard Rose & Lakeview at the Greens JPC07L10 Various Various Various $23,864,000.00 3/1/13 3/8/13Other Marsh Creek Country Club MLT06C01 Saint Augustine FL 32080 $3,678,674.72 11/1/15 2/19/13Other Allsize Storage CSF03CK2 Corona CA 92880 $3,618,245.65 1/1/13 2/15/13Other Butterfield Business Center LBUB06C7 Tucson AZ 85714 $3,586,770.05 8/11/16 2/26/13

Retail Fiesta Mall BACM0503 Mesa AZ 85202 $84,000,000.00 1/1/15 2/8/13Retail Palladium at Birmingham COM03LN1 Birmingham MI 48009 $32,917,190.74 6/1/13 2/22/13Retail Manhattan Gateway Shopping Center BSC05T20 Manhattan Beach CA 90266 $21,110,326.22 10/1/15 2/14/13Retail Willow Creek Shopping Center WBC06C23 Centennial CO 80112 $20,396,557.71 12/11/15 2/18/13Retail Grand Mart-Little River MLT07C01 Alexandria VA 22312 $17,589,858.14 7/8/17 2/28/13

Source: Morningstar Credit Ratings, LLC*First entered into special servicing on this date. For more information, go to http://ratingagency.morningstar.com/ or call (800) 299-1665

The following is a list of loans included in commercial mortgage-backed securities deals that were recently transferred into special servicing.

MORNINGSTAR’S LOAN TRANSFERS TO SPECIAL SERVICING


Real Estate Finance & Investment The weekly issue from Real Estate Finance Intelligence www.realestatefinanceintelligence.comReal Estate Finance & Investment The weekly issue from Real Estate Finance Intelligence www.realestate!nanceintelligence.com

Financing

More Tenants Seek Lease Restructuring Deals More tenants are turning to creative methods of renegotiating or restructuring leases to take advantage of today’s record low interest rates. “Many free-standing retailers are facing a situation where is an opportunity to create value for everyone by creating an arbitrage play,” said Tom Mullaney, a partner at lease and debt restructuring !rm Huntley, Mullaney, Spargo & Sullivan.

HMS has recently renegotiated a lease on behalf of a national retailer that reduced the rent but also gave the landlord an extra !ve years on the lease. “The arbitrage play here was rent reduction in exchange for a longer lease term. Both parties are better off. The tenant has reduced his rent and the landlord has increased the capitalized value of the asset,” Mullaney said.

The extension of the lease term is also making it easier for owners to re!nance their properties, locking in low rates. Banks are more likely to make a loan to a borrower with a stable tenant in place for the foreseeable future. “So now a landlord can say, ‘I have increased the value of my property,’ and they can either sell it or re!nance it to lock in low rates,” he added.

There is another side to this strategy as well. HMS has also negotiated on behalf of a national entertainment tenant that leases properties across the U.S. to split the cost of redevelopment with the landlord. “Landlords have agreed to put in half for as much as a $10 million redevelopment. For a good credit they can kick in $4-5 million at really low rates,” added Mark Richardson, principal.

Want more info on our donedeals? Visit goulstonstorrs.com

We congratulate our client

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211 East 43rd StreetNew York, New York

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Atlantic City Retail Loan Fuels Super Senior LossesLosses on an $80.5 million loan on The Pier at Caesars, securitized in a 2007 commercial mortgage-backed securities deal, have led to the !rst-ever interest shortfalls on AAA-rated super senior CMBS. At securitization, the loan made up 10.84% of Morgan Stanley’s $1.04 billion MSC 2007-HQ13, which is now seeing losses through the seven-year, A-1A class, according to Trepp LLC.

The Pier at Caesars loan was transferred into special servicing in 2009 and was subsequently hit with a series of large appraisal reductions. The value of the property continues to be hurt by declines in gaming activity in Atlantic City and is also in need of signi!cant physical repairs that will likely require a heavy capital injection, according to Trepp.

The height-of-the-market deal is likely to remain a rough spot for investors. Losses have wiped out nine of the 15 classes, making the BBB+ the !rst loss tranche. Several loans, including three of the !ve largest in the deal, were underwritten using pro forma fundamentals.

According to Trepp data, none of these loans has yet reached the levels projected at underwriting. The Piers at Caesars was underwritten at a debt service coverage ratio of 2.22x, but was at only .70x one year later.

The deal is also one of 25 conduits referenced in the CMBX.5 index. The Pier at Caesers




Property Sales

Legacy Partners and capital partner Alliance Bernstein are under contract to purchase Avery Dennison’s headquarters at 150 North Orange Grove in Pasadena. The label maker is set to vacate the 98,000-square-foot complex, leaving it empty for the joint venture to re-lease as the market improves. CB Richard Ellis’s Kevin Shannon and Thomas Bohlinger handled the deal, which closed at around $20 million, or $204 per square foot.

Legacy and Alliance beat out other value-added investors including Rising Realty, owner of the historic Paci!c Center in downtown Los Angeles. The deal is a signal that Pasadena’s commercial real estate market has started to pick up in recent weeks, as investors look outside their risk spectrum to !nd returns. “We’ve had maybe 30% more con!dentiality agreements signed since last year. We’ve done 40 tours in Pasadena over the last month. That’s an awful lot,” said one Los Angeles-based broker.

One local broker cited the Western Asset Plaza as a comparable

property. Worthe Real Estate sold that Pasadena office to the Irvine Company for around $525 per square foot last year. That building, however, was 96% occupied at the point of sale, after Worthe renewed the lease of the asset’s anchor tenant, Western Asset Management.

Other properties now on the market include Avon Products’ sale of its landmark 353,000-square-foot Pasadena facility at 2940 East Foothill Boulevard. That sale comes two months after the beauty products !rm decided to shut down the site.

Calls to Legacy, Alliance Bernstein and brokers at CBRE were not returned.

Legacy Venture Buys Pasadena Office

Transwestern’s recent success with its listings in Washington, D.C. is giving the brokerage cause for some optimism about the state of the city’s commercial real estate market. Dweck Properties’ sale of the 104,967-square-foot 1990 M Street is set to close on Friday. An undisclosed investor has the property under contract for around $45 million, or $409 per square foot. And offers are due today on 1522 K Street, a value-added office owned by American Realty Advisors. At the time of its listing in February, that property was set to sell for $25 million, or $294 per square foot. “All indications are that pricing [for that asset] will exceed expectations,” noted Gerry Trainor, executive managing director.

Office sales in D.C. are attracting a variety of investors, Trainor said. Indeed, Piedmont Office Realty Trust recently sold 901 North Glebe Road in Ballston for $175.6 million, or around $526 per square foot—a number that hints a return to 2007 peak pricing levels. The priciest trade to date in Northern Virginia came when

Paramount Group paid $412.9 million, or $652 per square foot, for the Waterview Building in Rosslyn in May 2007, according to data

from Real Capital Analytics. Transwestern received 20 offers for 1990 M

Street, and the top !ve bidders included two REITs, a pension fund, a foreign investor and a life insurance company. “Bidders continue to be a very good mix. I wouldn’t say that one group is monopolizing the market in any way,” Trainor said.

This all means that there is a great sense of certainty about the future of the market as prices start to push up to 2007 levels. “The market is very strong, especially downtown. The suburbs are still a little weak but the core product has surpassed peak levels. There’s limited product on the market right now so anything of quality is commanding top dollar,” Trainor said. “It

seems that effects of sequestration and government cutbacks are overstated, and have had a nominal effect on Washington. It’s more psychological at this point.”

Transwestern Sees D.C. On The Up

After a dry spell, the Washington, D.C., office market seems to be picking up. Gerry Trainor, an executive managing director at Transwestern, provides some analysis on why deals are starting to trade again. Part of the activity stems from the fact that the effects of

sequestration are not as bad as people expected, Trainor told REFI. Check out the full story below, as well as another piece about the sale of 1900 M. Street in the city.

“As difficult as the economic landscape is at the moment, the odds still suggest the US recovery will continue. It will not be robust, but it will be strong enough to strengthen leasing fundamentals in many US markets. ”

—Gerry Trainor

Legacy Partners and Alliance Bernstein are set to pay about $20 million, or $204 per square foot of the 180,000-square-foot property at 150 North Orange Grove.

FAST FACT



Property Sales

David Schaeffer has inked a deal to acquire 1990 M Street NW, a 110,000-square-foot office property in Washington, D.C. The local investor, who also heads up internet provider Cogent Communications, paid owner Dweck Properties around $45 million, or $409 per square foot. The property’s $36.1 million !rst mortgage was assumed. Transwestern marketed the property (see related story).

The sale illustrates a larger shift in Dweck’s strategy. The D.C.-based investor, headed up by Ralph Dweck, is seeking to shift its portfolio away from office holdings in favor of other asset classes, including residential. Calls to Dweck and Schaeffer were not returned and Gerry Trainor, who handled the transaction at Transwestern, declined to discuss the buyer or the !nancing.

Dweck retained Transwestern to market several of its office buildings in September, including 1900 M Street and Arlington Gateway at 901 North Glebe Road. Piedmont REIT snapped up Arlington Gateway for $175.6 million, or $541 per square foot at a 6% cap rate, according to data from Real Capital Analytics. New York-based Rockrose acquired Dweck’s 112,687-square-foot 1776 Eye Street in October for $55 million, or $494 per square foot—a 5.5% cap rate.

MPG Office Trust has launched the sale of the office component of the 193,000-square-foot Plaza Las Fuentes, a mixed-use property in Pasadena, and has tapped

Eastdil Secured to market the property. It is part of a 6.3 million-square-foot portfolio being shopped by the Los Angeles real estate investment trust and comes after the REIT struck a surprise deal to sell its largest property. Singapore-based investors agreed earlier in the week to buy the US Bank Tower in downtown Los Angeles for $367.5 million.

The portfolio is valued at around $1.5 billion and MPG, which initially hired Eastdil to sell the properties as a group, later decided to sell the assets individually (REFI 02/12). The Plaza Las Fuentes listing is seen as con!rmation that Eastdil will retain the restructured listing. Calls to Eastdil and MPG officials were not returned by press time.

Plaza Las Fuentes, located at 135 North Los Robles, is comprised of an eight-story office building and a 350-room Westin hotel. Potential pricing couldn’t be determined. MPG sold the hotel component to HEI Hotels & Resorts for $92 million in 2011 as part of a rush to sell its non-core assets to reduce its debt burden (REFI 11/10).

Separately, Maguire Investments, a private investment company headed up by ex-MPG CEO Robert Maguire, has obtained a $105 million loan to recapitalize Water’s Edge, a 6.5-acre creative office campus in Playa Vista. Robert Maguire will use the loan for tenant improvements and leasing commissions. Rob Verrone of Iron Hound Management arranged the !nancing. Maguire has tapped Jones Lang LaSalle to kick start leasing efforts at the property. Calls to Maguire and Verrone were not returned and additional details, including the lender, could not be determined.

Local Investor Acquires D.C. Property

MPG Pulls Trigger On Pasadena Office Sale

D.C. Sales SnapshotProperty Seller Size Price ($) Timing Broker

Washington Harbour Rockpoint, MRP

558 370M Pending HFF

One Metro Center Clarion Partners

421 330M March Cassidy Turley

1200 19th Street NW Hines 334 290M February HFF

Republic Square 1 (50%) Republic Properties

386 110M January Cassidy Turley

Commercial National Bank Building

Tishman Speyer

225 180M March Eastdil Secured

2100 M Street Hines 301 135M February HFF

Investor David Schaeffer agreed to pay about $45 million, or $409 per square foot for the 110,000-square-foot property in Washington, D.C.

FAST FACT

Questions? Comments? Criticisms? Do you have something to say about a story that appeared in REFI? Or is there information you’d like to see published?

Managing Editor Samantha Rowan can be reached at (212) 224-3996 or [email protected].

TELL US WHAT YOU THINK!

http://www.realestatefinanceintelligence.com/Article/3159403/Will-MPGs-Strategy-Shift-Tilt-Investors-Away-From-Acquisitions.html

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Builders & Buyers

STORE Capital, a single-tenant retail property investor, is tapping the securitization market with a $270 million net lease mortgage securitization, according to sister publication Securitization Intelligence. It’s the second ABS deal for the Scottsdale, Ariz.-based real estate investment trust.

The deal includes a $252 million, A-rated class A tranche and an $18 million, triple-B class B tranche. The underlying collateral comprises 78 leases on 287 commercial properties valued at $663.9 million, according to Standard & Poor’s. The transaction is structured as a net lease, or sale-leaseback, ABS, whereby a REIT scoops up properties and leases them back to the tenant.

The !ve largest tenants in the pool are C.J. Apple at 6.59%, Hill Country Furniture Partners at 5.41%, O’Charley’s making

up 5.33%, Chancellor Income Holdings with 5.24% and RMH Franchise with 4.81%.

STORE tapped the ABS market for the !rst time last summer, and Christopher Volk, STORE’s ceo, emphasized in an interview with SI at the time that the master trust funding structure leaves open the option for serial ABS issuance (SI, 8/17/12).

The issuer has existed in various other iterations since 1981, but opened for business as STORE Capital in 2011 after having sold off its platform several times. Securitization was integral to funding when STORE was Franchise Finance Corporation of America and Spirit Finance Corporation, previously.

Volk did not immediately return phone calls. Officials at bookrunner Credit Suisse declined to comment.

Retail REIT Brings Second Net Lease Deal

JCR Capital has held the !nal closing for JCR Commercial Real Estate Finance Fund II. The fund exceeded its target of $100 million, raising capital from a wide swath of public pension funds, foundations, insurance companies, funds of funds and family offices. It focuses on transactions of $2-15 million. “We are providing different lending products to middle market sponsors,” said Jay Rollins, president and ceo.

The company has three !nancing platforms: bridge loans, mid-yield loans that include preferred equity to mezzanine to hard money deals and an equity bucket. Although there is a perception

that the company is focused more on mezzanine, these loans don’t make up a large chunk of its business. “We’re a full-service real estate !nance company,” Rollins added.

The fund has been investing since its launch a year ago and has already returned 4% of the capital raised to investors. Investors will get quarterly distributions and a current return of 8%. “We were in the market for about 12 months and found investors to be receptive because our strategy is unique. We are a !nance fund, we are not a buyer, and we target middle market assets of an underserved market,” Rollins said.

JCR Holds Final Closing For Lending Fund

United Realty Partners, a New York-based investment management company, is tapping into a larger shift in the commercial real estate !nancing industry by seeking out creative types who are looking outside traditional debt-related positions (REFI, 3/18), “[We] put out capital anywhere in the capital stack to facilitate the acquisition or redevelopment of

assets,” said Jacob Frydman, ceo.The company recently hired Barry Funt as president of its real

estate markets group and Craig Eastmond as managing director of capital markets, and has further hires planned on the asset management front. Funt joined United Realty from Knight Capital Markets, where he was a managing director, and started his career in Ethan Penner’s CMBS group at Nomura Securities. Eastmond joined from Deutsche Bank.

At present, the company is raising a targeted $1.3 billion non-traded real estate investment trust, according to !lings with the U.S. Securities and Exchange Commission. Frydman declined

to discuss the REIT, but said the company’s investment focus generally includes properties on the East Coast outside of cities such as New York. “We like to buy at discounts, lever appropriately and generate double-digit returns. You can’t do this by buying trophy assets in the middle of cities [like New York],” he noted.

Separately, United Realty is working on a scholarship program, which gives away a number of $100,000 awards to school-age students to assist them with higher level education. The company works with a third-party provider that selects the program’s winners and distributes the money. “We’re really trying to give back to the community,” Frydman added.

United Realty Looking For Breakout Bankers

Jacob Frydman

“We like to buy at discounts, lever appropriately and generate double-digit returns. You can’t do this by buying trophy assets in the middle of cities [like New York].”

—Jacob Frydman

http://www.securitizationintelligence.com/Article/3077277/Search/STORE-Sells-Triple-Net-Lease-ABS-Eyes-Further-Growth.html



Views Q&A

REFI: Could you provide a brief overview of Almanac’s investment focus?

MK: We are similar to other companies in that we raise money from pension funds and institutional investors and invest it in real estate. But where we differ is how we invest: we are entity-level investors, investing in the companies that own the real estate as opposed to just buying the buildings directly.

REFI: What is compelling about this strategy?

MK: There are lots of ways to go about investing in real estate. What we like about entity-level investing is that the corporate model, while it has its "aws, is really a good model for operating any business. There is alignment of interests and a single company that everyone is working for.

It’s also more transparent than just owning a building. You generally have fully audited !nancial statements and transparency into the business and the management company that controls these buildings. To have this kind of insight and transparency is of great value. It’s better to know what is going on, see what is going on and !x it if there is a problem.

REFI: When you’re making an investment, what are the most important factors?

MK: If you’re investing in companies, the management team is the key element. The management team is generally focused on a property type or geographic region and knows the ins and outs of the businesses they are in. They also have a proven track record that shows their ability to make decisions and be good owners and borrowers.

REFI: Could you talk about one investment that illustrates what you do?

MK: We have had an investment since 1997 in a company called Merit Properties, an industrial owner and manager in Baltimore.

Our initial investment required a rollup transaction that rolled up into a single company all of the 30-odd partnerships that Merit had in a tax-approved transaction. When all was said and done, there was a single company that owned about seven to eight million square feet of "ex/industrial space.

We committed capital so that Merit could start an investment and development program and the size of our investment grew to $200 million. They’ve been good borrowers and partners and they know how to make money in real estate. The brains and the assets are under one roof and they were big investors in the company along with us. Also, our investment was in the form of convertible debt so we felt that our capital was protected.

Merit’s portfolio is now at about 14 million square feet and they’ve been slowly buying us out of our position at favorable terms to both parties. The real estate aspect worked, the partnership worked and the whole corporate format was very successful.

REFI: The market is seeing historically low rates – what is the takeaway from this?

MK: I’ve been in the business for twenty years and the debt and equity markets shift dramatically every one to three years. What we’ve been seeing since the !rst of the year is a massive strengthening in the lending market. The lending has been focused on high-quality, well-sponsored buildings and that has spilled over into the rest of the lending community for good assets. That is partly a result of the CMBS market coming back very strongly.

What it means to us is that there is a lot we’ve invested in and have been buying and we’re !nding that investors can leverage at low rates to buy.

REFI: Where do you see values going?

MK: We see values increasing over the next year. This is a generalization for properties but there should be a pretty strong lift for high-quality, good cash-"owing assets that should see some value creation.

Podcast: Matthew Kaplan, Almanac Realty InvestorsTo listen to the full interview, go to http://bit.ly/14hdCeb

Matthew Kaplan is a managing partner at Almanac Realty Investors, where he oversees the company’s investment program. The New York-based investment management company invests at the entity level via a series of private equity funds and recently held the !nal closing for Almanac Realty Securities VI.

“What we like about entity-level investing is that the corporate model, while it has its "aws, is really a good model for operating any business. There is alignment of interests and a single company that everyone is working for.”

—Matthew Kaplan




Views Guest Column

After experiencing a severe slowdown during the recession which stemmed from !nancing challenges, the vacation ownership industry, which includes traditional timeshares, fractional ownership interests and private residence clubs, appears to be on the rebound. A closer look at recent trends in the sector highlights potential synergies with traditional resort developments that could create incremental value, especially for underperforming properties and a shift in ownership patterns that could create acquisition opportunities.

Industry OverviewTimeshares are characterized as properties, typically resort condominium-style units, where multiple parties own the right to use the property for a particular time of the year, traditionally for one week. Fractionals and PRC generally refer to higher-end purchases for multiple weeks either in a deeded interest or a right to use program. Fractionals are typically viewed as vacation ownership product selling for less than $1,000 per square foot while PRCs sell for more than $1,000 per square foot.

The leading branded players in the industry include Hilton Grand Vacations, Wyndham Vacation Resorts, Starwood Vacation Ownership, Disney Vacation Club, Hyatt Vacation Club and Marriott Vacations Club, which recently spun off from Marriott International through an initial public offering. Other major non-hotel branded players include Diamond Resorts International, Westgate Resorts and Bluegreen Vacation Club.

Recovering Timeshare MarketAs shown in the graph below, timeshare sales (excludes re-sales in the secondary market) declined from a peak of $10.6 billion in 2007 to approximately $6.3 billion in 2009. A bottom, however, appears to have been reached over the last few years. Barring any further economic shock, the sector appears to have bottomed out and is poised for growth.

It is important to note that there was approximately $1.7 billion in sales related to Fractionals and PRCs in 2007. There is less certainty about a market bottom for these higher priced products as evidenced by its year-over-year decline through 2011.

Much of the decline has been attributable to a vacuum of liquidity, which engulfed the real estate industry, including the vacation ownership market between 2008 and 2011 but interestingly, not consumer demand. Historically, the timeshare industry has relied heavily upon specialty !nance companies for liquidity to fund acquisitions, development and receivables. In particular, the inability to monetize receivables generated by

selling units led to the mothballing of scheduled developments as well as a number of bankruptcies.

Since late 2011, liquidity has begun to re-enter the industry through securitizations and hypothecation of developer-originated receivables to its buyers. During 2012, for example, Westgate and Bluegreen completed securitizations for $221 million and $100 million, respectively. Even more recently, Diamond Resorts completed a $94 million securitization in January 2013 with a 95% advance rate and an overall weighted interest rate of 2.0%.

Market DemandDue to increased liquidity and the initial emergence of the U.S. economy from a protracted recession, the vacation ownership industry is now demonstrating pockets of growth and expansion throughout the country.

In Las Vegas for example, HGV recently added 1,500 units to its inventory or the equivalent of over 80,000 weeks in the last 18 months. Approximately 300 units of the 1,500 recently added by HGV were purchased from the underperforming 1,282-unit Trump project located off of the Las Vegas Strip in a $100 million bulk transaction ($333,000 per unit), considered a meaningful discount to the total development cost. Marriott Vacations Club recently began construction of 236 additional units at the Grand Chateau location. Meanwhile, Wyndham Vacation Resorts and other major developers continue to expand in the market place.

Points System – The New Paradigm The traditional timeshare, where the purchaser acquired a speci!c unit for a speci!c week during a speci!c time of year is becoming a rarity due to the evolution of the points-based programs incorporated by the major timeshare operators.

Points-based programs represent much greater "exibility in the use of timeshare interests and can be referred to as vacation currency. In such programs, buyers purchase points (vs. a speci!c unit type) which represent a right to use the resort’s lodging units (typically one bedrooms and larger) for a speci!ed number of nights depending on the unit type and time of year the use right is exercised. These points can be used to stay as little as one night on each trip (verses the traditional one week or split week formats) and is strategically aligned to the changing vacation patterns of Baby-Boomers and Gen Xers to take shorter but more frequent vacations in differing locations.

In some systems, points can be used to purchase plane tickets, car rentals, cruise passage and other vacation-related uses. Points

Vacation Ownership Industry Sees ReboundBy Jon Simon and Chris Forero

Jon Simon is a managing director and Chris Forero is a senior associate at Arcturus Group.

Chris ForeroJon Simon



Views Guest Column

programs can be viewed adding a layer of complexity to such programs as a result of increased "exibility.

Ownership TrendsWhile the vacation ownership industry will continue to expand through development and acquisition, new expansion opportunities

are presenting themselves which may lead to an overall transition of the business model. Wyndham Vacation Resorts has been one of the most active brands in the industry, completing its acquisition of Shell Vacations in September for approximately $255 million (inclusive

of assumed debt), continuing its position as the largest vacation ownership developer in the world. The major brands, however, are in transition in their overall business strategies.

One of the major trends we expect to see continue in the vacation ownership sector is large owner/operators repositioning themselves as fee for service providers. This approach follows the

lead taken by hotel companies which long ago adopted asset light strategies shedding ownership of underlying real estate and concentrating on fee-based marketing, sales and management services for property owners.

Hilton Grand Vacations recently entered into such a deal on the 1,200-unit Elara timeshare property which was part of a restructure whereby Centerbridge Capital Partners through their Resort Finance America affiliate), acquired the controlling interest in PH Towers Westgate in Las Vegas from Westgate Resorts. In a similar transaction at the Wyndham Aruba Beach Resort and Casino, Wyndham Vacation Resorts affiliated themselves with 361 units in a for-sale program where the resort was rebranded as a Wyndham and WVR became the exclusive marketing and sales agent of vacation ownership interests at the Resort.

We believe this trend will create additional opportunities for investors, who seek to enter the industry through the acquisition of existing projects or companies, their debt or conversion of existing resort assets.

Complimentary Uses within Lodging PropertiesToday’s design and programming of large mixed-use resorts is often predicated upon different and highly complementary resort uses. Vacation ownership components can be highly synergistic in the repositioning of resorts today. For owners and investors, this could present an opportunity to improve performance (and value) of resort properties.

Major mixed-use resorts are generally developed with a combination of real estate uses which produce residual and non-residual income streams. Residual income streams refer to assets that are not sold to owners, but rather are used by the resort guests while on property. These include hotel accommodations, restaurants, golf courses and retail. Non-residual income streams include for-sale product at a resort such as lots or fully constructed housing.

The synergy between vacation ownership and traditional resorts is complementary in several ways. First, these assets, while generally not part of the core resort, are usually situated on contiguous or nearby parcels. These non-core components are sold and thus produce cash "ow to help pay down development costs of the core residual components.

Once sold, the vacation ownership components produce high levels of occupancy each year and help contribute additional income to the core resort. According to Interval International, vacation ownership guests tend to spend up to 30% more per trip than the traditional hotel guest. At the same time, a resort with an active transient guest base provides a cost-effective source of lead "ow required to sell vacation ownership interests.

Value-Add OpportunitiesAs the vacation ownership industry, especially timeshares, continues to rebound, there are several potential opportunities for investors, operators and owners of lodging properties. The ability to integrate shared-ownership with an existing resort creates synergies resulting in additional sources of revenue, improved traffic at a property and increased value.

Additionally, owners of distressed properties may be able to bring in a top brand name under the fee for service platform to improve operations given the trending demand for operators to prefer the role of a manager instead of owner. In conjunction with the fee for service strategy, this may be an opportune time for potential investors to evaluate opportunities to create value at an existing resort or through acquisitions or joint ventures of properties owned by one of the major brand names as they seek to restructure their balance sheets or from other developers who have yet to move forward resort projects due to capital constraints or other limiting factors.

Source: The Shared-Ownership Resort Real Estate Industry in North America: 2012 Prepares by Ragatz Associates.

Fractionals & PRC Sales (2007-2011)

Source: State of the Vacation Timeshare Industry: United States 2012 Edition Prepares by Ernst & Young.

Timeshare Sales (2005-2011)



New Investment Funds

Although a number of real estate private equity managers launched new funds over the past month, there was only one manager that is making their first foray into the sector. Farallon Capital Management has rolled out its first dedicated real estate fund and aims

to raise about $350-400 million of equity. Much of the activity this month was from seasoned managers who are rolling out or holding closings for their latest offerings. This included an almost $2 billion fund from Rockpoint Group and a planned $1.25 billion fund from TA Associates Realty.

The next edition of Real Estate Private Equity Funds will be published in the April 29 issue. You can download a spreadsheet with this month’s funds at www.realestatefinanceintelligence.com.

has closed on $1.95 billion of equity commitments for Rockpoint Real Estate Fund IV. The investors include public and corporate pension funds, foundations, endowments and government entities. Fund IV has committed around $470 million of equity in 12 transactions so far, mainly in the U.S. (press release).

San Francisco-based Farallon Capital Management has launched its !rst investment fund speci!cally targeting real estate and is looking to raise $350-400 million of equity. The hedge fund manager is targeting a 20% internal rate of return. The fund’s !repower, including leverage, will be around $1 billion. It will have a three-year investment period from the date of its closing and a total life span of around 10 years (Reuters).

has closed a $100 million fund that will acquire apartment complexes in the western United States. Sares-Regis Multifamily Fund is co-sponsored by Philadelphia-based Penn Square Real Estate Group (San Francisco Business Times).

Boston-based TA Associates Realty has raised $1 billion of equity commitments for its latest Realty Associates Fund X. The target is $1.25 billion, which will be deployed via acquisitions of under-performing office, retail, multifamily and industrial properties in major U.S. markets. The strategy will be similar to the fund’s predecessor, Realty Associates Fund IX, which raised about $1.5 billion.

is in the market to raise at least $1 billion for its !rst real estate fund. The Fort Worth manager would invest in real estate companies and troubled projects that need cash infusions or new management. It expects to begin raising equity commitments in the second half of the year (Wall Street Journal).

has raised $128 million in equity commitments towards a target of $300 million for an investment fund that will buy and originate loans against multifamily properties. The Philadelphia-based manager’s LEM Real Estate High-Yield Debt and Preferred Equity Fund III, which launched towards the

end of last year, is targeting loans against core and core-plus properties in in!ll markets along the East and West coasts. The fund, which could have a $500 million capacity, would be the largest yet for LEM.

Value-add investor Dune Real Estate Partners has raised $175 million in the early stages of marketing its latest investment fund, Dune Real Estate Fund III. The fund is seeking to raise up to $850 million. The !rm’s investment strategy has historically focused on non-performing and other distressed debt, and over-leveraged real estate companies. It often co-invests with real estate specialists in speci!c sectors.

is aiming to raise up to $200 million of equity for its latest equity fund, Noble Hospitality Fund II. The Atlanta-based manager focuses on value-add and opportunistic acquisitions, and has already raised $101 million towards its target. Noble invests in full and limited-service properties that operate under national brands in major markets around the country. It buys properties below replacement cost, then focuses on upgrading the assets (Commercial Real Estate Direct).

has raised $203 million for its latest fund KHP Fund III, which will invest in the development and redevelopment of boutique hotels in major markets in North America. The fund, which is Kimpton’s fourth, now has $500 million worth of buying power (Commercial Real Estate Direct).

Washington D.C.-based Easterly Partners is in the market for $250 million for its latest investment fund. U.S. Government Properties Income & Growth Fund II will acquire properties nationwide that are net-leased to federal government agencies deemed particularly critical to federal operations (Commercial Real Estate Direct).

has hit the market with its second high-yield debt fund. The New York !rm is looking to raise $250 million of equity for C-III High Yield Real Estate Debt Fund 2. It plans to hold an initial close when it pulls in $75 million. The fund will target returns of 10-13% by acquiring CMBS and mortgages, and also plans to originate





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loans. Legacy CMBS and real estate CDOs will account for around half of the fund’s holdings. The fund will also invest in B-pieces of new CMBS issues, seasoned loans and mortgages it originates (Commercial Mortgage Alert).

has topped its $100 million equity target for its second high-yield debt fund. The Denver-based !rm wrapped up marketing for the $106 million JCR Commercial Real Estate Finance Fund 2. The fund’s investors include insurers, pension plans and fund-of-funds operators. Nearly half of the equity in Fund 2 has already been invested (see story, page 8).

Atlanta-based RCG Ventures is poised to hit the market with RCG Ventures Value-add Real Estate Fund 3. The fund is aiming to raise $100 million of equity for its third vehicle, which would target a 20% via equity and debt plays across the U.S. RCG typically invests in shopping centers that are underperforming or in need of renovation (Real Estate Alert).

, a Dallas investment manager, expects to !nalize marketing its !rst investment fund by the end of the month. The fund has raised $110 million, with a target of $150 million of total equity commitments. The fund is in the market to acquire core-plus caliber properties in the office, medical-office and retail sectors of $10 million-50 million in areas that have tight supplies and increasing demand (CRE Direct).

held an initial close on equity pledges of $153.5 million for its !fth high-yield vehicle, RCG Longview Debt Fund 5. The fund aims for a return of around 13%, by originating senior mortgages, mezzanine loans and preferred equity stakes of up to 90%. It also intends to write construction and bridge loans. RCG’s previous fund, the $602 million RCG Longview Debt Fund 4, had its !nal close in 2009 and is now nearly fully invested (Commercial Mortgage Alert).

CIM Group has closed on $350 million of initial equity for its latest opportunity fund, the CIM Fund 8. The vehicle is being pitched to institutional investors, with a $2 billion target. It will develop and redevelop properties in major markets. CIM’s most high pro!le investment to date is the ongoing development of a 128-unit luxury residential tower at 432 Park Avenue in Midtown Manhattan alongside developer Harry Macklowe (Real Estate Alert)

has held its !rst close, raising $75 million of initial equity for its fourth Latin America fund. The Los Angeles-based !rm will now launch a broad marketing campaign, targeting a total of $400 million. It is considering whether to hire a placement agent. Paladin Realty Latin America Investors will target office and multifamily investments, with 60% of the capital earmarked for development and the rest for acquisitions. The vehicle will focus on opportunities in Brazil, Peru and Colombia (Real Estate Alert).



Company Fund Target Investment Focus

Rockpoint Group Rockpoint Real Estate Fund IV $1.95B NA

Farallon Capital Management $350-$400M Hedge Fund

Velocis Partners NA $150M ($110M raised) Core office, medical-office and retail properties

Sare-Regis Partners Sare-Regis Multifamily Fund $100M raised Apartment complexes in the Western U.S.

TA Associates Realty Realty Associates Fund X $1.25B ($1B raised) Underperforming office, retail, multifamily and industrial properties

TPG Capital Management NA $1B Projects in need of cash infusions or new management

LEM Capital LEM Real Estate High Yield Debt And Preferred Equity Fund III

$300M ($128M raised) Buy and originate loans for multifamily properties

Dune Real Estate Partners Dune Real Estate Fund III $850M ($175M raised) Non-performing and other distressed debt

Noble Investment Goup Noble Hospitality Fund II $200M ($101M raised) Full and limited service hotels operating under national brands in major markets

Kimpton Group Holdings KHP Fund III $500M raised Development and redevelopment of boutique hotels in major markets

Easterly Partners U.S. Government Properties Income & Growth Fund II

$250M Properties net-leased to government agencies

C-III Capital C-III High Yield Real Estate Debt Fund 2 $75M CMBS and mortgages

JCR Capital JCR Commercial Real Estate Finace Fund 2 $106M raised CRE loans

RCG Longview RCG Longview Debt Fund 5 $153.5M raised Originating senior mortgages, mezzanine loans and preferred equity stakes

True North Management True North Real Estate Fund 3 $650M Providing rescue capital to distressed property owners, with emphasis on mezzanine and bridge loans

CIM Group CIM Fund 8 $2B ($350M raised) Development and redevelopment of properties in major markets

Menlo Equities Menlo Realty Partners 5 $150M Acquiring office and research properties in California and Seattle

Paladin Realty Paladin Realty Latin America Investors $400M Office and multifamilty properties in Brazil, Peru and Colombia

RCG Ventures RCG Ventures Value-Add Real Estate Fund 3 $100M Underperforming shopping centers in need of renovation

American Real Estate Partners Strategic Office Fund $250M Office properties via joint venture and separate accounts in the Washington area

MARCH INVESTMENT FUND ROUNDUP

Source: REFI, published reports


is in the market for its !fth fund, the value-added Menlo Realty Partners 5. The Palo Alto, Calif.-based investment manager is seeking to raise $150 million of equity. The vehicle would target a return in the mid-teens by acquiring office and research properties in California and Seattle, and is likely to team up with partners on investments (Real Estate Alert).

is looking to raise $250 million of equity for its !rst commingled fund. The investment manager’s traditional approach was to buy office properties via joint venture and separate accounts. The value-added Strategic Office Fund will target 14-16% returns via investments in the Washington

area. With leverage, the fund would have more than $700 million of buying power, and may team up with other investors on some investments (Real Estate Alert).

is in the market to raise $650 million of equity for its third high-yield debt fund. True North Real Estate Fund 3 will target opportunistic returns by providing rescue capital to distressed property owners, with an emphasis on mezzanine and bridge loans. The vehicle could also supply equity in the form of a direct investment in the property owner. Placement agent Atlantic-Paci!c Capital of New York is soliciting equity from institutional investors (Commercial Mortgage Alert).




National Appraisal Company Starts Up

Forty-two regional U.S. appraisal companies have joined forces to operate as Valbridge Property Advisors, according to a press release. The company now has 59 office locations and about 600 staffers across the U.S. “Client demand for a strong independent national commercial property appraisal services platform has driven the formation of Valbridge,” said Richard Armalavage, president and ceo.

KeyBank Closes Freddie Mac Loans

KeyBank Real Estate Capital has closed three Freddie Mac multifamily deals totaling $63.6 million, according to a press release. The properties are located in Utah, Arizona, and New Mexico and each of the !xed-rate loans carries a 30-year amortization schedule. The loans include a $33.2 million loan to Sentry Capital Co. for the acquisition of a Class A, garden-style apartment complex in Utah.

CBRE Sells Class A Offices

CBRE Global Investors has sold two Class A office properties to Rosemont Realty on behalf of two investment funds in its CBRE Strategic Partners U.S. fund series, the company announced. The buildings, 2000 Market Street in Philadelphia and Dulles View in Washington, D.C., are 95% and 94.5% occupied, respectively.

Paladin Forms Brazilian Venture

Paladin Realty Partners, a fund manager focused on Latin America, has announced a new programmatic joint venture with YOU Inc. Incorporadora e Participações S.A., the company announced. Paladin Realty is committing up to $75 million to the joint venture via its fourth institutional fund, with YOU Inc. investing approximately $32 million. With construction !nancing of 30-40% of cost, the program could develop more than 2,500 units.

Prudential Mortgage Expands Agency Program

Prudential Mortgage Capital has expanded its Agency Gateway Program for multifamily properties, according to a press release. The company is responding to increased interest from owners for bridge !nancing until their properties can qualify for longer-term loans from Fannie Mae and Freddie Mac. Prudential wants to originate as much as $200 million through the program this year, double the number that was targeted under the previous program.

ISL Green Taps Carlton To Market Lipstick Land

SL Green Realty Corp. has hired The Carlton Group to sell the land under the Lipstick Building in New York, according to a press release. The 650,000-square-foot office building is located on East 53rd Street in Manhattan, close to the Seagram Building, Lever House and 666 Fifth Avenue. SL Green has owned the land since 2007.

People & Firms



merit a rating of A-. It states that other agencies, especially S&P, were too generous in the assigned capitalization rate as well, and that the 7% given by S&P would be 8.5% if Moody’s had rated the deal. “A [7% cap rate] for us is consistent with only the highest quality malls having strong competitive positions and durable cash "ows,” said Moody’s director Tad Philipp.

Moody’s didn’t take issue publicly with ratings provided by Kroll Bond Rating Agency. In its own pre-sale report, Kroll applied a cap rate of 7.75% to value the property. The deal was also rated by Morningstar Credit Ratings, which also used a 7.75% cap rate.

Some investors who looked at the deal agree. “We share Moody’s concern about second-tier malls. We saw a nearby mall this week take almost a 100% loss severity,” said one CMBS investor in New York, referring to a mall in another Morgan Stanley deal issued in 2005. The Oviedo Marketplace, securitized in MSC 2005-HQ6 is 10 miles west of Altamonte was sold this week for $7.6 million. This means the $48.6 million loan on the property could experience loss severities upwards of 90%.

“Moody’s is out there appropriately sounding the warning bell saying, ‘hey, we’ve been the one consistent voice in this market and we’re starting to get nervous about credit,” said another CMBS buyer at a !rm in Connecticut. “When you don’t see their name on a deal there is a reason. Mr. Insurance Company Buyer should know it isn’t because the banks lost their phone number. They had a very different view on the deal,” he added.

One of the last malls Moody’s has assigned a 7% cap rate was the Ala Moana mall, the loan on which was securitized by Goldman Sachs last May. Philipp states that Ala Moana is one of

Moody’s Goes (Continued from page 1)Rising Realty Partners was closing in on a trio of acquisitions, poised to buy 500 Orange Tower and Stadium Tower from MPG Office Trust and Paci!c Center from Alliance Commercial Partners…Mike Mazzei had joined Ladder Capital from Bank of America. Mazzei, one of the founders of the commercial mortgage-backed securities market, joined as president and was set to expand the !rm’s new origination platform.

ONE YEAR AGO

“We like to buy at discounts, lever appropriately and generate double-digit returns. You can’t do this by buying trophy assets in the middle of cities [like New York].”—Jacob Frydman, ceo of United Realty Partners, on the New York-based investment management company’s acquisition philosophy (see story, page 8).

QUOTE OF THE WEEK

A “super” CMBS deal being mapped out by 10 Wall Street !rms was running into trouble. RBS Greenwich Capital bailed on the deal and several other banks were said to be looking to jump ship as well. Each of the banks involved was set to contribute $200 million to $300 million to the $2 billion deal…Lighthouse Real Estate Ventures closed on a nearly 2 million square-foot warehouse and "ex space from Baker Properties. The !rm paid $209 million for the 1.98 million square-foot portfolio, which included 25 properties located throughout New Jersey and Connecticut.

FIVE YEARS AGO

ramping up allocations. “It’s still the big American banks doing a lot of the lending, but you are now seeing a handful of foreign banks coming in,” said Delson. According to recent reports, the Bank of China has also been lending aggressively on trophy properties in major markets.

The deal is also unusual for its combination of hotel and residential units. Developments like this were common before the downturn, according to market players, but took a hit in 2008 when the lodging sector began to deteriorate. Hospitality has come back stronger and faster than many other property types, and investors say these kinds of projects will make a comeback.

Plans for the property include incorporating the heritage of the 250-year-old Baccarat Crystal company, which was acquired by Starwood in 2005. The hotel’s 114 rooms will include 26 suites and its development is part of a larger plan to roll out !ve Baccarat-branded properties over the next few years. Earlier this month, Starwood and partner Tribeca Associates launched sales for the condo component.

Calls to officials at Bank of America and Barry Sternlict, ceo of Starwood, were not returned. —Max Adams

Starwood Secures (Continued from page 1)the premier retail properties in the world, with $1,300 in sales per square foot. The risk factors that push the cap rate up on Altamonte include weak anchors, middle of the road inline sales and a highly competitive market. “Altamonte is surrounded in all directions by competing properties, and its merchandising and pricing strategies fall squarely in the middle of the pack,” Philipp said.

—Max Adams

forecasting consolidation in the brokerage community, which many believe has too many players chasing too few deals on both the leasing and sales sides. —Eleanor Duncan

Is Colliers (Continued from page 1)

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