Multiple New Issue - WFCM 2010-C1 ($735mm); Hilton; Extended Stay

WFCM 2010-C1 ($735mm) was announced today - first issue off the new shelf for Wells. Collateral is 37 loan, 59 properties, 43.5% BOA, 43% WF, 13.4% Basis RE Cap 2. More to come...

Also, the WSJ reported today that the two largest Hotel CMBS clusterf*cks are coming back with new issues.

Hilton is purportedly first in line with $3bln (this is original debt, still on BOA & GS books).

Extended Stay is then expected out with $2bln before November to partly fund the $3.9bln buyout by Centerbridge/Paulson/Blackstone.

And the Real Winner is...

We called it to soon back in March. The Centerbridge/Paulson/Blackstone investor group swooped in to take Extended Stay out of bankruptcy, quashing the creditor-approved group led by Starwood. More details to come.

There was one bit of unintended humor highlighted in the WSJ report on the matter:

Judge James Peck of the U.S. Bankruptcy Court in Manhattan initially approved Extended Stay's Chapter 11 restructuring plan in July, calling it "perhaps an unprecedented bankruptcy" involving entities "never expected" to file for bankruptcy protection.

I think it's fair to say that a lot of people expected this deal to fail - it epitomizes the rise and fall of the CRE space and Hotels in particular. Blackstone put $3-$4 billion into buying it in 2005, then flipped it to Lightstone in a highly levered $8 billion transaction in 2007, and now they're taking it back.

August 2010 Delinquencies up 1/2 billion to $61.4 billion

Realpoint came out with their August numbers. This is substantially faster than the June to July change of $387.9billion.

Balance of 90+ day delinquent loans declined (first decline since we started down this rabbit hole), every other bucket increased.

Total Realpoint Delinquency Level - 8.14%
sans Agency -- 8.48%
Conduit/Fusion - 8.61%


They reference the pipeline of problem loans too. All brand name loans typical of '06 and '07: EOP, ESH, PCV/ST, Beacon & Seattle, Farallon MHC, and CNL Hotels & Resorts. (That's 3 pari passu loans now)

Average Loss Severity in August - 62%. They have a nice breakout at the end regarding losses if you want some references.

Their report is free - realpoint.com.

The Late Show

Nothing new to report. The rating agencies started dinging Peter Cooper Village/Stuyvesant Town and the Extended Stay deals, again, today...

PCV/ST downgrades. And some thoughts on their mezz debt that was being shopped around.

Extended Stay - Fitch Affirms (a few days back) S&P puts on Rating Watch Negative

CMBS spreads unchanged to slightly tighter on bad news

How can spreads be unchanged today! A ton of bad news comes out and spreads go down or sit tight - sounds like the equity market.

• ESH bankruptcy front page news - WSJ misrepresents the CMBS debt and quotes an idiotic lawyer who doesn't know who owns the bonds and apparently never used the PHDC function in Bloomberg or called the Trustee (who delivers coupon payments to the bondholders every single month).
• Red Roof Inn defaults - again WSJ reporting. It's in several CMBS deals as previously noted.
• Tishman defaulted on an $86mm (86, the same age as Alan Tishman when he passed on) land loan on 42 acres it purchased just 3 years ago.
  
• Worldwide Plaza can't close a deal.
• Naysayers of the current government "plans" are claiming to be in the Appalachian forests but are found to actually be cutting through the Argentinian bush.
• Six Flags - bankrupt. (Looked at a CMBS loan once - hah).
• Eddie Bauer - bankrupt. Whiskey Tango Foxtrot (WTF)?
• Reuhl (aka Abercrombie & Fitch subsidiary) - bankrupt.
• Even the Pink Elephant went bankrupt last week.
• Apartment rents in Manhattan dropped 12.3% - to JUST $3k or so for a 2 bedroom apartment without a bedroom. In the real world (outside of the city) that would buy you a far more than average house worth more than half a million (assuming T&I of $3.6k per year, a 20% downpayment, 30-yr mtg, and 5% or 6% interest). Not to mention that the median income of the entire country, including Manhattan, is just about $10k more a year than an 'average' apartment in NYC would cost you!
  

I guess news like BB&B earning money last quarter (mainly because its competitors are just empty store fronts now), ReREMIC deals, and hopes that TALF 2.1 works are carrying the market through. Spreads didn't move today.

Nothing to see here, move along.

Update: Ed McMahon was also 86 when he passed, on the 23rd! Further, Eddie Bauer (the human) died in 1986, the same year Billy Ocean and The Cure and even The Eurythmics put on shows at Six Flags, the number for the Chinese manufacturer that makes the clothes sold at Reuhl stores begins with 86 (China's country code), Governor Sanford 86'd his family this very week to get his jollys on with his latina lover, I once stayed very near the #86 Red Roof Inn (in Richmond, VA) at a much nicer establishment in town, I have driven by the #86 Extended Stay south of Charlotte within the last month, Maxwell Smart was Agent 86, the Sopranos had 86 series (so did Secret Agent Man), not to mention that the ship my grandfather served on in the war is docked at pier 86 in Manhattan at this very moment! There is definitely a pattern here - it involves Tishman, although it is unclear at this time what the precise connection is - stay tuned for further updates.

Just give me time - I'll tie McMahon to all this somehow - the Donald did bail him out of foreclosure... Check back for further updates...

Extended Stay Files

Extended Stay was destined for failure as we noted on numerous occasions, but in detail back in December. They defaulted earlier this month on the big CMBS loan, and the mezz lenders (BOA and Wells Fargo) and holders started a court battle last week.

Today's big news is that they finally filed for bankruptcy - they should of done this the day after they originally closed the deal.

Extended Stay defaults... Biggest Loser - Taxpayer

WSJ reports

U.S. taxpayers also have had an interest in the talks because another lender in the buyout was Bear Stearns Cos., whose stake was taken over by the Federal Reserve after Bear collapsed in March 2008. BlackRock Inc. has been representing the Fed in the restructuring talks, according to people with knowledge of the negotiations.

...

Most of the holders of junior mezzanine debt bought at a discount, some around 60 cents on the dollar, but others as low as 10-15 cents, say debt holders. Both the senior and mezzanine loans mature June 12, with extension options.

can't pay their phone bills...

... May after Extended Stay failed to pay a $3.5 million late phone bill, according to the people familiar with the matter.

fraudulent??

The suit, filed in New York state court, alleges the banks colluded with the borrower and "hatched a Machiavellian scheme to wipe out " the investors who bought the junior slices of the $3.3 billion in mezzanine debt. Lightstone isn't named as a defendant in the suit. Mr. Lichtenstein declined to comment.