Thursday, February 25, 2010

Appaloosa attacks Special on Stuy Town

Tepper sues CW Capital...

In the lawsuit, Appaloosa says CW Capital shouldn't have moved to foreclose on the complex while earning fees. The complaint says a foreclosure could cost as much as $200 million in transfer taxes, which would be paid by the investors who own the CMBS bonds....

"The key is, the servicer has to practice its fiduciary duty" to CMBS investors, Mr. Tepper said. "Why did they go into foreclosure? Why are they taking all these excess costs?"

Tuesday, February 23, 2010

2009 was a tough year for retail...

but, as ESL so eloquently put it in his SHLD annual letter, it was good for some retailers...

n 2009, we kept expenses under control and stayed focused on our vision and strategic, operational, and financial goals. We were both prudent and opportunistic in spending money and in allocating capital at a time when many others had to make major adjustments...

...On a less positive note, we regret the closing of roughly 60 stores in 2009...

The pace of expansion in retail generally and in big-box retail more specifically has slowed dramatically in the past year. I have written previously about what I believed was the reckless expansion of retail space leading to lower profitability for many retailers and to low or negative returns on the investment required to expand space...

While a number of our major competitors saw their EBITDA decline in the past year, we were pleased to report a meaningful improvement in Adjusted EBITDA from 2008 to 2009 and we aspire to repeat this improvement again in 2010...

I just finished Thomas Sowell’s most recent book, Intellectuals and Society. ..

OK, I read books I can relate to all the time, but they're rarely named silly names like "Intellectuals and Society". I went to school with Tommy Sowell, and hung out with him a fair amount, mostly due to his ninja throwing star collection and his older sister, Stacey. OK, let's get serious again...

I fear that Americans have been provided a false choice between a little more and a lot more regulation and taxes. We keep hearing more ideas to create jobs and generate growth that almost exclusively require more government spending. Jobs can come from government, but those jobs get paid for by taking money from the private sector, reducing the private sector’s ability to provide jobs. On the other hand, there are many who believe that less regulation, less government interference, less arbitrary regulation when it does exist, and lower government spending will generate more growth and more jobs. I agree with those views.

As one of the largest private sector employers in the United States, Sears Holdings recognizes the challenges of finding good talent, developing good talent and keeping good talent. We have created not just new jobs, but new job categories and job descriptions as our industry changes and as new technology provides both new opportunities and new challenges.

There is a lot more there worth reading and analyzing. I never really understood why ESL did the SHLD purchase, or the AZN for that matter, but I've always respected ESL

And, to be perfectly honest, I didn't read the whole letter, or apply any stringent analysis, I just found some great pictures on that seemed to fit the story, and hey, it's Friday night after all, oh wait, it's not Friday - no excuses.

TALF Studs and Wallflowers

CUSIPs Bonds
05947UR59 BACM 2005-3 A3A
059512AB9 BACM 2007-3 A2
07383F3X4 BSCMS 2005-PWR7 A2
07383F5K0 BSCMS 2005-T18 A4
07387BEB5 BSCMS 2005-PW10 A4
07387MAE9 BSCMS 2006-PW11 A4
07388NAB2 BSCMS 2006-T24 A2
07388PAE1 BSCMS 2006-PW14 A4
07388QAC3 BSCMS 2007-PW17 A3
073945AB3 BSCMS 2007-T28 A2
14986DAF7 CD 2006-CD3 A5
190749AB7 CWCI 2006-C1 A2
20047EBG6 COMM 2006-C8 A2B
20047QAE5 COMM 2006-C7 A4
20173QAB7 GCCFC 2007-GG9 A2
20173TAB1 CSMC 2007-C4 A2
20173WAC2 CMLT 2008-LS1 A3
22544QAB5 CSMC 2007-C3 A2
22545BAC5 CSMC 2006-C2 A3
22545XAB9 CSMC 2007-C1 A2
22545YAB7 CSMC 2007-C2 A2
36246LAB7 GSMS 2007-GG10 A2
36828QQE9 GECMC 2005-C4 A4
396789JS9 GCCFC 2005-GG3 A3
46628FAB7 JPMCC 2006-LDP7 A2
46629GAE8 JPMCC 2006-CB16 A4
46629PAM0 JPMCC 2006-LDP9 A2S
46630EAC4 JPMCC 2006-CB17 A4
46632HAB7 JPMCC 2007-LD12 A2
50177AAB5 LBCMT 2007-C3 A2
50179AAC1 LBUBS 2007-C1 A3
50180LAC4 LBUBS 2008-C1 A2
52109PAB1 LBUBS 2007-C6 A2
52109RBK6 LBUBS 2007-C7 A2
55312TAB9 MLCFC 2007-6 A2
55312VAB4 MLCFC 2006-4 A2
59022HDU3 MLMT 2004-KEY2 A4
59025KAB8 MLMT 2007-C1 A2
60688BAB4 MLCFC 2007-8 A2
61745MT45 MSC 2004-HQ4 A7
61750WAX1 MSC 2006-IQ12 A4
61751XAE0 MSC 2007-T25 A3
61754KAC9 MSC 2007-IQ14 A2
929766TP8 WBCMT 2004-C14 A2
92976VAE8 WBCMT 2006-C25 A4
92977QAB4 WBCMT 2006-C27 A2
92977RAD8 WBCMT 2006-C26 A3
92978MAB2 WBCMT 2006-C28 A2
92978NAB0 WBCMT 2007-C33 A2
92978PAE9 WBCMT 2006-C29 A4
92978YAB6 WBCMT 2007-C32 A2

059497AV9 BACM 2007-1 A3
17310MAE0 CGCMT 2006-C5 A4
50179MAE1 LBUBS 2006-C6 A4
61751NAD4 MSC 2007-HQ11 A31
92978QAC1 WBCMT 2007-C30 A3

TALF applicants, please form a line to your right:

Monday, February 22, 2010

Nothing to see here - CPPI up 4.1%

December 2009 commercial property prices shot up 4.1% according to Moody's CPPI index, providing journalists and analysts the world over an opportunity to call an early bottom... (No link, on BBG)

The Moody’s/REAL Commercial Property Price Index climbed 4.1 percent from November, the second straight monthly increase, Moody’s said today in a report. Transaction volume rose more than 75 percent. Values are down 29 percent from a year earlier and 41 percent lower than the peak in October 2007.
“Two months of positive returns and one month of higher transaction volume does not allow us to discern a trend just yet, particularly in light of the fact that year-end commercial real estate activity can distort the true condition of the markets,” the report said.

Saturday, February 20, 2010

Vail wants Whistler

Deal Junkie has an update

Are there any legacy BOA employees in the BOAT?

One Bryant Park lost another 1/2 dozen legacy BOA traders and salesmen from their structured products group since the start of the year. They may now have completely wiped out the entire seasoned and successful team that was there... It's really a lose-lose for all parties.

Wednesday, February 17, 2010

Goldman working on Glimcher loan

Bloomberg reports.

I'm really just referencing the story for the quote below...
Restarting the commercial mortgage-bond market is “like recovering from a very bad motorcycle accident,” said William Glazer, president of Keystone Property Group of Bala Cynwyd, Pennsylvania

Tuesday, February 16, 2010

SPG just offered to buy GGP

Looks close to market close price... cash ($6) and equity ($3+) offer...

UPDATE: Don't forget my nifty interactive map showing the two companies postcoital.

Sunday, February 14, 2010

PCV/ST - The Tenant Bid

Lest we forget, the tenants made a bid north of $4 billion before Blackrock/Tishman came in with their $5.4 billion offering. Well, they haven't gone away...

Note that Rose Associates got the management contract after the above article was published.

Saturday, February 13, 2010

Comings and Goings

According to one reporter (see image at bottom), there was an amazing event where a multi-borrower CMBS deal was completed without anyone in the CMBS market realizing it . The headline reads, "Keystone Completes Market's First Multi-Borrower CMBS in Two Years". Of course, that is not exactly true - Keystone made a loan that they hope to put in a CMBS deal in 4 or 8 months, or so...

Not sure if you heard, but delinquencies are up:
The hotel delinquency rate grew the most in January, to 9.82%, followed by retail loans, which make up 30% of the total outstanding balance and 40% of last month's new delinquent loans. On a percentage basis, the month-to-month change in the delinquency rate--which now sits at 5.24%--was bigger for retail than the hotel sector.

Markit added additional volatility, er, I mean, they added a new tranche to the CMBX index to represent a basket of AM bonds.

DDR is no longer pursuing a second CMBS deal, instead raising $304mm in new equity (equity is cheaper and easier than senior mortgage debt).

It's disturbing no matter how you twist it - reality, photoshopped, reality, photoshopped...

Wednesday, February 10, 2010

CMBS In the News

The WSJ reports on 3 CMBS stories:

Notes the loan is going into a multi-sponsor deal slated for the 2nd quarter.
The owner of the Keystone Summit Corporate Park, private-equity firm Keystone Property Group, recently refinanced the building for $53.5 million, including a $41.5 million first mortgage from Deutsche Bank AG and a $12 million junior loan from Pembrook Capital. What makes this deal stand out is the plan Deutsche Bank has for the first mortgage.

First Ritz to ever default. Ever. Described by a former colleague as 45 minutes into the desert, the middle of nowhere.
The hotel's closure is the latest stumble for the Lake Las Vegas development, which was planned around a manmade lake roughly 15 miles east of the Las Vegas Strip. Developer Transcontinental Corp., led by Ron Boeddeker and Texas tycoons Sid Bass and Lee Bass, began developing the 3,600-acre project in the 1990s to include thousands of upscale homes, three golf courses, a small casino and two resorts. But Transcontinental defaulted on a $540 million loan from lenders led by Credit Suisse and sought Chapter 11 bankruptcy protection for the project last year..

Regarding the MBA default on their building, Petrie calls Kempner a dolt:
The worst part of buying "that stupid office building," Mr. Petrie says, was that it led to emergency cost-cutting that forced the MBA to dismiss some "wonderful people" on its staff. Mr. Kempner, who resigned in 2008, says the board approved the purchase unanimously. "It was not my decision," he says. An MBA spokeswoman declined to comment.

I'm not even going to do an outake of this FT story - the reporter did a poor job writing this up - but maybe this is of interest to someone because it has opinions based on a survey of how various markets will perform (including CDOs and CMBS).

Also in the FT, the Beltway Battle, discusses the attempted takeout by Brookfield for CarrAmerica's DC properties, that Tishman has defaulted on. I initially thought the article was talking about the CarrAmerica portfolios in BALL 2006-BIX1 and CGCMT 2006-FL2, but the addresses listed in the article do not match up.

Monday, February 8, 2010

CoStar buys MBA building

CoStar just paid $41.25mm for a building that cost $90 mm to build just 2 years ago. But wait, there's more. MBA, the mortgage bankers association of America, paid for it partly with a $75mm mortgage loan. Although I don't know the terms, the timing is about right for a development loan to be coming due.

It's a little ironic that a major CRE news/data provider is buying a distressed property (it's shiny though) from a industry group that represents CRE bankers. One might venture so far as to say it is representative of the shift from large banks to boutiques.

UPDATE 2/9/10: The WSJ had this great quote today that is sure to make someone go postal...
The worst part of buying "that stupid office building," Mr. Petrie says, was that it led to emergency cost-cutting that forced the MBA to dismiss some "wonderful people" on its staff. Mr. Kempner, who resigned in 2008, says the board approved the purchase unanimously.

Friday, February 5, 2010

CMBS Delinquencies Accelerate

I know this is not new information, and it was widely reported over the last couple of weeks, but some charts to put it in perspective below from the Group Formerly Known As Wheeler's (GFKAW):

Nevada and Arizona are really sucking wind with >14% delinquencies. Behind them, there are a number of other >10% states, but most are relatively low overall CMBS exposures (i.e. Rhode Island, Virgin Islands, Montana, etc.).

Thursday, February 4, 2010

The Golub Program

Cuomo has loaded his 50cal and has the sights squarely aimed at Vantage Properties for the whole kick out the pesky rent control tenants and replace them with market-paying tenants strategy.

Vantage & Apollo (aka AREA) Multifamily + CMBS Loan deals:
Esquire Portfolio (1.49%; CSMC 2007-C4)
Broadway Portfolio (2.13%, CSMC 2007-C2)
Savoy Park (6.25%, CSMC 2007-C1) (fka Delano Village)

"Vantage's business plans refer to this strategy of removing tenants from rent-regulated apartments to convert them to market rate apartments as the company's 'Golub program,'" the New York Attorney General's letter states. "Vantage's business plans highlight its Golub program as a means of generating tenant turnover. As reflected in Vantage's annual reports to investors and business plans, Vantage's business goals are to "generate unit turnover through active management of the Golub program and other legal efforts."

"The investigation revealed that Vantage often failed to exercise due diligence prior to serving tenants with Golub notices or other legal termination notices," the letter continued. "Vantage often commenced Housing Court proceedings seeking to evict tenants from homes in which they had lived for decades based on little more than database reports, which were often incorrect, or contradicted by other evidence in Vantage's possession."
..."Any experienced commercial real estate operator in New York would know better than to engage in the practices alleged in the AG's letter," said Charles Cecil, partner and CEO of Opin Partners, a CMBS and real estate investment advisor and investment management firm in New York.

The "Golub Program" is not a new movie in the Bourne series, but I liked it as a headline. It is just what Vantage termed it's strategy in reference to the "Golub Notice" that is required to be delivered to the tenant 90-150 days prior to eviction/removal from stabilized rent.

I'll update these as I discover more. Cuomo also took out a GBU-24 Paveway III and aimed it Ken Lewis and BOA this morning, and took off his white glove and smacked Moynihan across the face several times and challenged him to a pissing contest. Very busy over at the AG office today.

Wednesday, February 3, 2010

Riverton headed to auction

Riverton was back in the news today.

Riverton, like a number of complexes during the real estate boom, was bought for top dollar in 2005 by a company led by the developer Laurence Gluck, who had a plan to increase profits by replacing tenants in rent-stabilized apartments with market-rate tenants.
Lawyers familiar with the Riverton foreclosure said the sale would probably take place in March. Several groups have expressed interest in buying the property, which has 1,228 apartments in seven buildings, many of them surrounding a 700-foot-long grassy mall. But it is unclear whether any of them will offer enough money to satisfy the lender, which is represented by Wells Fargo Bank.

“We’re very interested in buying the property,” said Adam Holland, president of Jackson Management, who heads a group of investors who are circling the complex. Like Stuyvesant Town and Peter Cooper, Riverton was built in the 1940s by the Metropolitan Life Insurance Company. It sold Riverton in 1976 to Jack Holland — Adam Holland’s grandfather — and Charles A. Vincent for $12.5 million.

They, in turn, sold it to Mr. Gluck of Stellar Management in 2005 for $135 million. A year later, Mr. Gluck refinanced, getting a $225 million mortgage and a $25 million loan. That enabled him to recover his initial investment of $44 million and collect tens of millions of dollars in profit.

See history on Riverton here

Cry Me a River

WSJ "reports" on small investors losing out in CRE.
...the 27 owners of 1023 Cherry Road in Memphis, Tenn...lost all $7.1 million they invested...

Many such deals were structured as so-called "tenant-in-common" ventures, known by the acronym TIC. Often, the TICs took out commercial mortgages that were packaged into commercial-mortgage-backed securities.

Cherry Road property's manager, TIC Properties Management LLC, contacted the "master servicer" about a loan extension, according to Paul Aiesi, the company's chief investment officer. But the servicer, KeyCorp, was only in charge of passing along interest payments to the CMBS investors every month. According to CMBS rules, a master servicer has no power to modify loans before they go into default. A KeyCorp representative declined to comment.

Mr. Aiesi says the servicer offered to extend the loan if the investors would contribute another $2 million in equity. He recommended against that move.

"The property is worth significantly less than the debt on it," he explains.

Cherry Road investors say they are innocent bystanders who are paying a painful price for the credit crunch.

"We're not going out to fancy dinners and we're not taking vacations or major trips," says Steve Harris, a retired television-advertising executive who lives in Valley Center, Calif. He declined to say how much he invested in the Cherry Road building.

The article implies this default has something to do with the fact that this was a TIC deal or that the loan failure has something to do with the CMBS market. How shoddy. If roles were reversed and the property was owned by a corporation on Wall Street, and the loan had been made by an artist living in the East Village, the workout would likely have been the same - except the emotion would be removed. It is a 100% vacant office building in West Tennessee, and has been 100% vacant for almost 4 years. The servicer may have been able to let them slide since the rent was still coming in, but they did actually offer them an extension in exchange for new equity - which would likely be required for deferred maintenance, TI/LC, etc. Only then did the owners walked away.