Originations

Duke Realty Corp., Indianapolis, has announced the pricing of $575 million in aggregate principal amount of exchangeable senior notes due 2011.The notes, which bear a coupon of 3.75%, were offered through a subsidiary, Duke Realty LP, to qualified institutional buyers. The company said Duke Realty LP will use approximately $88.37 million of the net proceeds from the sale of the notes to fund the repurchase of shares of Duke's common stock and approximately $26.97 million to fund the capped call transaction relating to the notes. Duke can be found online at http://www.dukerealty.com.

Lexington Corporate Properties Trust, a New York-based real estate investment trust, has reported the acquisition of additional shares of Lexington Strategic Asset Corp., bringing its ownership of LSAC's common stock to approximately 76.2%.The purchase, totaling approximately $14.4 million, was made at a price of $9.30 per share, the company said. LSAC is a real estate investment company that is externally advised by a subsidiary of Lexington. The REIT can be found on the Web at http://www.lxp.com.

Secured Diversified Investment Ltd., Scottsdale, Ariz., has announced a joint venture agreement (through a mortgage lending services subsidiary) with Allpointe Mortgage that will enable SDI to originate, process, broker, and fund mortgage loans throughout the United States.Allpointe, based in Canonsburg, Pa., a suburb of Pittsburgh, is the mortgage banking subsidiary of National Real Estate Information Services. "Our new relationship with Allpointe Mortgage will allow SDI, and its sister companies, to greatly expand their business models and service offerings," said Jan Wallace, SDI's chief executive officer. The SDI subsidiary involved in the arrangement is Secured Lending LLC. The companies can be found online at http://www.secureddiversified.com and http://www.allpointe.com.

Equity Office Properties Trust, the largest office real estate investment trust by market capitalization, is being taken private in a $36 billion acquisition by Blackstone Real Estate Partners that includes the assumption of Equity Office's debt.The Chicago-based REIT reported that Blackstone is acquiring Equity Office common stock, and limited partnership interests, for $48.50 per share in cash, representing an 8.5% premium over the shares' closing price on Nov. 17. Equity Office's board has recommended the merger and is also recommending that shareholders approve the transaction. Jonathan D. Gray, Blackstone's senior managing director, said the deal "represents the largest private equity deal in history." Blackstone said it expects that Equity Office will enhance its office platform, which includes CarrAmerica and Trizec, two other REITs recently acquired by Blackstone. According to J.P. Morgan's U.S. REIT research group, the overall REIT group should benefit from this transaction. The REIT can be found online at http://www.equityoffice.com.

The corporate credit rating of Weingarten Realty Investors, a Houston-based real estate investment trust, has been lowered from A to A-minus by Standard & Poor's.In addition, Weingarten reported that its senior unsecured debt was downgraded from A to A-minus, and its cumulative preferred shares were downgraded from A-minus to BBB-plus. Noting that these ratings "are still among the highest" in the REIT industry, Weingarten attributed the downgrades to a strategy announced earlier this year that involves additional leverage and an increase in the use of joint ventures. The strategy includes a "significant increase" in development and an "aggressive" acquisition program. "Management had the option of issuing additional common equity to maintain leverage ratios, but chose not to dilute the interests of existing shareholders," said Steve Richter, the REIT's executive vice president and chief financial officer. The company can be found online at http://www.weingarten.com.

Thornburg Mortgage Inc., a lender based in Santa Fe, N.M., has priced 4.0 million shares of series D adjusting rate cumulative redeemable preferred stock at $25 per share.The real estate investment trust said the dividend will be fixed at 7.875% until Jan. 12, 2012, and will float quarterly thereafter at 268 basis points above the three-month London interbank offered rate. The joint book-running managers of the offering were Stifel, Nicolaus & Co. and Bear, Stearns & Co. The REIT can be found online at http://www.thornburgmortgage.com.

Chris McCullough has been named managing director of specialty lending at Countrywide, America's Wholesale Lender, a Plano, Texas-based division of Countrywide Home Loans Inc.Mr. McCullough will oversee the day-to-day operations of Countrywide's wholesale nonprime lending initiatives. Before joining Countrywide, he served as executive vice president of production for WMC Direct within General Electric Consumer Finance, spearheading the company's growth in the nonprime mortgage market, Countrywide said. The Countrywide wholesale unit can be found online at http://www.cwbc.com.

Reckson Associates has received a new merger proposal from a partnership formed by Harry Macklowe and Carl Icahn to acquire the New York-based office real estate investment trust for $49 per share in cash.Reckson reported that its board is reviewing the proposal to determine how best to proceed in considering the previous merger agreement with SL Green Realty, another New York office REIT. Reckson shareholders are scheduled to meet Nov. 22 to vote on the SL Green merger proposal, under which SL Green is proposing to acquire Reckson for about $6 billion, including the payment of $43.31 per Reckson common share. SL Green is disposing of about $2 billion of the Reckson assets to a group led by Reckson management, and this deal is being questioned by some shareholders. Reckson is required to pay SL Green a breakup fee if it does not go through with the merger. Reckson can be found on the Web at http://www.reckson.com.

Summit Financial Group Inc., Moorefield, W. Va., has announced its intention to sell or terminate "substantially all" business activities of Summit Mortgage, its residential mortgage loan origination unit.The company said it expects Summit Mortgage to cease operations on or about Jan. 31 if it has not been sold before that date. "The decision to exit the mortgage banking business was based on this business unit's poor operating results and the continuing uncertainty for performance improvement," Summit Financial said. "Further, Summit desires to concentrate its resources and capital on its community banking operations, which have a consistent record of exceptional growth and profitability."

Single-family housing starts dropped 16% in October as builders finally put the brakes on new construction to stop a huge pile-up of unsold homes.The U.S. Census Bureau reported that single-family starts dropped from a seasonally adjusted annual rate of 1.40 million in September to 1.18 million in October -- the lowest rate in six years. Single-family starts were off 31% from the level recorded in October 2005. Members of the Federal Reserve Board's rate-setting committee noted in the minutes of its Oct. 25 meeting that builders are "cutting back sharply" on starts and offering substantial price incentives to reduce their backlogs of unsold homes. "Several meeting participants noted the considerable strain on some small and medium-sized residential construction firms," according to the Federal Open Market Committee minutes. Meanwhile, a monthly survey by the National Association of Home Builders found that builders expect sales to stabilize and gradually move up in the coming months. Builders are picking up on a "change in market momentum," NAHB chief economist David Seiders said.

Fitch Ratings has downgraded three classes of J.P. Morgan Chase Commercial Mortgage Securities Corp.'s commercial mortgage pass-through certificates, series 2001-CIBC1.The downgrades were as follows: class K, from B-plus to B-minus; class L, from B to CC/DR4; and class M, from CCC/DR4 to C/DR6. Fitch also affirmed the ratings on 11 other classes in the deal. The rating agency attributed the downgrades to expected losses on six specially serviced loans that would fully deplete the credit enhancement of class M and hurt the other two classes. Fitch can be found online at http://www.fitchratings.com.

Health Care REIT, a Toledo, Ohio-based real estate investment trust, has priced the sale of $300 million of 4.75% convertible senior notes due in 2026.The notes will be convertible, under certain circumstances, into cash. If applicable, they will also be convertible into shares of Health Care REIT's common stock at an initial conversion price of approximately $47.89 per share, the company said. The estimated net proceeds of $293.6 million will be used to repay borrowings under the REIT's lines of credit and to invest in additional health care properties, the company said. The joint book-running managers for the offering were UBS Investment Bank and Deutsche Bank Securities. The REIT can be found on the Web at http://www.hcreit.com.

The average 30-year fixed mortgage rate fell from 6.33% to 6.24% over the seven-day period ended Nov. 16, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.04% to 5.94%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.08% to 6.04%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.55% to 5.53%, Freddie Mac reported. Fees and points averaged 0.5 of a point for all four mortgage categories. "Both long- and short-term mortgage rates fell this week on early signs that the threat of inflation may be waning," said Frank Nothaft, Freddie Mac's chief economist. "The Producer Price Index and Consumer Price Index for October came in lower than expected, and bond yields dropped, pulling mortgage rates lower." A year ago, the average 30-year and 15-year fixed rates were 6.37% and 5.90%, respectively, and the average hybrid and one-year ARM rates were 5.86% and 5.20%, respectively, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Two tranches from GSAMP Trust 2004-SEA2 have been downgraded by Moody's Investors Service and two others have been placed on review for possible downgrade.The rating actions were as follows: class M-5, downgraded from B1 to Caa2; class B-1, downgraded from B3 to C; and classes M-3 and M-4, placed on review for possible downgrade. The actions were based on "rapid deterioration of overcollateralization and subordination caused by accelerating losses," the rating agency said. The losses were attributed to the number of defaulted loans and "substantial severity of loss" on liquidated collateral. The transaction consists of seasoned subprime mortgage loans, some of which had been delinquent before securitization. Moody's can be found online at http://www.moodys.com.

Fitch Ratings has lowered the residential primary servicer rating of Nationstar Mortgage LLC (formerly Centex Home Equity Corp.) from RPS2-plus to RPS2 for subprime loans.The rating agency said the downgrade was based on Nationstar's change in ownership from Centex Corp., which is rated BBB-plus, to a nonrated company, Fortress Investment Group. Nationstar is part of Fortress' private equity group. Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.

HouseRaising Inc., a Charlotte, N.C.-based service provider to custom homebuilders, has announced a credit program that will enable affiliated builders to buy materials and supplies from Lowe's through a master credit facility.Under the program, builders of custom homes constructed with the HouseRaising proprietary management system and with financing through SunTrust Mortgage, Richmond, Va., can buy building materials from Lowe's. Greg Wessling, chairman and chief executive officer of HouseRaising, said the arrangement will lower the cost of homes and help builders who often find it difficult to get financing for materials purchases. The company can be found on the Web at http://www.houseraising.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 620.9 to 647.5 on a seasonally adjusted basis during the week ended Nov. 10, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 7.6% on the week and were down 0.1% from the level recorded a year earlier. The Purchase Index rose from 402.2 to 412.9 on a seasonally adjusted basis, while the Refinance Index rose from 1897.9 to 2022.2, its highest level since October 2005. Refinancings represented 48.0% of total applications, up from 46.3% the previous week, while adjustable-rate mortgages accounted for 25.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.24% to 6.15%, and points (including the origination fee) declined from 1.08 to 0.98 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Subprime lender ECC Capital Corp., Irvine, Calif., posted a stunning $54 million loss in the third quarter, citing loan buybacks and early payment defaults.Through the first nine months of the year, the publicly traded nondepository lost almost $80 million. In October, investment banker Bear Stearns & Co. agreed to purchase the money-losing subprime production arm of ECC Capital. In an interview with MortgageWire, a Bear Stearns spokeswoman denied that there were any buyback issues between the Wall Street firm and Encore Credit Corp., the mortgage unit of ECC. (Bear had been warehousing and purchasing loans from Encore.) In its earnings statement, ECC said it is continuing to "experience higher levels of repurchase claims generally relating to early payment defaults." Almost 6% of Encore's loans are in foreclosure. The company also has a 30-plus day delinquency rate of 3.3%. (For more details, see the Nov. 20 issue of National Mortgage News.

Federal banking regulators are discussing ways to supplement their nontraditional mortgage guidance so that the underwriting standards apply to 2/28 adjustable-rate mortgages, which also carry the risk of payment shock after the initial two-year rate expires.Sheila Bair, chairman of the Federal Deposit Insurance Corp., said 2/28 ARMs are "technically" not covered by the guidance issued in September by federal regulators. "We have been thinking in terms of maybe doing some kind of an advisory to complement the guidance," she told a Women in Housing and Finance luncheon in Washington. The Center for Responsible Lending, Durham, N.C., calls 2/28s "exploding ARMs." The consumer group has urged the regulators to act because 2/28s are generally underwritten based on teaser rates, and many borrowers cannot afford the fully indexed rate. Similar issues with interest-only and payment-option ARMs prompted the regulators to issue the nontraditional mortgage guidance. "We are very concerned about the increased reliance in the subprime market on loans that have a built-in payment shock," said CRL vice president Josh Nassar.

Four classes of Salomon Brothers Mortgage Securities VII Inc. asset-backed pass-through certificates, series 2002-CIT1, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-2, from A to BBB-plus; class M-3, from A-minus to BBB; class M-4, from BBB to BB; and class M-5, from BBB-minus to BB-minus. Fitch also affirmed the ratings on two other classes in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations.