Commercial Mortgage News

Eighteen months after becoming a Fannie Mae multifamily "DUS" lender, CB Richard Ellis has reached the $1 billion mark in originations. The Boston-based real estate and lending company launched its DUS initiative in April 2008. In 2009, the company has closed $605 million in product to date. Nearly 60% of its volume was generated in collaboration with its investment sales team, financing the acquisition of properties. The group is headed by Peter Donovan, who serves as president.

The first new issue of commercial mortgage-backed securities completed under the government's Term Asset-Backed Securities Lending Facility is a step forward on what may be a long journey toward that market's recovery, according to Moody's Investors Service. The first CMBS deal done under TALF is collateralized by a $400 million loan to subsidiaries of Developers Diversified Realty Corp., a retail real estate investment trust. According to combined news reports, the security came to market this week but Moody's notes in a new report that, "significant issues affecting the broader CMBS securitization sector remain unresolved." The rating agency adds, "not all CMBS loan financings will benefit from the program, which has stringent rules."

Although its portfolio is continuing to perform well, PMC Commercial Trust has seen the weakened economy impact some of its borrowers, according to its third quarter financial results. In addition, the Dallas-based commercial real estate investment trust has taken possession of two properties through foreclosure. "We anticipate the weakness to continue for at least several quarters," said PMC chairman Lance Rosemore in a statement, adding, "our loans are typically real estate secured and, in most cases, the value of the underlying collateral should cover our principal exposure." In response to the current economic conditions, PMC Commercial Trust increased its reserves for loan losses during 2009. Income from continuing operations increased to $1.5 million in 3Q09 from $587,000 during the third quarter of 2008. Net income increased to $1.9 million during the third quarter of 2009 compared to $603,000 for the third quarter of 2008.

Ashford Hospitality Trust booked a non-cash impairment charge of $19.8 million in the third quarter, setting aside loan reserves on two luxury hotel projects. The Dallas-based real estate investment trust elected to reserve for the remaining $9.1 million of its $18.2 million first mortgage participation in the Four Seasons Nevis due to additional uninsured costs incurred by the borrower and the delayed reopening of the resort until 2010. In addition, Ashford signed an agreement with the borrower on the Ritz Carlton Key Biscayne to allow for a discounted payoff of Ashford's $33.6 million loan that was set to mature in 2017. If closing occurs, Ashford will receive $20 million in cash and a $4 million secured note that matures in 2017. The company will reserve $10.7 million on this loan in anticipation of the discounted payoff.

A pair of real estate investment trusts managed by Vestin Mortgage Inc. saw net losses for the third quarter of 2009 due in large part to their level of nonperforming loans and the increase in properties acquired through foreclosure. Vestin Realty Mortgage I reported a net loss of $4.7 million for the period, compared with a net loss of $6.4 million in the same period in 2008, while Vestin Realty Mortgage II reported a net loss of $17.4 million for the third quarter of this year, compared with a net loss of $40.1 million for the third quarter of 2008. As of Sept. 30, 2009, Vestin I had 21 loans outstanding with an aggregate principal amount of $36.1 million, of which 10 loans with an aggregate principal amount of $24.5 million were considered nonperforming. Vestin II had 28 loans outstanding with an aggregate principal amount of $143 million, of which 11 loans with an aggregate principal amount of $79.5 million were considered nonperforming.

Commercial and multifamily mortgage loan originations for the third quarter of 2009 were 12% lower than during the second quarter of 2009 and 54% lower than during the same period last year, according to the Mortgage Bankers Association's quarterly survey of commercial/multifamily mortgage bankers originations. The 54% overall decrease in commercial/multifamily lending activity during the third quarter was driven by year-over-year decreases in originations for all property types. When compared to the third quarter of 2008, the total decrease included a 62% drop in loans for retail properties, a 59% decline in loans for health care properties, a 58% reduction in loans for industrial properties, a 56% fall-off in loans for office properties, a 46% drop in hotel property loans and a 40% decline in multifamily property loans. "Every investor group and property type saw year-over-year declines in origination volume," said Jamie Woodwell, MBA's vice president of commercial real estate research. However, third-quarter originations for office properties saw a 65% increase in third quarter from the second quarter. There was also a 49% increase for industrial properties, but a 32% decrease for hotel properties, an 18% decrease for health care properties, a 17% decrease for multifamily properties and a 14% decrease for retail properties.

Six special-purpose property-owning subsidiaries of Los Angeles-based Maguire Properties went into default on their mortgages during the real estate investment trust's third quarter, directly impacting its earnings. The defaults occurred as a result of Maguire's board approving a plan to cease funding cash shortfalls at these properties. The properties are Stadium Towers in Central Orange County, Park Place II in Irvine, 2600 Michelson in Irvine, Pacific Arts Plaza in Costa Mesa, 550 South Hope in downtown Los Angeles and 500 Orange Tower in central Orange County. During the quarter, Maguire accrued default interest totaling $4.6 million as well as regular scheduled interest totaling $7.3 million related to properties currently in default, both of which were unpaid. The net loss for the third quarter of 2009 was $46.8 million, compared to a net loss of $72.5 million for the same period the year prior.

Commercial banks are extending the maturities of a significant portion of their commercial real estate mortgages and construction loans, according to a Federal Reserve Board survey of senior loan officers. More than 75% of the respondent banks extended more than 25% of their maturing construction and development loans. Only 16% of the banks refinanced more than a quarter of their maturing construction and development loans. Meanwhile, 70% of the banks extended more than 25% of their CRE mortgages that were on their books at the beginning of the year and scheduled to mature by September. Only 20% of respondents refinanced more than a quarter of those maturing CRE loans. The October survey revealed weaker demand for CRE loans but "stronger" demand for prime residential mortgages. However, 25% of the banks said they tightened their underwriting standards on prime single-family loans over the past three months, which is a slightly higher percentage than reported in the July loan officer survey.

The Peter Cooper Village/Stuyvesant Town $3 billion A-Note loan has been transferred to CWCapital, a specialty servicer, due to the sponsors' request for relief. Details of the request for relief by Tishman Speyer Properties, LP and Blackrock Realty have not been disclosed. New York-based Fitch Ratings expect debt service reserves to be depleted by the end of December. In addition, Fitch expected the transfer of the loan to special servicing as cash flow generated by the property remains insufficient to service the debt. Peter Cooper Village/Stuy Town comprises 56 multi-story buildings situated on 80 acres and includes a total of 11,227 apartments. The loan sponsors Tishman Speyer Properties and BlackRock Realty acquired the property with the intent of converting rent-stabilized units to market rents as tenants vacated the property. However, the conversion of units has since been determined to be illegal by the New York State Court of Appeals. In addition to the $3 billion securitized balance, there is an additional $1.5 billion of mezzanine debt held outside the trust.

Fannie Mae's $180 billion multifamily loan portfolio appears to be in decent shape, suffering little in the way of serious delinquencies, according to a new public filing. In a supplementary report with the Securities and Exchange Commission, Fannie says its MF holdings have a seriously delinquent rate of just 0.62%. It notes that a small percentage of the portfolio has a loan-to-value ratio north of 80%. Moreover, much of the portfolio ($123 billion) matures in 2014 and beyond. Meanwhile, Freddie Mac, in its recent earnings statement said it is facing additional risk on its MF portfolio because certain MF seller/servicers "are coming under financial pressure." The GSE cites Capmark Finance, which recently filed for bankruptcy protection, and Centerline Holding Co., which is in the process of restructuring its debt. However, Freddie, notes that its "counterparty risk" to these companies is minimal, adding "we have not incurred any losses."