Origination

The commercial real estate market is facing its worst year since the S&L and banking crisis of the early 1990s, according to a new report by Merrill Lynch. "Our outlook is for property values to fall and CMBS credit problems to ratchet up," writes commercial mortgage-backed securities analyst Roger Lehman in a new report. Merrill estimates that $23.5 billion in CMBS loans are set to mature this year - most of it conduit issuance. Property owners have been complaining for months that banks and other funders are unwilling to either lend or renegotiate loans at favorable terms. The Treasury Department is toying with the idea of using Troubled Asset Relief Funds to jump start new issuance in the CMBS market but nothing has been decided yet. How future TARP funds will be spent is now up to the incoming Obama Administration.

The Mortgage Bankers Association wants to raise the net worth requirements for mortgage brokers originating Federal Housing Administration loans from $63,500 to $150,000. But the mortgage brokers want to do away with net worth requirements altogether. "Net worth requirements serve to assure that a vendor has a stake in the mortgage industry and they also provide some resources for a borrower to seek in the event of misfeasance," MBA chairman chief executive John Courson told a congressional panel. The National Association of Mortgage Brokers noted that net worth could disappear quickly as evidenced by the recent failure of hundreds of mortgage bankers, lenders and Wall Street firms over the past two years. NAMB past president George Hanzimanolis suggested that all originators should contribute to an FHA recovery fund instead and eliminate net worth requirements. "There is no evidence to demonstrate that loans originated by high net worth originators perform better that those with a low net worth," Mr. Hanzimanolis testified. The current FHA net worth requirement for mortgage bankers is $250,000. MBA would support a "reasonable increase," Mr. Courson said.

Impac Mortgage Holdings Inc., Irvine, Calif., said that its common stock underwent the planned 1-for-10 reverse stock split and began to trade on a split-adjusted basis at the open of business on Jan. 12. The stock is now traded-over-the-counter under the new ticker symbol "IMPM." Impac primarily invested in non-conforming alt-A mortgage loans and to a lesser extent small balance commercial and multi-family loans.

In what is being billed as "the largest-ever" simultaneous Internet auction of residential properties, 79 loft apartments in a downtown Los Angeles condominium are up for grabs to the highest bidders. Unlike traditional high-pressure auctions, which sell units one at a time, bidders will be able to see the amount other buyers are bidding for every condo in the Rowan during the entire auction on large bidding screens at the auction site or on their own computers through a secure Internet site. The auction clock resets every time a new bid is received so bidders have ample time to consider their next step. The auction ends when there has not been a bid submitted on any of the properties for a specified period of time. Developed by auction pioneer William R. Stevenson, president of Intelligent Market Systems, the proprietary software used for the auction gives potential buyers "ample time to make decisions and switch to other units if they are outbid." This versatility benefits everyone, says Mr. Stevenson, "including the seller who often gets better results because buyers are able to maximize their opportunities to purchase the home they most want." Buyers interested in participating in the auction must first secure pre-qualification for a loan from the seller's preferred lender, complete a registration form and put down a "good fund" deposit. Only 30 of the building's 206 apartments have been sold to date. But if the auction is successful, the property will be more than 50 percent sold at its grand opening.

Brookfield Properties Corp., New York, has made a series of promotions and additions to its executive management team. Steve Douglas has been named president of Brookfield Properties Corp. He was most recently senior managing partner at an affiliated company, Brookfield Asset Management, focused on that company's operations and international property portfolio. Dennis Friedrich has been named president and chief executive of U.S. Commercial Operations. Mr. Friedrich was formerly president and chief operating officer of U.S. Commercial Operations. Paul Schulman has assumed the post of COO of U.S. Commercial Operations. He was formerly senior vice president and head of the company's Washington region. Tom Farley has been named president and chief executive of the Canadian Commercial Operations, where he was formerly president and COO. The new COO of Canadian Commercial Operations is Jan Sucharda. Brookfield Properties CEO Ric Clark has taken on the added responsibility of overseeing Brookfield Asset Management's global real estate activities with the title of senior managing partner and CEO.

First Industrial Realty Trust Inc., Chicago, has hired Bruce W. Duncan as president and chief executive. He presently serves as chairman of Starwood Hotels & Resorts Worldwide Inc., a position he has held since 2005. Mr. Duncan also served as Starwood's interim chief executive from April to September 2007. From 2002 through 2005, he was president and CEO of Equity Residential, the largest publicly traded apartment REIT. In a related move W. Ed Tyler, who has served as the company's interim chief executive since October 2008, has been appointed the new non-executive chairman of its board. Jay H. Shidler has resigned as chairman, but will continue to serve as a member of the board and the chairman of the investment committee.

Foreign real estate lenders may grow their activity by 58% in the United States this year, according to a trade group's survey of its investor members. "Our investor members have expressed a growing confidence and interest in U.S. real estate," said James A. Fetgatter, chief executive of the Association of Foreign Investors in Real Estate, Washington, D.C. Foreign RE lenders also plan to increase global lending by 54%, according to the survey, which was conducted in the early part of 2008's fourth quarter. Survey respondents ranked preferred property types as follows: multifamily, office, industrial, retail and hotels.

Jonathan L. Kempner, who was president and chief executive of the Mortgage Bankers Association until the end of last year, has accepted a position as an independent director of Behringer Harvard Multifamily REIT I Inc. Before joining MBA in 2001, he spent 14 years as president of the National Multi Housing Council. Said Robert S. Aisner, chief executive of Behringer Harvard, "Jonathan brings to this role more than two decades of experience encompassing all facets of the commercial real estate industry. He's developed extensive expertise in both the multifamily property sector and commercial lending, as well as deep relationships with leaders in both industries."

KDX Ventures, Boston, a partnership of DebtX and KEMA Advisors, will sell $144 million in multifamily and healthcare loans for the U.S. Department of Housing and Urban Development. The portfolio includes 15 multifamily loans and four healthcare loans, ranging in size from approximately $1 million to $30 million. The collateral is located in 12 states in the east, south and midwest. Investors may bid on any individual loan or on pre-determined pools of loans. "KDX Ventures is expecting strong interest in these HUD loans due to increasing demand for product from investors around the world," said DebtX chief executive Kingsley Greenland. "Over the past three months, a significant new number of investors have entered the whole loan marketplace. The increasing liquidity is likely to mean very active bidding for the HUD loans." The transaction announced today is the first since KDX Ventures signed a multi-year agreement with HUD in October to sell loans. Bids will be accepted at http://www.debtx.com on Feb. 4, 2009.

Equity Residential, Chicago, is cutting back on the number of planned development projects it will undertake and, as a result, will incur a non-cash charge in the fourth quarter of 2008 of approximately $115 million ($0.39 per share). The charge reflects impairments in the value of land holdings for five potential development projects that the company no longer plans to pursue. The impairment charge is the difference between each parcel's estimated fair value and current capitalized carrying value, which includes pursuit costs. The impairment charge does not affect the company's continued compliance with its financial or debt covenants. "We have said for some time that maintaining ample liquidity and credit capacity are our foremost priorities and as a result we would be very cautious regarding new development projects," said David J. Neithercut, president and chief executive. "Our view on development was solidified by the significant acceleration last fall in the deterioration in the credit markets and economy as a whole. We will not start any new projects for our own account until capital markets and the economy show signs of improvement." For more information on Equity Residential, visit http://www.equityresidential.com.