CRE Slump Not as Bad as S&P Feared

Phew!

PCV/ST Foreclosure rescheduled for September 8th

This came out Friday on BBG:

Aug. 20 (Bloomberg) -- Pershing Square Capital Management LP and Winthrop Realty Trust set a new date for a foreclosure auction on New York’s Stuyvesant Town-Peter Cooper Village after a judge halted a sale planned for next week.
The auction will take place Sept. 8, pending the resolution of a lawsuit brought by the property’s senior mortgage lenders, who object to it, according to letter filed in New York State Supreme Court today.
Pershing, led by Bill Ackman, and Winthrop had sought an Aug. 25 foreclosure auction after buying mezzanine debt on the property, Manhattan’s biggest apartment complex. Senior lenders filed a lawsuit claiming that the venture may not move to take
over the 80-acre apartment complex until the mortgage holders are paid the $3.66 billion they are owed.

Mr. Obvious hired by Fitch Ratings

Fitch reports today that European Mortgage Defaults are rising.

510 Madison trades at $1,000 psf

BXP buys from Macklowe the WSJ reports. On the one hand, that's the richest price we've seen since this little journey into the fourth circle of our own little CRE inferno, but at the same time BXP speculates in the article that Macklowe probably lost all his equity and they're basically buying the debt.

JPMCC 2010-CNTR $484.6MM

JPM just got a $484.6mm deal rated by Realpoint:

The issue is based on a single JPMorgan loan collateralized by 72 retail properties in 20 states, with tenants including The Kroger Co., Kmart, Burlington Coat Factory and Big Lots, Realpoint said. The borrower is Centro NP LLC, a unit of Centro Properties Group, a U.S. and Australian mall owner.

....

Realpoint said the issue has a loan-to-value ratio of 78.7 percent, based on the "loan cut-off balance" and an aggregate property value of $616.3 million. Its debt service coverage ratio would be 1.64 times.

--10/8/10 Updated deal name. Priced mid September, settled 9/13.

Bank of America, N.A. v. PSW NYC LLC

BOA sues Ackman and Winthrop for violating intercreditor agreement, calls them dirty rotten liars... Lawyers get richer, legal expense bill to Trust goes up, shortfalls coming soon.

(N.Y. Sup Ct.) Bank of America, N.A. v. PSW NYC LLC, Docket No. 651293/2010
(Aug. 18, 2010)

Balloon Defaults decline

NREI reports, that Trepp reports, that Balloon defaults are slowing. Nearly 50% of maturities paid off on time in July, versus less than 40% in June, and it is the highest percentage since 2008.

They also touch on the topic that CMBS is obviously gone in a big way, and new private lending is filling the gap - a topic frequently discussed amongst all the RE guys out there trying to reinvent themselves. They also note that most of the problems refinancing are more on the B & C assets, and that trophy assets are not having the same issues obtaining financing.

One thing that is not clear, is how harsh they were with the Balloon Default definition - for instance, if a balloon paid off 1 month after it was due, its probably not fair to count that as a balloon default if it had a material impact on the numbers. I'd probably put a 3 month band around the maturity date, perhaps even 6 in this environment. Stuff happens that slows down refis.

New Issue - DLT 2010-1 and 2010-2

DLT 2010-1 -- $94.2mm (April 2010)
DLT 2010-2 -- $26.9mm (July 2010)

Seem to be USD bonds and collateral, backed by defeased loan pools. Really don't know anything else, and just missed it whenever they got done by DB.

New Issue - JPM $1bln

Don't have the details yet, but Bloomberg states they already placed the 10yr $50mm B piece with H/2 Capital Partners for a 14% yield.

MBIA's CMBS losses

Floyd Norris at the NYT reports:

The company said it expected to have to pay out $230 million over time on insurance for CMBS — commercial mortgage backed securities. As Rob Haines of CreditSights pointed out, the company in the past claimed that portfolio was “nearly bulletproof,” although it did cite a $123 million number three months ago. But officials then played down that number, saying they still thought the most probable result was that, in the end, there would be no losses on CMBS exposure.

And, the most laughable comment is directly out of the 10Q:

certain debt coverage ratios have deteriorated in this sector.

A few comments here. MBIA did not wrap CMBS deals. Okay, they did - they wrapped virtually every tranche of every military housing deal, they wrapped the senior tranches on 7 net lease deals between 1999 and 2005, and they wrapped a couple of foreign deals between 1994 and 2003. But that business was nothing compared to selling CDS. I assume they mostly sold CDS on A1-A4 tranches of CMBS deals, but I don't have a good way to look at their holdings. There were always rumblings about some shady dealings going on with MBIA around new issue deals back at the peak of the market, but the rumors seem to be unfounded/unproven.

So, anyone know where they keep their holdings? I don't see a 13f - do they have something similar that they have to file?

Russia - Just Like America

The top doctor in Russia stated today in the Moscow Times, "If a businessman visiting Moscow stays in a hotel, or an office, or a car, it is safe,".

It's cool, nothing to see here... oh, them, those extra dead people in Moscow, don't look at them. Look over there, ... no, not at Ozersk where the state of emergency was declared, at the big bunny, look at that bunny.

Nothing to see here, move along people...

Ackman Enters The Fray

Bloomberg reports Ackman jv'd to buy the senior most 3 mezz pieces from Peter Cooper/Stuy Town:

The joint venture paid $45 million for the senior-level mezzanine debt and began foreclosure proceedings on the property, the companies said today in a statement. Pershing Square, based in New York, owns 77.5 percent of the venture.

CRE Industry Groups remind Congress CRE maturities suck

From ZH:

The undersigned commercial real estate industry associations strongly support the Community Recovery and Enhancement Act (CRE Act), important legislation introduced by Congresswoman Shelley Berkley to help incentivize equity investment in distressed commercial real estate assets and to address the pending crisis threatening community banks that currently hold significant real estate debt on their books.

According to the February 11, 2010 report by the Congressional Oversight Panel on the Troubled Asset Relief Program, small and mid-sized banks will bear the brunt of coming losses on commercial real estate loans. The report found that nearly 3,000 banks have concentrations in commercial real estate loans, including 2,115 banks with $100 million to $1 billion in total assets. Banks hold $1.5 trillion, or 45 percent, of the $3.4 trillion of commercial real estate debt in the U.S.

We believe that the CRE Act is a thoughtful and targeted solution to the current credit crisis in commercial real estate. This legislation will enable banks to convert troubled loans into performing assets through modest tax incentives to attract new equity capital to existing commercial real estate projects. The new investments would be specifically used to pay down debt, resulting in lower loan-to-value ratios of existing loans as well as improved debt coverage ratios. Importantly, the CRE Act relies upon market factors and economic incentives, rather than direct government involvement, to determine winners and losers.

Under this temporary tax incentive proposal, qualifying investments must be made before 2013 and only applies to assets purchased before 2009. At least 80 percent of the newly invested project capital must be used to reduce the outstanding balance of debt on the asset, with the balance going toward capital improvements, such as energy efficiency enhancements or leasehold improvements to attract new tenants. The new investment would qualify for a one-time 50% bonus depreciation and investors would be able to deduct any losses associated with the qualifying investment without regard to the passive loss limitations under Section 469 of the IRS Code.

We believe that this proposal has been carefully crafted and will help rebalance the debt vs. equity equation plaguing the commercial real estate and community banking industries. By giving lenders the ability to responsibly refinance debt and rebalance capital reserve levels, the CRE Act will provide the opportunity for additional lending capacity that will help stimulate lending to small businesses, job formation and economic growth in communities across the country.

Signed,

International Council of Shopping Centers
National Multi Housing Council
National Apartment Association
National Association of Realtors®
Institute of Real Estate Management
CCIM Institute
Associated General Contractors
Society of Industrial and Office REALTORS®

Hartford Takeover Rumors...

FDIC looking to securitize "distressed" CRE

And there it is, RTC Part Deux, that means that all of those real estate funds that raised capital to go after distressed loans and properties are going to have to change their docs and get investor permission to buy CMBS to stay in the game... If they haven't already been shut down after running up against the end of their investment period.

GSMS 2010-C1 ($788.5mm) *UPDATED* Launch

GSMS 2010-C1

3 other tranches; 23 mortgages/48 properties; 78% retail; WAVG coupon 6.081%, 11% have additional debt. 25 & 30 Ams.

Class	DBRS/Mdy	Size($mm)	WAL(yr)	CE%	Guidance	Launch px/sprd
A1	AAA/Aaa	$ 232.00	4.96	18.50%	S+130a	$103/+125
A2	AAA/Aaa	$ 410.62	9.86	18.50%	S+140-145	$103/+135
B	AAA/Aa2	$ 27.60	9.9	15.00%	S+200-225	$103/+190
C	AA/A2	$ 35.48	9.9	10.50%	S+275-300	$101/+265
D	BBB(high)/Baa3	$ 35.48	9.9	6.00%	S+375-400	WAC/+400

Announced 7/28
Guidance 7/29
Launched 8/4 - inside of guidance!
Priced 8/4 - at Launch Levels

Savoy Park (CSMC 2007-C1) $210mm Seeks Refi

Another deal brought to you by a jv between Apollo (AREA) and Vantage Partners... Anyway, this is another rent control story in NY. Bought it for $175mm, leveraged it up to $367.5mm with $210mm in CSMC 2007-C1, and the $157.5 remainder in B-notes and mezz.

Without even looking, you can guess that this loan is with the special, but just so you know, it's not covering with a 0.49x DSCR (NCF; senior debt) at 97% occupancy. There is a healthy reserve, but even the Realpoint spokesperson quoted in the story in yesterday's WSJ notes that it should last "about another two months".

It's due 1/11/2014

Parkus lands at Morgan Stanley

Richard Parkus, one of the few CMBS guys not to change seats over the last few years, finally jumped from Deutsche (-1) to MS (+1).

Blackstone's Property Deals

The WSJ summarizes Blackstone deals this year

• Blackstone and Glimcher buying Pearlridge Center on Oahu for $242mm from Northwestern Mutual
  
• Blackstone bought 60% stake in Glimcher's Lloyd Center (Portland) and Westshore Plaza (Tampa) in March for $60mm + debt assumption -- see here-both serve as collateral in 4 2003 deals.
  
• Caruso Affiliated & TPG Capital paid $750mm for retail and mixed-use out West
• Blackstone is buying an 80% stake in 17mm sq ft of warehouse space for $105mm + debt from an Eaton Vance Fund. Prologis is the joint owner and will keep its 20% stake.
• Blackstone closing this week on a $500mm purchase of a portion of GGP, this week.
  

New Issue - Vornado $600mm+

Coming soon. Will update with details when known.

Trepp Updates July Delinquencies

Trepp reports that delinquencies are worser-er, but are getting lesser worse each month (sic), or something.

30+ Days Delinquent
July-09 - 3.71%
Jan-10 - 6.49%
Apr-10 - 8.02%
May-10 - 8.42%
Jun-10 - 8.59%
Jul-10 - 8.71%

It wasn't really written that poorly, I'm just ornery and picking on them.

FTC kicks out 3 Prime Outlets from Simon Takeover

Bodamer reports that the FTC kicked out 3 centers and reduced Simon's investment by $700mm on the Prime Outlets deal...

Securitization IS the answer after-all?

American Banker reports the FDIC sold securities backed by $471.3 million of performing single-family mortgages originated by 16 failed banks.