A Weekly Newsletter Focusing on Changing Market

MARK HESCHMEYER, EDITOR
APRIL 28, 2011
WWW.COSTAR.COM
A WEEKLY NEWSLETTER FOCUSING ON CHANGING MARKET CONDITIONS, COMMERCIAL REAL ESTATE, MORTGAGES AND
CORPORATIONS PUBLISHED BY COSTAR NEWS
IN THIS WEEK'S ISSUE:
Banks Whittle Away at CRE Assets While Waiting To Jump Back In ................................................................................................ 1
CoStar Group to Acquire LoopNet ..................................................................................................................................................... 4
Housing Remains the Achilles Heel of the Expansion ....................................................................................................................... 5
Multifamily Mortgage Debt Contracts for First Time in 17 Years ....................................................................................................... 7
Good News: Corporate Relocations Up; Bad News: Fewer Employees Want To Go ....................................................................... 8
Toys R Us, Walmart Expanding E-Commerce Initiatives .................................................................................................................. 9
Real Money: Property Financings ................................................................................................................................................... 10
Pacific Office Properties Falls Out of Listing Compliance ................................................................................................................ 12
Watch List: Latest Specially Serviced Loans ................................................................................................................................... 13
Banks Whittle Away at CRE Assets While Waiting To Jump Back In
Banks Beginning To Point to the Second Half of the Year as Their Return to CRE Lending
Coming out of the first quarter, most U.S. banks still currently view commercial real estate as an anathema to be
further banished from their books, or at least kept off their rolls. However, for the first time in a long time, they
have started talking about the day when that won't be the case. And that day could come sometime in the
second half of this year.
In a review of first quarter banking results and earnings conference calls, banks said they looking towards the
second half of the year for a return to CRE lending. For now, though, when it comes to CRE lending, banks fall
into one of three general categories: still clearing the books; maintaining existing customers; or ready to jump
back in. The number in the first two categories is probably about equal and make up the vast majority, which has
left an opening for the third group.
Wilshire Bancorp Inc., a $2.9 billion Los Angeles-based holding company, is typical of the first group. Jae Whan
(J.W.) Yoo, president and CEO of the bank holding company, told analysts that CRE is approximately 78% of its
loan portfolio and by the end of the year he wants to have it down to about 72%. That could mean clearing about
$175 million of CRE assets from its books.
"To achieve these goals, we will be very aggressive in selling CRE loans in the coming quarters, which will not
only help reduce our CRE concentration but also decrease our level of problem assets," Yoo said. "At the same
time, we'll have to continue to produce in the commercial & industrial [portfolio] and SBA and residential
mortgage so that we have larger denominator so that it becomes a percentage that will be reduced."
Regions Financial Corp., a $94 billion holding company in Birmingham, AL, kind of balances between the first
and second categories. On the one hand, its focus on CRE lending continues to be on renewing and
restructuring real estate loans with existing clients. On the other, it is still see its CRE portfolio decreasing,
somewhat willfully but also because of lack of demand in the market.
"I think that several months ago, we came out with an internal goal of reducing that portfolio to no more than
100% of risk based capital," said O. Hall, vice chairman, CEO and president of Regions. "And we'll achieve that
this year. Frankly, we have another concern, Our concern is while we are seeing some opportunities in investor
commercial real estate space, they are very limited and we are not seeing new production opportunities rebound
with any materiality and if they don't, then we'll see that portfolio decline below that $14 billion mark."
Clearly in the second category, is Pacific Continental Corp., a $970 million holding company in Eugene, OR.
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Charlotte Boxer, president and director of CRE for Pacific Continental told analysts: "It appears that by the end of
the second quarter of 2011 that we will probably have bottomed out on our reduction in our commercial real
estate asset. While we're not out there looking for new business per se, we do have existing commercial real
estate borrowers who have fared quite well through their last three or four years who are beginning to express
some interest in some additional financing. And we will obviously look at those deals very carefully, but should
be able to accommodate some small growth in some very high quality commercial real estate transactions."
KeyCorp, a $59.8 billion holding company in Cleveland, is another example in the second category and is one of
the many banks that points to growth in the back half of the year.
"Interestingly, [in its real estate book] we're starting to see, frankly, a fair amount of traction," Christopher M.
Gorman, president of Key Corporate Bank, told analysts. "In that portfolio, we still think it will be down in the
second quarter, we think it will stabilize in the third quarter, and we think it will grow in the fourth quarter."
"Our confidence in the growth is based on the pipeline," Gorman said. "We see the pipeline is up, say, 8.5 times,
believe it or not, from where it was in April of 2010. Not everything in the pipeline is going to matriculate, but the
fact of the matter is when you have that kind of pipeline, we feel pretty good about it. Real estate's a little bit of
an out wire and that it grows later as we implement our strategy, but we see stabilization to second quarter
growth and the third and fourth."
Creeping into the third category would be bank holding company Prosperity Bancshares Inc., a $7.5 billion
holding company in Houston. James D. (Dan) Rollins III, president and COO of Prosperity, said he just doesn't
see the competition for lending.
Rollins said he keeps hearing about banks chasing stuff very aggressively, but he's not seeing it on deals they're
involved in.
"Three or four years ago, the competition was so hot, probably everywhere, but in Texas, you picked up the
phonebooks, you called 10 banks, and within 5 minutes, just like the record drivers, you had 10 bankers in your
office, begging you to please take the money," Rollins said. "Today, you pick up the phonebook, you call 10
banks, eight banks don't return your call."
"So, the market has clearly moved in our favor," Rollins added. "Sometimes your own bank doesn't return your
call. So, that's making it a lot easier for us to take care of business, and our team is very focused on making that
happen."
Prosperity's chairman and CEO, added: "I think if you wanted [to increase your] commercial real estate portfolio,
and you were competitive on the rate, you could fill your boat up pretty easily."
Independent Bank Corp., a $3.7 billion holding company in Rockland, MA, has also jumped back into CRE
lending.
"Our commercial loan activity has been strong," said Christopher Oddleifson, president and CEO of Independent.
"Our commercial portfolio grew at an annualized rate of 9% since year-end. Growth was generated in both the
C&I and commercial real estate sectors, and this is not a one quarter aberration, but rather extends our track
record of strong loan growth over many quarters now. Our loan pipeline remains strong."
In its CRE portfolio Independent has seen growth in retail and non-owner occupied properties.
Bank of Hawaii Corp. in Honolulu with $9 billion in assets also has been growing its CRE portfolio in the last
couple of quarters.
"We are seeing some improvement in transactions in the marketplace as compared to a year to two ago,
although that was a pretty a muted environment to begin with," said Peter S. Ho, chairman, president and CEO.
"But really I think the bulk of our growth has come from the fact that a number of essentially out of town lenders
are not in the marketplace any more with the conduit market being a bit more muted and a number of the
monolines are really not having a presence anymore."
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CoStar Group to Acquire LoopNet
CoStar Group Inc. signed a definitive agreement to acquire LoopNet Inc., the leading online commercial real
estate marketplace.
The combined company will be the premier resource for researching, analyzing and marketing commercial real
estate properties online and will be positioned to provide more widespread market coverage for customers
ranging from large, national brokerage and institutional market players to small, local brokers and owners.
"CoStar revolutionized how the industry researches commercial real estate and LoopNet revolutionized the way
the industry markets commercial real estate," said Andrew C. Florance, president and Chief Executive Officer of
CoStar. "We expect the combination of our companies to give the $11 trillion commercial real estate market the
full benefit of the internet."
"CoStar and LoopNet have been at the cutting edge of innovation in their respective businesses and we believe
the two companies will be even stronger together," said Richard Boyle, chairman and CEO of LoopNet. "This
transaction combines the capabilities and best practices of two successful and very complementary companies.
We are excited about the possibilities that can be created together."
The commercial real estate market is one of the largest asset classes in the United States with over $11 trillion in
value and the potential size of the industry providing marketing and information services to commercial real
estate professionals is approximately $30 billion, according to CoStar. Based upon the first quarter of 2011, the
combined companies have annualized revenue of approximately $321 million.
The transaction will double the size of CoStar's paid subscriber base to at least 160,000 which represents
approximately 15% of the estimated 1 million participants in the commercial real estate market.
CoStar's market studies have indicated that customers view the services of the two companies as serving two
very different but complementary needs and that the overlap between CoStar and LoopNet subscribers is
estimated to be relatively low. As a result, CoStar expects significant cross-selling opportunities between the two
customer bases.
With the addition of LoopNet's complementary listings, CoStar will have a database with approximately 2 million
active listings, giving customers a more comprehensive and efficient view of the market.
"CoStar and LoopNet truly bring together Wall Street and Main Street," added Florance. "We expect the scale,
complementary service capabilities and diversified client and geographic footprint created by the combination of
CoStar and LoopNet will drive significant revenue opportunities and cost saving synergies."
LoopNet.com is the industry's largest and most heavily trafficked online marketplace with 4.8 million registered
members and more than 6 million unique visitors quarterly, according to Google Analytics. LoopNet is also the
leading website for marketing commercial property listings. As commercial real estate brokers and owners
continue to move property listings to online channels, we fully anticipate LoopNet's marketplace will become
increasingly important to those marketing or searching for properties.
CoStar operates the largest and most robust commercial real estate information database with more than 77
billion square feet of office, retail, and industrial inventory, 1.5 million listings, and 10.6 million images.
LoopNet shareholders will receive $16.50 in cash and 0.03702 shares of CoStar Group common stock for each
share of LoopNet common stock, representing a total equity value of $860 million and an enterprise value of
$762 million. The boards of directors of both companies have unanimously approved the transaction which is
expected to close by the end of 2011.
For more detailed information, see the full release.
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Advertisement
Housing Remains the Achilles Heel of the Expansion
Ahh, spring is in the air, housing sales are up and the residential markets look like they're finally coming
around… if only that were so.
Recent U.S. housing statistics have been weak and disappointing even though the sector has had good sales
news in recent weeks. And the latest outlooks from Fitch Ratings, Wells Fargo, Fannie Mae and Freddie Mac say
that will be the trend for a while: some good news mixed with bad.
The latest Case-Shiller Home Price Indices released this week show that prices for its 10- and 20-city
composites are lower than a year ago but still slightly above their April 2009 bottom.
"There is very little, if any, good news about housing. Prices continue to weaken, while trends in sales and
construction are disappointing," said David M. Blitzer, chairman of the Index Committee at S&P Indices. "Ten of
the 11 MSAs that recorded index lows in January fell further in February. The one exception, Detroit, is 30%
below its 2000 price level. The 20-City Composite is within a hair's breadth of a double dip. Fourteen MSAs and
both Composites have continued to decline month-over-month for more than six consecutive months as of
February."
"Recent data on existing-home sales, housing starts, foreclosure activity and employment confirm that we are
still in a slow recovery," Blitzer added. "Existing home sales and housing starts rose in March, but remain close
to recent lows. Foreclosure activity showed decreases in mortgage delinquencies in the fourth quarter of 2010,
but are still close to historic highs."
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WHERE WE GO FROM HERE
During the first 12−24 months off the bottom, the housing recovery may appear sawtoothed as substantial
foreclosures now in the pipeline present as distressed sales, loan modifications fail, and as meaningful new
foreclosures arise from Alt-A and option ARM resets, Fitch is projecting
High unemployment rates and the tightening of loan standards will be notable impediments early in the upcycle,
Fitch and others said.
The excess supply of homes also continues to be an especially troubling issue, Fitch noted. As of February
2011, the supply of existing homes for sale stood at 8.6 months, according to the National Association of
Realtors. In addition, as of January 2011 CoreLogic estimates there are an additional 1.8 million distressed
homes (homes more than 90 days delinquent, in the foreclosure process, or already bank-owned) that have not
been listed for sale ⎯ a shadow inventory that will inevitably become foreclosed homes.
Distressed sales (foreclosure and short sales) accounted for more than a third of total existing home sales in the
first part of 2011. In turn, a rising share of distressed sales and the winding down of various programs to support
the housing market have caused home price measures to decline, according to the April 2011 Economic Outlook
released this past week by Fannie Mae's Economics & Mortgage Market Analysis Group.
"Home price expectations have deteriorated during the past several months, which could cause some potential
homebuyers to remain on the sidelines - and further sharp cutbacks in housing demand would pose a risk to the
fragile housing recovery," said Doug Duncan, Fannie Mae chief economist. "We expect a little more decline in
house prices at the national level than we had thought previously, but expect prices to begin stabilizing later this
year."
On the upside, recent employment reports have been very strong, with more than 230,000 private sector payroll
jobs added in each of the last two months.
"We anticipate there will be continued reasonably good news in employment through the rest of the year,"
Duncan said. "If that continues, we expect housing to move in a similar positive direction - hopefully by the
second half of 2011."
Freddie Mac is seeing some signs of an earlier bounce up.
"Expect to see a bit of spring in homes sales activity during the second quarter," said Frank Nothaft, Freddie
Mac, vice president and chief economist. "Sales contract signings for existing homes were up in February,
positioning the market for a bounce up going into the traditional homebuying season."
HOME BUILDERS COULD BE THE LAST TO SEE IMPROVEMENT
Most public builders will be unprofitable in the first quarter (excluding non-cash real estate charges) with
revenues trailing a year ago, Fitch Ratings forecast in its spring 2011 Chalk Line. That being said, there has
been a notable uptick in traffic from much of the first quarter. New home orders have seen some slight seasonal
pickup across most regional markets.
Wells Fargo Economics Group reported this week: "The steady decline in existing home prices due to
foreclosures and short sales has significantly widened the gap between the median prices of a new home versus
existing. The large price gap will continue to make it difficult for builders to compete. The median price of a new
home is now $213,800 while the median price of an existing home is $159,600. Unfortunately, the gap will likely
remain until the pace of foreclosures moderates."
"New home sales rose 11.1% in March, but remain at an extremely depressed level. Much of the increase
reflects payback from the pullback in February due to unusually harsh weather conditions in the first half of the
month. With builders still reluctant to increase inventories, the overall inventory of new homes fell to 183,000
units, the lowest level since 1967. The pipeline of new housing also remains depressed," Wells Fargo reported.
"If the economy continues its advance and a moderate number of jobs are added, housing metrics should, for the
most part, rise at a single-digit pace this year," said Bob Curran, Fitch managing director and lead homebuilding
analyst.
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Nonetheless, the future state of U.S. housing remains highly dependent on the health of the broader economy.
So conversely, Curran added, "if the broader economy begins to retreat from what gains it has made thus far,
U.S. housing is in essence right back where it started about a year ago."
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Multifamily Mortgage Debt Contracts for First Time in 17 Years
Despite renewed interest in multifamily mortgages, total outstanding multifamily mortgage debt declined last
year, falling by 0.9% from 2009, according to analysis of new Federal Reserve data by Kim Betancourt, Fannie
Mae's Director Multifamily Economics and Market Research.
Total multifamily mortgage debt outstanding (MDO) decreased to $841.2 billion in 2010 – that's the lowest level
of multifamily MDO since fourth quarter 2008. The last time multifamily MDO declined year-over-year as of yearend was 1993.
Government-sponsored enterprises, including Fannie Mae, expanded their holdings while banks and conduits
showed the decline.
In fourth quarter 2010, Freddie Mac and Fannie Mae were the second- and third-fastest growing market
participants, respectively. Freddie Mac increased at an 11.8% annualized rate and Fannie Mae increased its
multifamily MDO share at a 5% annualized rate. .
The CMBS conduits, as well as banks and thrift depositories, continued to decrease their overall holdings of
multifamily MDO during fourth quarter 2010. The depositories have not grown their holdings of multifamily
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mortgages since second quarter 2009. The CMBS conduits have been dormant even longer, with no increases
in multifamily MDO since third quarter 2007.
Overall market shares moved only slightly. As of fourth quarter 2010, Fannie Mae accounted for 20.5% of overall
multifamily MDO. While this makes Fannie Mae the largest single holder of multifamily mortgage debt, the
combined book of business held by the nation's banks and thrifts is the largest component, comprising 30.7% of
multifamily MDO.
Freddie Mac saw an increase to 11.9% from 11.6%. Ginnie Mae increased its share to 6.2% from 5.1% and the
state and local credit agencies increased their share to 8.8% from 8.5%.
Separately, the Mortgage Bankers Association reported that commercial and multifamily mortgage origination
volumes increased 44% in 2010 over the previous year, with mortgage bankers reporting $118.8 billion of closed
commercial and multifamily loans.
"Coming off of the 2009 lows, commercial and multifamily originations increased by a strong 44% in 2010," said
Jamie Woodwell, MBA's vice president of commercial real estate research. "Low interest rates coupled with
improving economic fundamentals have the potential to draw out even more borrowers in 2011."
Fannie Mae, Freddie Mac and FHA, collectively, were the largest investor group in 2010, responsible for $42.8
billion of the total, followed closely by life insurance companies and pension funds at $30.6 billion.
In terms of property types, multifamily properties saw the highest volume, $48.9 billion, followed by office
properties with $22.6 billion of originations. First liens accounted for 92% of the total dollar volume closed.
Lending for office properties had the largest percentage increase in originations by property type, followed
closely by hotel/motel properties and retail.
Good News: Corporate Relocations Up;
Bad News: Fewer Employees Want To Go
Relocation managers across the U.S. are expressing optimism that the worst of the recession is now in the
rearview mirror. Responding to Atlas Van Lines' 44th annual Corporate Relocation Survey, 72% of the relocation
managers polled say they believe their respective companies will fare better in 2011. The optimism rate among
large firms surveyed (more than 5,000 workers) jumps to 80%.
"Our relocation research has served as a solid barometer of where the American economy is headed," said Jack
Griffin, president and COO of Atlas World Group, the parent company of Atlas Van Lines. "The good news is that
our survey respondents are focusing on growing their businesses and believe there will be abundant opportunity
for expansion and increased revenues in 2011. This is encouraging for Atlas Van Lines and our relocation
agents."
The percentages of firms that expect increases in volumes and budgets have risen to non-recessionary levels
across company size. The percentages expecting further cuts have fallen near or below these levels as well,
indicating the recovery that began in 2010 is likely to continue in 2011.
Interestingly, 30% of companies said they plan to relocate workers this year, the highest percentage in six years.
However, overall Atlas has noted increased employee reluctance to relocation. More than half (59%) of
companies reported employees declined relocation in 2010 Atlas said that corresponds to housing/mortgage
concerns.
Other report highlights:
54% of executives surveyed said they believe the U.S. economy will improve in 2011 - the highest rate of
such optimism recorded since 2006.
87% of companies will spend as much or more on relocation in 2011 as in 2010, the most since 2007.
And
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The Midwest is now the top destination of transfers (37%) followed by the Northeast (31%), the South
(28%) and West (20%).
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Toys R Us, Walmart Expanding E-Commerce Initiatives
Two of the largest retailers in the country, Toys R Us Inc. and Walmart Stores Inc., are boosting their ecommerce efforts as online retailing continues to make inroads into traditional sales channels
Walmart signed a definitive agreement to acquire Kosmix, a social media technology platform that filters and
organizes content in social networks to connect people with real-time information.
"We are expanding our capabilities in today's rapidly growing social commerce environment," said Eduardo
Castro-Wright, Walmart's vice chairman. "Social networking and mobile applications are increasingly becoming a
part of our customers' day-to-day lives globally, influencing how they think about shopping, both online and in
retail stores."
"The world of social media is exploding and for millions of consumers their social connections matter hugely in
their daily lives," said Anand Rajaraman, co-founder of Kosmix. "Our work has focused on developing a social
genome platform that captures the connections between people, places, topics, products and events as
expressed through social media -- be it a feed, a tweet or a post."
The Kosmix team will operate as part of the newly formed @WalmartLabs. Walmart plans to expand the group
and create technologies and businesses around social and mobile commerce that will support Walmart's global
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multi-channel strategy, which integrates the shopping experience between bricks and mortar stores and ecommerce.
Toys R Us plans to open a new e-commerce distribution center near Reno, NV, to support the company's
growing online business. The dedicated e-commerce fulfillment center will be located within the Tahoe-Reno
Industrial Center in the town of McCarran, approximately 10 miles east of Reno, and is scheduled to open in July
2011.
Once operational, the 300,000-square-foot facility will enable Toys R Us to increase its fulfillment capacity and
expedite deliveries to online customers in the western United States.
"As more consumers enjoy the simplicity and ease of online shopping, Toys R Us continues to invest in ecommerce enhancements to advance customer service and satisfaction across all shopping channels. We
believe the McCarran facility will play an important role in further accelerating our company's online business
growth and order fulfillment," said Jerry Storch, Chairman and CEO, Toys R Us.
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Real Money: Property Financings
SL Green Realty Corp. refinanced 3 Columbus Circle and repaid the $250 million acquisition bridge loan that
was originated in January by SL Green and Deutsche Bank. The new five-year $260 million mortgage loan,
provided by The Bank of China, has an earn-out option that increases the loan up to $300 million upon
achievement of certain performance thresholds. Terms were not provided.
CBL & Associates Properties Inc. closed on a 10-year, $185 million non-recourse loan secured by Fayette
Mall in Lexington, KY, with two institutional lenders. The new loan bears a fixed interest rate of 5.42%. Excess
proceeds of $100 million were generated after repayment of the $85 existing loan that was scheduled to mature
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in July 2011. Fayette Mall is a super-regional shopping center with more than 150 specialty stores and eateries.
CBL acquired Fayette Mall in 2001.
DiamondRock Hospitality Co. closed on a new $100 million, limited recourse loan secured by a mortgage on
the Hilton Minneapolis. The loan has a 10-year term, bears interest at an annual fixed rate of 5.464% and will
amortize on a 25-year schedule. The company acquired the Hilton Minneapolis in June 2010 for approximately
$157 million and the hotel was previously unencumbered by debt.
HFF arranged the following loans.
A $61 million refinancing for El Paseo de Saratoga, a 295,979-square-foot, grocery-anchored retail
center in San Jose, CA. HFF represented the borrower, Terramar Retail Centers, which secured the
10-year fixed- rate loan through a life insurance company. The loan has five years interest-only at an
interest rate of 4.55%. The borrower bought the property in October 2008 in an all-cash purchase.
Completely redeveloped in 2007, the property features 18 buildings on a nearly 32-acre site. El Paseo
de Saratoga is anchored by Lucky Supermarket, AMC Theatres, Office Max and Petco. The property is
at 200 El Paseo de Saratoga close to I-280 and US 85 in Silicon Valley.
A $50 million refinancing for The AutoNation Building, a 204,337-square-foot mixed-use office and retail
complex plus a 522-space parking garage in downtown Fort Lauderdale, FL. Working exclusively on
behalf of Stiles Financial Services, HFF placed the 7-year, 6.22% fixed- rate loan with JP Morgan
Chase & Co. Loan proceeds are being used to refinance existing debt that matured in March 2011.
Completed in 2007, The AutoNation Building is 90% leased. The 17-story property is at the corner of Las
Olas Boulevard and SW First Avenue. And
An $8.9 million refinancing for Lanikai Lane Mobile Home Park, a fully-occupied, 146-pad site in
Carlsbad, CA. Working on behalf of Irvine, CA-based Core Capital Investments, HFF placed the 4year, 6.55% fixed-rate, interest-only loan with ING Investment Management. Loan proceeds are paying
off existing debt as well as providing an interest reserve until an existing ground lease expires in two
years. The borrower owns the land, which it leases to the unaffiliated owner/operator of the mobile home
park. Lanikai Lane is at 6550 Point Drive across the street from the South Carlsbad State Beach. The
14.3-acre site is also within walking distance to the new Hilton Carlsbad Oceanfront Resort and Spa.
Marcus & Millichap Capital Corp. arranged the following loans.
$30.57 million in refinancing loans for a 23-property single-tenant net-leased portfolio. The properties are
Walgreens and CVS drugstores throughout the United States. The loan is fixed for 10 years at 4.3%.
The loan-to-value is 50%. And
A $1.025 million fixed-rate loan for the cash-out refinance of a mixed use property at 220 5th Ave. in
Brooklyn. The loan is for seven years, amortized over 30 years with a fixed interested rate of 5.25%. The
loan to value is 75%.
NorthMarq Capital arranged financing for the new headquarters of Nestle Foods' Frozen Pizza Division. The
75,260-square-foot building is at 885 Sunset Ridge in Northbrook, IL. The $6.65 million loan fully amortizes over
15 years at 5% interest. The loan was arranged as a forward commitment in July 2010 through Aegon USA.
Whitestone Featherwood LLC executed a promissory note of $3 million payable to ViewPoint Bank with an
applicable interest rate of 6% per annum. The interest rate is fixed through March 30, 2016, and then will be
reset to the rate of interest for a 5-year balloon note with a 30-year amortization as published by the Federal
Home Loan Bank. The promissory note is a non-recourse loan secured by the borrower's Featherwood property
in Houston, TX.
Thomas D. Wood and Co. arranged the following loans.
$2.1 million for Southern Center Associates I LP with Southern Farm Bureau Life. The fixed-rate loan
has a term of 10 years, based on a 25-year amortization and an interest rate of 5.15%. The loan-to-value
is 50%. The borrower wanted to refinance the loan to lock in a low interest rate. The 24,000-square-foot
multi-tenant office was built in 1985 and is at 1500 Cordova Road in Ft. Lauderdale.
$1.5 million for 3A3B Ltd. with Advantus Capital Management. The fixed-rate loan has a 10-year term,
based on a 20-year amortization and an interest rate of 5.15%. The loan-to-value is 50%. The 68,000square-foot industrial building was built in 1985 and is at 3126 Park Road in Pembroke Park, FL.
$1.5 million for Park 25 Corp. with Advantus Capital Management. The fixed-rate loan has a 10-year
term, based on a 20-year amortization and an interest rate of 5.15%. The loan-to-value is 50%. The
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45,000-square-foot industrial building was built in 1985 and is at 3126 John P. Curci Drive in Pembroke
Park. And
$1 million for Melson Corp. placed with The Standard in the amount. The fixed-rate, fully- amortizing loan
has a term of 15 years, based on an interest rate of 6.375%. The loan-to-value is 50%. The 40,000square-foot multi-tenant industrial building at 1800 N. Powerline Road in Pembroke Park was built in
1980, and is home to major tenant Rainbow Tile.
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Pacific Office Properties Falls Out of Listing Compliance
Pacific Office Properties Trust Inc., a San Diego-based REIT that owns interests in 45 office buildings primarily in
Hawaii and California, received notice from the NYSE Amex indicating that it is not in compliance with the
continued listing standards.
According to NYSE Amex Pacific Office Properties has had total equity of less than $2 million and losses in two
out of its three most recent fiscal years, and total equity of less than $4 million and losses in three out of its four
most recent fiscal years, both of which put Pacific Office Properties in violation of NYSE Amex's listing
standards.
Pacific Office Properties pointed out that the equity NYSE Amex referenced differs from the company's market
equity and net equity in its office portfolio.
Pacific Office Properties said it intends to submit a plan by May 19 for meeting compliance by Oct. 19, 2011 and
that it expects its shares of common stock will remain listed on the exchange during the plan period.
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Last month, Pacific Office Properties Trust hired Eastdil Secured to assist in the potential recapitalization of a 1.6
million-square-foot portfolio of Class A office buildings in Honolulu. Pacific Office Properties is a San Diegobased REIT and is the largest office-building owner in Honolulu.
"Honolulu has always been seen as a high barrier-to-entry market in which achieving critical ownership mass is
difficult and time consuming," James Ingebritsen, Pacific Office Properties' CEO, said at that time. "We have a
long and successful history of co-investing with institutions and believe this six-property portfolio is ideal for a
new buyer to obtain a dominant position in the Honolulu office market or to seed a major joint venture that will
acquire additional investments in the Honolulu market."
The company reported a GAAP net loss for the year ended Dec. 31, 2010, of $17.2 million compared to a net
loss of $15.6 million a year earlier.
Watch List: Latest Specially Serviced Loans
The following information for these lead listings was provided by Trepp LLC, an industry leader in providing surveillance data
on loan and commercial real estate performance underlying the CMBS market.
Property
Property
Address
Type
Current Bal.
Transer Reason; Comment
Transferred for imminent default, The borrower
was not able to refinance so it was transferred to
special serving. The portfolio has a maturity date
of July 2011. The borrower has two 1-year options
to extend. Future risks for the loan include the
recent tsunami in Japan that is expected to have
an immediate negative impact on Hawaii as there
will be a decrease in Japanese tourism. Hawaii
Tourism Authority's stated that Japanese tourism
in Hawaii accounted for 16.92% of all tourism
expenditures. Prior to the tsunami, this number
was expected to increase in 2011. HTA expects
Kyo-Ya Hotel
the following decrease in Japanese tourism: March
Pool
see below
Hotel
$1,055,397,370 -25%; April -45%; May -35%; June -30%.
2255 Kalakaua
Sheraton Waikiki Ave., Honolulu, HI
Sheraton Moana
2365 Kalakaua
Surfrider
Ave., Honolulu, HI
2605 Kaanapali
Sheraton Maui
Parkway,
Resort
Lahaina, HI
The Royal
2259 Kalakaua
Hawaiian
Ave., Honolulu, HI
2 New
Montgomery St.,
San Francisco,
The Palace Hotel CA
Sheraton
Princess
120 Kaiulani Ave.,
Kaiulani
Honolulu, HI
One Grand
Hyatt Regency
Cypress Blvd.,
Grand Cypress
Orlando, FL
One Grand
The Villas at
Cypress Blvd.,
Grand Cypress
Orlando, FL
THE WATCH LIST NEWSLETTER
13
Property
Address
Bocas Resorts
Hotel Pool
Property
Type
Current Bal.
see below
Hotel
$799,914,865
2301 SE 17th
Street Causeway,
Hyatt Regency
Fort Lauderdale,
Pier 66
FL
Bahia Mar Beach 801 Seabreeze
Resort &
Blvd., Fort
Yachting Center
Lauderdale, FL
1901 Gulf Shore
Edgewater
Blvd. North,
Beach Hotel
Naples, FL
7760 Golden
Naples Grande
Gate Parkway,
Golf Club
Naples, FL
501 East Camino
Boca Raton
Real, Boca
Resort & Club
Raton, FL
Naples Grande
475 Seagate
Resort & Club
Drive, Naples, FL
CMBS: WBCMT 2006- Whale 7; Special Servicer: Wells Fargo
THE WATCH LIST NEWSLETTER
Transer Reason; Comment
Transferred for imminent default, The portfolio
showed signs a recovery in 2010 as occupancy
and REVPAR were higher than 2009 and the
budget. Year-end 2010 net operating income was
up 13.4% over prior year. Year-end debt service
on NOI was 6.98x. Room rev, food and bev rev in
2010 all outpaced the budget and prior year of
2009. Total Revenue was $13.8MM higher than
prior year and but was $1.1MM short of the
budget.
14