Originations

Office and industrial real estate investment trusts should be ready for growth when the economy rebounds, but the sector's recovery is likely to be limited, according to Standard & Poor's.S&P said it rates 20 real estate companies focused on office or industrial property, but that only 10% carry a negative outlook, in spite of tough operating conditions in most markets, and the rest have stable outlooks. Though poised for recovery when the economy improves, the office and industrial property sector "remains highly vulnerable to further economic weakness due to the lagging nature of cash flow streams for REITs," S&P said in its "industry report card" on North American office and industrial REITs. "In the near term, rental rate rolldowns will take a toll, and common dividends will be under pressure for many REITs in this sector." The rating agency can be found online at http://www.standardandpoors.com/ratings.

Citizens Financial Group Inc., Providence, R.I., has announced that its New England banks have been awarded more than $335,000 by the Federal Home Loan Bank of Boston to support lending for affordable housing.Citizens said the FHLBank is making available more than $1.2 million in New England through its new 2003 Equity Builder Program, and that the award to Citizens (with banks in Massachusetts, Rhode Island, Connecticut, and New Hampshire) was the largest amount given to any bank in New England. The awards are aimed at supporting residential lending to low- and moderate-income homebuyers. "Citizens' award will provide funds to assist buyers with downpayment and closing costs for their new home," said Thomas J. Hollister, president and chief executive officer of Citizens Bank of Massachusetts. The bank can be found online at http://www.citizensbank.com.

Health Care REIT, Toledo, Ohio, has expanded its primary unsecured credit facility from $175 million to $225 million.The real estate investment trust said the revolving facility's maturity date was extended to May 2006, with an option to extend it for another year. KeyBank was the co-lead arranger and administrative agent for the modification, and Deutsche Bank Securities was the co-lead arranger and syndication agent. The company also announced the expansion from $25 million to $30 million of its unsecured revolving credit facility with Fifth Third Bank. The REIT can be found on the Web at http://www.hcreit.com.

Equity Office Properties Trust, a Chicago-based owner and manager of office properties, has received a new $1 billion line of credit to replace its expiring $1 billion facility.The real estate investment trust said the terms of the new three-year facility are similar to those of its expiring LOC. Of the 20 banks participating in the transaction, Bank of America and JP Morgan Chase Bank are the co-lead managers, the REIT said. The company can be found online at http://www.equityoffice.com.

Class B-1 of DLJ Mortgage Acceptance Corp.'s commercial mortgage pass-through certificates series 1997-MF1 has been placed on Rating Watch Negative by Fitch Ratings.The ratings on four other Fitch-rated classes in the deal were affirmed. The rating agency attributed the Rating Watch placement to higher-than-expected losses on four liquidated loans and losses on specially serviced loans remaining in the trust. Fitch can be found online at http://www.fitchratings.com.

Sales of commercial property remain very active, in spite of a decline in market leasing fundamentals, according to speakers at a National Association of Realtors commercial real estate forum.The NAR reported that Scott M. Johnston, vice president at Spaulding & Slye Colliers, told the forum that people were speculating after 9/11 that commercial markets in Washington and New York would take a hit. However, these are now "the two strongest commercial markets in the country," he said. W. Cabell Grayson, senior managing director at CB Richard Ellis, said the current commercial property sales market is remarkable. "This is one of the hottest commercial investment markets in memory," he said. "The emergence of individual investors and syndicates has been remaking America in terms of commercial institutional investment, and they have become the driving force of the commercial market over the last five years." The hottest properties in today's markets are multifamily, retail, major downtown office space, and single-tenant properties, Mr. Grayson said, while suburban office space and flex or research and development space are out of favor. The NAR can be found online at http://realtor.org.

The Oklahoma House of Representatives has passed the Oklahoma Home Ownership and Equity Protection Act, a predatory lending bill, by a 73-26 vote.Gary Huddleston, a lobbyist for the Oklahoma Financial Services Association, said the highlights of the bill are a limit on prepayment penalties, a restriction of refinancing on certain loans, and a requirement that the lender determine the borrower's ability to pay back the loan. He described it as an industry bill that bars localities in the state from passing their own laws and does not include any assignee liability.

For the fourth time since October and the second time in less than two months, the Mortgage Bankers Association of America has upped its estimate for mortgage originations in 2003 -- to $3 trillion.That would easily best last year's record-setting production level by more than half a trillion dollars. MBA chief economist Doug Duncan estimates that two of every three loans will be in the form of refinancings. Only last month, Mr. Duncan forecast that refis would be drying up. But now the markets are expecting the Fed to lower rates to prevent deflation, loan rates are down to the lowest levels since the early 1950s, and refis are on the upswing again. "Absent any signs of inflation or a resurgence in the economy, rates should remain low enough to continue the current refinance wave to the point where we should hit $3 trillion for the year," Mr. Duncan said. The MBA is continuing to forecast that purchase origination mortgages will also set a record this year of more than $1 trillion.

Single-family housing starts fell 3.0% in April after a strong rebound in March, continuing a see-saw pattern that has prevailed so far this year.The Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 1.40 million in March to 1.36 million in April. Housing starts overall fell by 6.8% from the revised level for March, but were 2.7% higher than the level recorded in April 2002, the bureau said. Single-family housing permits rose 1.2% in April, climbing from a seasonally adjusted annual rate of 1.31 million in March to 1.33 million, according to the agency.

New Plan Excel Realty Trust, New York, has priced a public offering of $100 million of 3.75% senior unsecured convertible notes due 2023.The real estate investment trust said the notes will be convertible into New Plan common stock upon the occurrence of certain events, at an initial conversion price of $25.00 per share. Banc of America Securities LLC, the sole underwriter, has been granted an option to buy up to an additional $15 million of notes to cover any overallotments, New Plan said. The REIT can be found on the Web at http://www.newplanexcel.com.

Anworth Mortgage Asset Corp., a real estate investment trust based in Santa Monica, Calif., has priced a follow-on public offering of 3.85 million shares of common stock at $14.10 per share.Friedman, Billings, Ramsey & Co. Inc., the Arlington, Va.-based lead manager for the offering, said the underwriters have an option to buy up to an additional 577,500 shares to cover any overallotments. FBR said the net proceeds to Anworth, a mortgage REIT, will be approximately $51 million, assuming no exercise of the overallotment option. FBR can be found on the Web at http://www.fbr.com.

Entrust Financial Services Inc., the Denver-based holding company for Entrust Mortgage Inc., has reported a net loss of $319,267 ($0.13 per share) for the first quarter, compared with net income of $183,728 ($0.09 per share) a year earlier.Scott Sax, Entrust's president and chief executive officer, said the first quarter is typically the worst of the year for Entrust. "Additionally, the company made a decision in late 2002 to restructure the management team to develop the infrastructure and base necessary to achieve the desired growth over the next few years," Mr. Sax said. "Toward the goal of accomplishing the projected growth, the company borrowed $2 million at the end of 2002 to ensure adequate cash reserves to finance the growth." Mr. Sax said wholesale production in April exceeded $20 million for the first time in company history. Entrust can be found online at http://www.entrustfs.com.

The ratings on seven classes from three commercial mortgage-backed securities deals containing loans secured by Shiloh Inn lodging properties have been placed on CreditWatch with negative implications by Standard & Poor's.The affected classes are as follows: classes E, F, and G of Merrill Lynch Mortgage Investors Inc. pass-through certificates, series 1996-C2 and series 1997-C1; and class E of Commercial Mortgage Acceptance Corp. commercial mortgage pass-through certificates, series 1997-ML1. S&P said the Shiloh loans have been delinquent for more than two years, during which the borrowers filed for bankruptcy. A settlement was reached with Criimi Mae Services LP, the special servicer, to modify the loans and return them to performing status, the rating agency said. "The settlement calls for, among other things, the creation of an 'A' and 'B' note, where the A note balance will approximate the outstanding principal balance of the loan, and the B note will represent the outstanding advances due to the trust through the modification date," S&P said. The certificates will remain on CreditWatch until the "ultimate impact" of the Shiloh modifications on trust cash flows can be determined, S&P said. The rating agency can be found online at http://www.standardandpoors.com.

James G. Farmer has been elected president and chief executive officer of UCAP Inc., the Denver-based parent company of United Capital Mortgage Corp.Mr. Farmer, 54, was most recently chairman and CEO of Woodson Holdings, a manufacturer of precision metal components. He said UCAP's immediate goals will be to increase same-branch originations and open new offices; acquire existing mortgage operations; and boost loan productivity by standardizing processes and employing Internet-based technology. The company can be found online at http://www.ucmc.net.

Municipal Mortgage & Equity, Baltimore, has announced an agreement to acquire the Housing and Community Investing unit of Lend Lease Real Estate Investments, New York, for $102 million in cash.HCI, a syndicator of low-income housing tax credit investments, will be combined with MuniMae Midland, a subsidiary of MuniMae that finances affordable housing, to form MMA Financial. The new company will manage $7.4 billion of real estate investments representing approximately 220,000 apartment units, making it the fourth-largest owner of apartments in the United States, MuniMae said. MMA Financial will be a wholly owned subsidiary of MuniMae and will be based in Baltimore. The tax credit syndication operation will be headed by Jenny Netzer, now managing director of HCI, and the affordable debt business will be led by Keith Gloecki, who now heads MuniMae Midland's investment operations. Lend Lease REI is a subsidiary of Lend Lease Corp., Sydney, Australia. The companies can be found online at http://www.munimaemidland.com, http://www.mma-financial.com, and http://www.lendlease.com.au.

States would be permitted to tax the enormous profits earned by Fannie Mae and Freddie Mac under legislation introduced May 15 by Rep. Pete Stark, D-Calif.The two government-sponsored enterprises are "profitable enough to provide a steady stream of home loans without the state tax-exempt status that was once needed to draw investors," the lawmaker said. The two companies earned some $10 billion in combined profits in 2001 and are ranked on Fortune magazine's list of most profitable companies. Though they pay federal taxes, they do not pay state or local corporate income taxes. States would not be required to assess Fannie and Freddie under Rep. Stark's Secondary Mortgage Market Fair Competition Act, but they would be allowed to if they so desire. And the California Democrat left little doubt that, given a choice between cutting basic services or taxing two companies that are "amassing billions in profits each year," they would choose the latter. He said the two GSEs are successful enough that they no longer need to be sheltered by Congress. The 16-term lawmaker from Freemont, Calif., is the second-highest-ranking minority member of the House Ways and Means Committee.

The average 30-year fixed mortgage rate fell to a survey-record low of 5.45% for the week ending May 16 from 5.62% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The previous low was 5.61%, recorded earlier this year in the week ended March 14. (Freddie Mac began tracking the rate in 1971.) The average 15-year fixed mortgage rate fell from 4.97% to 4.84%, and the average rate for one-year Treasury-indexed adjustable-rate mortgages crept up from a survey-record low of 3.66% to 3.67%. Fees and points averaged 0.6 points for 30-year fixed-rate mortgages and ARMs and 0.7 points for 15-year FRMs. "Continued reaction to last week's Federal Reserve Committee statements about the threat of deflation has triggered a rally in the bond market, driving long-term yields to the lowest level since 1958," said Frank Nothaft, Freddie Mac's chief economist. ".... The Producer Price Index for April, released today, showed a considerably larger decline than had been expected, reaffirming market concerns about the state of the economy." A year ago, the average 30-year and 15-year fixed rates were 6.89% and 6.37%, respectively, and the average one-year ARM rate was 4.81%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Equity One Inc., North Miami Beach, Fla., has announced a public offering of 3.0 million shares of common stock that is expected to net approximately $48.7 million.The real estate investment trust said the underwriter, Deutsche Bank Securities Inc., has been granted an option to buy up to an additional 450,000 shares to cover any overallotments. The shopping center REIT can be found online at http://www.equityone.net.

Boston Properties Inc., a Boston-based real estate investment trust, has reported that its operating partnership, Boston Properties LP, has priced an offering of $250 million of senior unsecured notes.The 5.000% notes, due June 1, 2015, were priced at 99.329 to yield 5.075%. The REIT said the proceeds will be used primarily to repay short-term floating-rate debt, reducing its floating-rate debt to 5.4% of total debt (all of which will be construction loans). The company can be found online at http://www.bostonproperties.com.

Real estate investment trusts have been added to a group of more than 4,000 companies ranked according to a Standard & Poor's system that appraises the growth and stability of earnings and dividends.S&P's Earnings and Dividend Ranking System, or Quality Ranking, is a quantitative model that uses per-share earnings and dividend records over the most recent 10 years. The rating agency said REITs were added to the companies ranked under the system in response to market demand. "REITs have not only outperformed the broader market for the past three years, but have posted positive total returns in each year," said Raymond Mathis, an S&P REITs equity analyst. "Despite softening fundamentals, the streak continued in the first quarter of 2003, with the S&P REIT Composite Index providing a positive total return of 0.72%, versus a 3.3% drop for the S&P Super Composite 1500." The S&P Quality Rankings range from A-plus through C; a D ranking indicates that a company is in reorganization. S&P can be found online at http://www.standardandpoors.com.