APARTMENT NEWS

ARCHIVES 2009:

Loan-Sales Market Sees Flurry of Activity, But Big Slowdown Seen - 081309
CRE News

A total of at least $800 million of performing and distressed commercial mortgages are in the market through loan-sale
advisers - a relatively hefty volume for late summer - but many players expect the market to slow down sharply soon.

The offerings currently in the market include:

- a $252 million portfolio of distressed CMBS loans of Michigan and Ohio properties that CWCapital Asset Management is
offering through Mission Capital Advisors;

- a $115 million offering of loans on Texas, Florida and Georgia properties that CWCapital is offering through Eastdil
Secured;

- a $235.8 million portfolio of loans on land and developed properties with concentrations in Arizona and Illinois that
Mission Capital is marketing on behalf of a midwest bank, believed to be M&I Bank, and

- a $161.4 million portfolio of performing loans on a mix of industrial, office, medical office and retail properties that
Mission Capital just launched on behalf of an insurance company client. The loans have a weighted average maturity of 2018
and coupon of 6.62 percent. All amortize and most have some sort of recourse to their borrowers.

In addition, LNR Partners is said to be offering a student-housing loan through CB Richard Ellis.

FDIC, meanwhile, which had been the most active seller of commercial mortgages on a whole-loan basis, hasn't offered a loan
in some time and forecasts call for that not to change.

Said one loan investor: "We haven't seen a good offering from the FDIC in months. There's a huge void in the market."

The agency is expected to sell primarily consumer, business and unsecured credits through the whole-loan sales market, while
commercial mortgages will be sold through large structured offerings, where it sells an equity piece of a portfolio and
provides financing for it. But those aren't expected to start to come to market until later this year, at the earliest.

Meanwhile, with few exceptions, most other holders of loans, such as banks and investment banks, are still generally
unwilling to accept the discounts that buyers demand. Many simply can't because of capital constraints. And because property
values are expected to continue to decline, those discounts could get larger. So few expect many more loan offerings to
materialize after those in the market clear.

Loan investors say a number of banks that were very active lenders during the market's peak have been actively showing
massive lists of loans they'd like to sell. But few loans have actually sold and the expectation is that few will sell going
forward.

Those banks include Citigroup, Credit Suisse, JPMorgan Securities, PNC Bank and KeyBank have at various times circulated
large lists, of at times substantially more than $1 billion each.

Meanwhile CMBS special servicers might prove to be a bright spot in the whole-loan sales market. At least if CWCapital's
current offerings are any indication.

It's no secret that special servicers are seeing ever increasing volumes of loans come their way. And with expectations that
property fundamentals will continue to weaken, now might be a better time to sell than later.

CWCapital said it "employs a number of strategies designed to maximize value in distressed situations," according to a
spokeswoman. "Loan sales are just on of those strategies, and we will tap into the loan-sales market when our analysis
indicates it will result in the best execution for our client."

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