Origination

Boston Properties Inc., a Boston-based real estate investment trust, has reported that its operating partnership, Boston Properties LP, has priced an offering of $650 million of exchangeable senior notes. The net proceeds of the 3.625% notes, due 2014, will be used for the funding of a capped call transaction, the repayment of debt, real estate development opportunities, the acquisition of real estate assets, and other real estate investment opportunities, the REIT said. The company can be found online at http://www.bostonproperties.com.

Downey Financial Corp., a thrift institution based in Newport Beach, Calif., will be dropped from the S&P SmallCap 600 after the close of trading on Aug. 20, according to Standard & Poor's. It will be replaced by Interval Leisure Group Inc., Miami, a provider of membership services to the vacation ownership industry. At the close of trading on Aug. 13, Downey had a market capitalization below the target range for the SmallCap index, S&P said. Downey can be found on the Web at http://www.downeysavings.com, and S&P can be found at http://www.standardandpoors.com.

The sales of existing homes, including single-family homes and condominiums, fell 0.8% to a seasonally adjusted annual rate of 4.91 million units in the second quarter and were down 16.3% from 5.87 million a year earlier, according to the National Association of Realtors. The NAR stressed, however, that resales rose in 13 states, largely as a result of buyer response to discounted home prices. Out of 150 metropolitan statistical areas, 115 recorded declines in median single-family resale prices from levels recorded a year earlier. The median resale price stood at $206,500, down 7.6% from $223,500 in the second quarter of 2007. NAR president Richard Gaylord, a broker with RE/Max Real Estate Specialists in Long Beach, Calif., said foreclosures are distorting the price data. "In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement-cost values," Mr. Gaylord said. ".... Once the inventory is drawn down, price pressure will return because the costs of construction are rising -- today's buyers are very well positioned to build wealth over time." The NAR can be found online at http://www.realtor.org.

Prudential Financial Inc., Parsippany, N.J., has announced that its PREI real estate investment management business has formed a joint venture with L&L Holding Co., New York, to acquire office properties in the New York City area on behalf of institutional investors. Prudential said the joint venture will invest up to $500 million to acquire prime New York City office buildings, chiefly in Manhattan. It said New York City's office market has remained "remarkably strong" and that vacancy rates have held steady. "The current markets have provided our investors with a unique opportunity to take advantage of softening prices," said Leonard Kaplan, principal for PREI's global merchant banking team. PREI can be found on the Web at http://www.prei.com.

As part of its efforts to concentrate on its core U.S. mortgage insurance business, The PMI Group Inc., Walnut Creek, Calif., is selling its Australian mortgage insurance subsidiary to QBE Insurance Group Ltd., that country's largest general insurance and reinsurance group. The purchase price is approximately 100% of the net tangible asset value of PMI Australia under U.S. generally accepted accounting principles as of June 30. The aggregate purchase price payable upon closing is approximately $920 million. The purchase price will be payable 80% in cash at closing and 20% in the form of an interest-bearing promissory note issued by QBE. PMI will also fund premiums of approximately $46.5 million to assist in procuring an excess of loss reinsurance coverage for PMI Australia. Steve Smith, chairman and chief executive of PMI Group, said the transaction "represents an important step in our five-point plan for progress, specifically maintaining our financial strength and focusing on our core U.S. mortgage insurance business." PMI and QBE have also reached an agreement in principle for the sale of PMI Asia, based in Hong Kong.

The Federal Home Loan Bank of San Francisco has finally launched its foreclosure prevention program, which provides matching grants to cover lender costs of refinancing or restructuring subprime mortgages into fixed-rate 30-year mortgage. The FHLBank will provide up to $25,000 for each restructuring, but the lender has to put up $2 for every $1 in grant monies. The $10 million pilot was approved by the Federal Housing Finance Board in January, but the FHLBank regulator did not give final clearance until this summer. The program is designed to help low-income homeowners who cannot afford the reset on their mortgage. The recently passed housing bill authorizes the FHLBanks to use affordable-housing funds to assist and refinance troubled borrowers. The San Francisco bank can be found on the Web at http://www.fhlbsf.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 432.6 425.9 on a seasonally adjusted basis during the week ended Aug. 8, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Purchase Index was unchanged, at 315.2, on a seasonally adjusted basis, while the Refinance Index declined from 1121.8 to 1074.6. Refinancings represented 35.2% of total applications, down from 35.9% the previous week, while adjustable-rate mortgages accounted for 7.3%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.41% to 6.57%, and points (including the origination fee) increased from 1.13 to 1.14 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Nehemiah Corporation of America, Sacramento, Calif., has announced the launch of DPAGroundSwell.org, a Web-based community aimed at mobilizing industry opposition to the ban on seller-funded downpayment assistance. The site will provide a central information hub to fight the ban, which was written into law with the signing of H.R. 3221 Housing and Economic Recovery Act of 2008. "Since the passage of the housing bill, we have been contacted by families, industry groups, and individuals voicing concern about the long-term impact of this ban on themselves and their communities," said Scott Syphax, president and CEO of Nehemiah. "When the bill passed, we pledged to continue to fight for these programs, and DPAGroundSwell.org is an important tool that will enable us to harness the swell of industry dissent against the ban by empowering individuals at all levels to influence public-policy decisions." The new site can be found online at http://www.dpagroundswell.org.

The Federal Home Loan Bank of Chicago has recorded a $74 million loss for the second quarter, compared with a $78 million loss in the previous quarter, and the bank expects to report losses in "subsequent quarters," according to a securities filing. The FHLBank blamed the continuing losses mainly on a $30 million impairment loss on its investments in subprime mortgage-backed securities and $35 million in derivative and hedging costs related to its $33.5 billion Mortgage Partnership Finance portfolio. However, the bank's president and chief executive, Matthew Feldman, says he hopes the second quarter will be a "turning point" for the Chicago bank, which has $92.8 billion in assets. The FHLBank is expanding its advance business as it sheds MPF single-family loans that it purchased from members and other FHLBanks. In the second quarter, advances rose 6% to $34.7 billion and exceeded MPF loans for the first time since 2002. The Chicago bank stopped buying mortgage loans on Aug. 1, and other FHLBanks have stepped in to buy loans from Chicago members and keep the MPF program going.

Higher mortgage rates have reduced house prices throughout the United States by more than 10%, according to a study by Christopher J. Mayer, Paul Milstein professor of real estate and senior vice dean at Columbia Business School. For the past 20 years, mortgage rates have averaged 1.6% above the 10-year Treasury rate, whereas in today's distressed market they exceed that rate by more than 2.4%, according to the study. Professor Mayer's analysis predicts that further deterioration in mortgage markets and economic fundamentals will cause house prices to keep falling nationwide, including in "bubble" markets such as Miami, Phoenix, and Tampa, Fla., where he says prices are likely to drop at least another 10%-15%; coastal markets such as San Francisco, Boston, and New York; and hard-hit markets such as Detroit and Cleveland. "The problems in the mortgage market have put the nation's housing in a downward spiral that will be hard to break," he said. The Columbia Business School can be found online at http://www.gsb.columbia.edu.