Comings and Goings

I need a little help. Looking for a retail focused b/d to buy bonds (Corps, MBS, Sovereigns, etc.) from - any recommendations? No problem sourcing it at an institutional level, I'm talking about buying for my personal account, some directed trades. I'm tired of dealing with the TDAmeritrades of the world who are great at stocks, but don't know the difference between an MBS and a corporate and want to charge me a 150bp spread everytime I trade or are getting duped on the other side of the trade with an asinine price from the seller.

Don't expect much until after the new year passes. CMBS has been relatively quiet, but it's not dead. This week, we've seen lists that include everything from A4s down through AJs (on one of the TIAA deals), and several small seasoned credit pieces are floating around.

ZH and Sprott have their tin foil hats on again, but I moved mine prominently to my desk for easy access after reading.

Why didn't Peter Cooper Village/Stuyvesant Town default?

Tepper is heavily invested in CMBS - but some of his logic is wrong, or he's talking his book.

All we want for Christmas is some Jingle Mail

Morgan Stanley is turning in the keys to 5 properties that were part of the Blackstone EOP-flip. All are in San Francisco. I'd say these properties are off more than the 50% quoted in the article - they were the peak of CRE market, and they're in San Fran which already has issues that are worse than the average MSA.

My favorite part about the story is this:

“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”

They're not defaulting - they're just going to give the lender the keys and stop paying the mortgage payments, permanently, which is the opposite of what was agreed to in the loan docs. He sounds like the traffic cop who explained to me that he was giving me a "simple" speeding ticket, not one of those complicated ones.

The buildings Morgan Stanley is giving up are One Post, 201 California St., Foundry Square I, 60 Spear St. and 188 Embarcadero, Barnes said. The bank will continue to own the five other office buildings it acquired in the deal, Barnes said.

Comings and Goings

Bridger has started making Conduit loans again. First?

Fitch was out this morning with an update on CRE CDOs - delinquencies are just at 12%! I would've guessed much higher. Maybe should revisit some of those bid lists that keep getting dismissed.

Extended Stay examiner, "earned" $4mm, or 10% of the original senior note. What a great job. The new structure looks like it will be a $1.8bln senior, 775mm second, 471mm preferred stock going to the senior mortgage holders... Mezz and preferred stock holders are getting 10% of the new common.

ZeroHedge puts some more CMBS loan updates up. Full disclosure, the loss severities are extremely low (lower than historical averages even in good times) and the information is from the servicer comments and is a little dated (some of the information is almost 2 years old). Still interesting to some people based on the comments on ZH.

Zell has been on the horn all week now that his new fund is getting fat. CRE will recover before employment does is the message.

Stuy Town Update

(Press release from Tishman)


December 14, 2009

Joint Statement from Tishman Speyer, Wolf Haldenstein Adler Freeman & Herz, and Bernstein Liebhard

Re: Amy Roberts et al. v Tishman Speyer Properties et al.

“Representatives of the property owner and counsel for the plaintiffs, Wolf Haldenstein Adler Freeman & Herz LLP and Bernstein Liebhard LLP, today reached an interim agreement to adjust rents in each apartment affected by the recent Court of Appeals decision in Roberts v. Tishman Speyer Properties to an estimated rent-stabilized level for January and February 2010.
The rent adjustment will be reflected in the January invoices that will shortly be sent to residents. During the interim agreement, each affected tenant will also be afforded certain rights available under the Rent Stabilization Law, including the right of renewal and succession rights.

“In addition, Tishman Speyer and BlackRock have reached agreement with counsel for the plaintiffs on a more inclusive, six-month agreement covering a wider range of unresolved issues beyond those addressed in the interim agreement. The six-month agreement, which is intended to achieve an expedited resolution of the Roberts case, is contingent upon consent by CW Capital, the special servicer acting on behalf of the property’s senior lenders.”

Inland pricing rumored

Reuters/BBG reporting the top two classes at +150 and +205, respectively.

Someone hit me back with the structure?

UPDATE (Hotel Tango crabsofsteel)

Amount Rating (S&P/Realpt)
Class ($Mil.) sprd
A-1 58.354 AAA S+150
A-2 330.646 AAA S+205
B 24.100 AA S+360
C 42.900 A S+420
D 44.000 BBB-

NAIC - "We'll just rate our own bonds!"

Risk.net reports: You have to have sympathy with their plight - the US National Association of Insurance Commissioners (NAIC) sat down a long time ago and put restrictions dictating how much an insurance company must keep in reserve based on an investment's rating; a rating determined by NRSROs.

Obviously, in hindsight, and even just with sound investment management practices, no one should make an investment solely based on a rating. Nonetheless, that is how virtually all funds are set up to some extent ("Investment Grade" fund, "AAA" portfolio, you see it over and over).

On the other hand, the new methodology has a little bit of the Fox watching the henhouse feel to it, despite being implemented by PIMCO. They're already using it for RMBS, and they're looking at moving it to CMBS.

In an exclusive interview with Life & Pensions, Kermitt Brooks, first deputy insurance superintendant (sic) for New York State Insurance Department, speaking on behalf of the NAIC, said that after evaluating the performance of its new agency-independent capital requirement regime for residential mortgage-backed securities (RMBSs), the regulators would consider expanding the methodology to other structured securities.

"The NRSROs did a good job on single-name securities like corporate bonds, but not on structured products. Let's see how the new approach with RMBSs works – if it does, we will consider whether we want to expand into other structured products, like CMBSs."

On a side note, hopefully this will hasten the demise of the rating agencies...

p.s.s. another win for PIMCO. After TCW's epic fail this week, customer's who are fleeing TCW will naturally be attracted to PIMCO. Despite outperforming PIMCO time and time again, PIMCO carries much better brand recognition as a fixed income powerhouse.

SPG taking down Prime Outlets

I didn't see that coming - Simon paying $700mm, $2.325 bln total valuation. Lightstone needed cash from somewhere because no one would accidentally confuse them with savvy real estate investors. Probably a real good deal for Simon.

Prime Outlets Property Roster

Property	City / State	GLA (sq. ft.)
Prime Outlets Orlando	Orlando, FL	773,368
Prime Outlets Birch Run	Birch Run, MI	681,621
Prime Outlets San Marcos	San Marcos, TX	672,093
Prime Outlets Grove City	Grove City, PA	532,152
Prime Outlets Williamsburg	Williamsburg, VA	521,604
Prime Outlets Hagerstown	Hagerstown, MD	484,906
Prime Outlets Ellenton	Ellenton, FL	476,755
Prime Outlets Jeffersonville	Jeffersonville, OH	409,869
Prime Outlets Pleasant Prairie	Pleasant Prairie, WI	401,436
Prime Outlets St. Augustine	St. Augustine, FL	338,414
Prime Outlets Barceloneta	Barceloneta, PR	331,813
Prime Outlets Gaffney	Gaffney, SC	303,602
Prime Outlets Gulfport	Gulfport, MS	302,783
Prime Outlets Queenstown	Queenstown, MD	298,409
Prime Outlets Huntley	Huntley, IL	278,759
Prime Outlets Calhoun	Calhoun, GA	253,667
Prime Outlets Lebanon	Lebanon, TN	226,869
Prime Outlets Lee	Lee, MA	224,519
Prime Outlets Florida City	Florida City, FL	207,873
Outlet Marketplace	Orlando, FL	204,866
Prime Outlets Pismo Beach	Pismo Beach, CA	147,416
Prime Outlets Naples	Naples, FL	145,966
Total		8,218,760

CRE Mortgage Market Share

Bad Comparisons - MBA Edition

The MBA is out with their little delinquency chart that tells you nothing. It's like saying the apples at the corner market cost more than the steak at the butcher?!?! I know that they now disclaim as much, but why bother putting out a useless chart in the first place.

I'm not sure why they don't just put out a chart that compares, say, 60+ day delinquencies for each lender group. I've asked, and they claim not to have the data, which makes me wonder where they get the data from that they do have - any source should have both.

Comings and Goings

The current CRE crisis will be over in 2011.

This guy says you should buy REIT equity now! I couldn't disagree more.

Banks fully understand their CRE risk, and it's manageable. Nothing to worry about there. Defaults are not expected to exceed 11.3%. Interestingly, in another article out by the same rating agency (Fitch) on the same day, is also quotes max losses for recent vintage CMBS at 8.7% and max CRE related losses at Insurers (presumably including their CMBS) at 8.37%.

GGP may come out of this whole thing mostly intact, despite angling by a number of players including Ackman, Brookfield, Simon, and Westfield.

Istithmar owns a number of trophy properties in the U.S. and is a subsidiary of Dubai World's. We saw a couple of sell-side reports listing CMBS exposures, but they were not consistent with each other and both were missing one property that we know of - as time allows, we'll publish a combined list. Most of the properties are in NYC, most are recent vintage, highly levered, and underwritten poorly. Some will default imminently.

Wheeler to join Amherst Securities

From Bloomberg (no link):

Wheeler will join the company early in 2010 as head of CMBS strategy and “the company intends to build a comparable operation” to its residential-mortgage bond business, Amherst said today in an e-mailed statement...
... “We are very pleased to welcome an executive of Darrell’s caliber,” Amherst Chairman and Chief Executive Officer Sean Dobson said in the statement. “Together with Laurie Goodman, who oversees our RMBS strategy efforts, we believe Amherst is
now poised to provide more knowledge, insight and reliable data on the entire mortgage industry than any other broker-dealer.”

$625MM Inland Deal

The 3rd CMBS deal A.D. is coming from Inland - also looks like it'll be non-TALF. From the WSJ:

The $625 million in 10-year financing is backed by 55 retail stores owned by Inland throughout the country, and represents 75% of the property's value. The loan-to-value ratio is higher than the 50% of the Developers Diversified offering, which was collateralized by 28 shopping centers. Despite the relative high leverage, the Inland debt was underwritten based on factors including current property values, rent rolls and the potential for more downward pressures on cash flow as the health of commercial real estate typically lags behind that of the overall economy by a year or two.