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Power Profile:
MattGalliganOn CIT Groups
New Real EstateFinance Challenge
Q&A: the M.O.
chats with
Ackman-Ziffs
SimonZiff
Lending Powerhouse
M&T Bank
Plus:Top Large DealsTop Smaller Deals
Monthly Mortgage
Charts and more
The InsidersMonthly Guide
to New YorksCommercial
Mortgage
Industry
APRIL 2012
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the MORtGAGe OBSeRVeR APRIL 201222
Power Profile
senior secured lender, he said. The only product type that we were not playing inand
it was a vast holewas this real estate product type. Since Bank of Irelands team was
essentially taken as a whole and dropped in to ll that vast hole, it becomes a much less
risky move. Plus, as Mr. Galligan added, the company gured that if it could be done on
a moderately leveraged basis in both the middle market and in the larger trophy assets,
then they were interested in being in the business.
The move came about as the Bank of Ireland portfolio was being shopped around. CIT
looked at the portfolio and passed. It ultimately went to Wells Fargo for roughly $1.2 bil-
lion. It sold at a premium. Wells later bought Bank of Irelands Burdale Financial Hold-
ings Limited and Burdale Capital Finances portfolio of loans, about $1 billion outstanding
in the U.S. and United Kingdom.
During the marketing of the loans, CIT Group andMr. Galligan started talking and an agreement was
reached to do a lift-out of his entire team. Paul Mc-
Donnell, head of the Property Finance Group at Bank
of Ireland, told The Mortgage Observer that Mr. Galli-
gan and his team had worked professionally through-
out the closure of the business. He also underscored
the success the portfolio had achieved.
We had a very good experience with Matthe did
a fantastic job for us, Mr. McDonnell said. I think
that the best way to conrm that was the success that
we had with our book over there. And when we hadto sell itand we had to sell it in terms of broader
issueswe achieved a very strong price for it. A lot of
that I would put down to Matts management of the
business.
An announcement went out over the wires at the
beginning of November 2011. CIT Group Inc. presi-
dent Nelson Chai heralded the arrival of Mr. Galligan
and his team as indicative of CITs focus on opportu-
nities for growth. The deep relationships and indus-
try expertise of our team will enable us to capitalizeon market conditions while pursuing a conservative
approach in middle market commercial real estate
nancing, Mr. Chai said in a prepared statement at
the time. He added the launch highlighted a focus on
growth opportunities and efforts to source and build
assets at CIT Bank.
The road to CIT Real Estate Financehis fth
start-up, no lesshas taken Mr. Galligan through a
long list of familiar bank names. He grew up in Wall-
ingford, Conn. and attended college in Worcester, Mass. at the College of the Holy Cross.
He and his wife, whom he met at Chase, have two sons and live on 41st Street, an easywalk to his new ofce.
Personal projects include golf, travel and reading (on a recent trip to Aguadilla on
Puerto Ricos western coast, he worked his way throughHis Way: The Unauthorized Bi-
ography of Frank Sinatra, by Kitty Kelley). He meditates twice a day.
Professionally, he got his start in the Chase global credit training program. While
nishing up the program, he met and started doing some analytical work for William
McCahill, who retired last October from Capital One, where he was an executive vice
president. The two became mentor and mentee.
Reached at his home, Mr. McCahill told The Mortgage Observer that he saw at the time
a fantastic young guyvery bright and energetic. After 10 years at Chase, where he left
as a vice president and team leader in the Real Estate Department, Mr. Galligan went to
the Bank of Boston. There, he created and managed its real estate distribution process
structuring, arranging and placing multi-bank syndications.
Recruited to run its syndications desk, he rejoined Mr. McCahill at Fleet in 1996.
He became what I would label the high priest of the syndications world, Mr. Mc-
Cahill said of his friend. He was by far, I think, the most respected banker in putting
major syndicated deals together. That reputation really put Fleet into the big leagues, so
we were able to do $200 million and $300 million deals because we knew Matt and his
group could sell them down very quickly.
When asked about the title later, in CIT Groups ofces, Mr. Galligan shunned the
credit. Hes being very modest, he explained. Hes really who put Fleet into the big
leagues here in the city.
But structuring syndicated loans was denitely an area of focus, and one that provided
him with a plethora of contacts. I syndicated debt for 15 years, and thats how I estab-
lished a lot of my contacts here in New York, because I was here for 10 and then I went to
Boston for 20, but I was constantly on the phone withbankers in New York, he explained. And I got into
that business when it was developing so I was one of
the early guys, and Ive gotten to know an awful lot of
people as a result of it.
At CIT Groups midtown ofces, homage is paid to
one of the banks primary business areas. The bank is
a leading aircraft lessor and dozens of aircraft models
line cabinets and walls on the route back to the area
where Mr. Galligan and his team sit. By industry,
commercial and regional airlines comprise the largest
chunk of the assets in its portfolio, at 25.9 percent. Andas of December 31, 2011, transportation nance was
a $13.3 billion portion of the banks business. Student
lendingoriginations ceased by April 2008still made
up 18.5 percent as of its assets at the time, followed by
manufacturing, at 12.9 percent.
Its total assets, as of December 31, 2011, were $45.3
billion and total loans decreased from $21.9 billion to
$19.9 billion over the fourth quarter of 2011, mainly
due to the termination of student loan originations and
the transfer of $2.2 billion of student loans to held-for-
sale status.
Mr. Davis, at Guggenheim Partners, said that a part
of this new chapter for CIT Group is a return of CIT
to being a more active lender after having reduced
its loan and lease portfolio by about 50 percent from
where it was pre-crisis.
So with its focus on top-tier sponsors and develop-
ers in major cities, what kind of loans might come out
of CIT Real Estate Finance?
Well, rst of all, what were looking for is not necessarily the largest developer, Galli-
gan said when asked that question. Were looking for one thats kind of best-in-class. Wetypically would like developers that are building very close to the urban core because we
think that theres less risk being associated with the marketplace because there are much
higher barriers to entry.
One recent project the bank nanced is Edgewater Harbor, a 24-acre mixed-use in-
dustrial complex that is being converted into 495 residential units and 100,000 square
feet of retail and restaurants. The project is being undertaken by National Resources,
whose president, Joseph Cotter, called Mr. Galligan the right blend of the traditional
relationship banker and a market-savvy New York real estate lender.
Relationships and character seem to be key themes, in fact. In addition to terms like
best in class and urban core, Galligan referenced the three Cs in talking about what
he looks for in a borrowercharacter, capacity and capital.
The driver there is character, he said, if the people are going to do the right thing
when its easy to walk away and leave us with a property and perhaps a loss.
As to how well capitalized a borrower needs to be, he indicated that it depends on the
I think rom 10,000 eet itlooks to be a really goodft or CIT. I youre aninvestor, I think you likeit because it provides
diversifcation. Secondly,as I understand thesituation, we have alot o commercial realestate mortgages thatare fnanced elsewherethat are looking or newbalance sheets.
Jefrey Davis,Guggenheim Partners
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So welcome to The Mortgage Observer. Stick around and stay a while.
Were dedicated to bringing you all the commercial real estate nance news happening in the
New York tristate area, with a focus on tracking and diving down deep into recent mortgages
thats our mission.
As we head further into spring, its easy to feel optimistic and ready to start something new with
vigor. The weathers warmer, the owers are blooming, the sun sticks around later Well, opti-
mism regarding the economy and what our collective nancial recovery means for commercial
real estate seems to be in bloom once again, too. No doubt uncertainties still loom, but several of
the stories were bringing you this month attest to this.For instance, my prole of CIT Groups Matt Galligan, formerly of Bank of Ireland. After helping
to set up Bank of Irelands U.S. portfolio, Matt found himself having to wind itand his position
down when Irish regulators called for the bank to deleverage. Matt and much of his team from
Bank of Ireland weathered that storm and started something newthe real estate nance division
at CIT Group.
The move isnt without risk. But as Matt told me, everyone has riskwhether they know it or
not.
For me, optimism abounds in the story of M&T Bank, as well. With its focus on community lend-
ing and a loyalty for its long-time customers, the bank weathered the nancial crisis and recently
acquired Wilmington Trust, which will allow it to provide new wealth management services to
those customers.
As someone helping to start something new myself, I took a lot from all of these stories. And Im
sure that youll nd them valuable and informative, too.
Also of value, I hope, will be our analysis of commercial mortgage deals in the New York tristate
area. Weve populated this magazine with lists, charts and graphsall designed to give you an on-
going, easy to access snapshot of who the lenders, borrowers and brokers are.
As we continue on, please feel free to get in touch and let me know whats working for you and
whats not. And, of course, as we continue on into spring and deals bloom for you, reach out and
share them with us.
Happy spring.
Editors Letter
Springs HereMight Optimism Follow?
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Commercial Real Estate Finance
Financing provided by:Drew [email protected]
Alan [email protected]
Atlanta | Bethesda | Chicago | Dallas | Irvine
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Th Cu P$163,800,000 | 1,170 u
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Fannie Mae, Freddie Mac and FHA. So well be merg-
ing two companiesone with a focus on multifamilyrental housing and the low income to moderate income
side with Bellwether, which has a very strong commer-
cial and then market-rate multifamily business.
Bellwether Enterprise will be based in Cleveland,
Ohio, but will retain a presence in the New York tristate
area, where Mr. Seats said that it will target low income
and affordable housing.
We cover the entire New York City metro area and
all ve boroughs, so we want to do business in all of
them, he explained. As for its deal pipelinethere aretargeted loans moving through, he said, both in New
York City and New Jersey.
Overall, Mr. Seats said, the company expects to hit
$1.5 billion in mortgage production from the time the
merger takes effect, through the end of 2012, a gure he
conceded was both aggressive and very solid volume.
In a prepared statement about the merger, Charles
Werhane, president and CEO of Enterprise Community
Investment, said that $1.5 billion was, in fact, only a
start. Through this merger and with planned strategic
growth initiatives, Mr. Werhane said, we expect tobuild Bellwether Enterprises annual production vol-
ume to over $3 billion.
Helios Capital Retained toAdvise on Two Loan SalesTotaling $9.3 Million
Helios Capital Advisors has been retained to provide
advisory services on the sale of two non-performing
rst mortgages. The loans are secured by a develop-
ment sites in Hells Kitchen and Harlem.
The rm, which opened its New York City ofce in
January, will use a controlled bid process for the twoloans. The rst mortgage on the Hells Kitchen develop-
ment site80,000 square feethas an unpaid principal
balance of roughly $7.5 million. Meanwhile, the rst
mortgage on the Harlem property has an unpaid princi-
pal balance of $1.8 million. That site is located on Fred-
erick Douglas Boulevard.
Helios will use our established, controlled bid pro-
cess to complete both of these sales, Steven Schultz,
chief executive ofcer for Helios Capital Advisors, said
in a prepared statement about the assignment. These
diverse properties provide tremendous potential andwe are sure they will attract much interest from knowl-
edgeable investors.
Based in Woodbridge, NJ, Helios opened a Madison
Avenue location in response to over $300 million intransactions in 2011, the rm said at the time. Managing
director Josh Malka and associate director Ben Shul-
man both work out of that ofce.
Mr. Malka said that, since opening, Helios has
sourced many exclusive assignments in the borough of
Manhattan and the outer boroughs from noted banks
such as Northeld, BNB as well as two private lenders.
Madison Realty CapitalGets $28.7 Million PortfolioReal estate investment rm Madison Realty Capital
has grabbed a portfolio of New York City loans from
a regional savings bank. The portfolio, secured by 11
Manhattan properties and 14 Brooklyn properties, is
valued at $28.7 million and consists of 15 notes.
The loans in the portfolio were originated between
2006 and 2009.
Joshua Zegen, co-founder and managing principal of
MRC, told The Mortgage Observer that the Manhattanproperties were located in Hamilton Heights and west
Harlem. A number of the properties we got deeds and
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7/36APRIL 2012 THE MORTGAGE OBSERVER 9
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debtwe bought the debt but it came along with the
deeds to the property as well at closing, he said in ref-erence to the upper Manhattan portion of the portfolio.
These number 125 apartment units and will be man-
aged by Silverstone Property Group, the property and
asset management arm of MCR. He said that they were
working at the moment to maximize value on those
properties.
The 14 Brooklyn properties are in Park Slope, Carroll
Gardens and Bed-Stuy.
In many cases, MRC restructures the deal back to the
borrower, but Mr. Zegen said that his rm was uniquelypositioned should this not be the case. In cases where
it takes ownership, Silverstone is ready to take over
management and reposition the buildings. In many
of these deals we wont own, he said, and obviously
were very happy to be paid off.
Since 2010 MRC has closed over $150 million in dis-
tressed debt transactions with more than 10 banks. Mr.
Zegen said that he sees more distress on the horizon as
well.
In the recent 12 months a lot of the deals have this
kind of a restructuring or recapitalization component,he said. I see that happening more and more because
some of the smaller banksnally their balance sheets
have strengthenedand so they have the ability to write
down assets and sell loans at some sort of a discount.
Mixed Bag o Notes onOfer rom Ariel
Ariel Property Advisors is marketing a note portfolio
that is made up nine investment properties throughout
the New York City area. Its principal balance is a little
under $9 million, according to Ariel.
Most notably, however, the portfolio includes proper-ties that are both performing and non-performing, a
fact that Ariel Property Advisors vice president Victor
Sozio says makes them unique.
Some note sale packages are just purely distressed,
where they include notes that are in the midst of the
legal process, Mr. Sozio told The Mortgage Observer.
Here we have a mix of both performing and non-
performing notes. Five out of the nine are performing
and these notes offer up good returns. Those returns
are being achieved, he added, as a result of the fact that
most are at an interest rate above 6 percent, collateral-ized by strong assets.
Those assets include three properties in Manhat-
tan, two in Brooklyn, three in the Bronx and one on
the South Shore of Long Island. Mr. Sozio declined toprovide specic addresses or the name of the nancial
institution on whose behalf Ariel is marketing the port-
folio.
Once signed condentiality agreements are in place,
however, he said that interested parties will have access
to the data room, where they will be able to go through
all the mortgage les, see where they stand in the legal
process, if there is one, and theyll see all the internal
appraisals the institution has performed.
Its a good mix, Mr. Sozio said of where the per-
forming portion of the portfolio is located. Both that
we have in Manhattan are performing. Of the two in
Brooklynone is performing and one is in the legal
processand in the Bronx one out of the three is per-
forming.
Despite the tremendous amount
of commercial real estate loans
coming due this year, Mr. Sozio
doesnt anticipate a huge wave of
distress hitting the market this year.
He said that banks have done wellin strategically unloading these
distressed notes, which has kept aVictor Sozio.
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NEWS EXCHANGE
{ Continued on Page 6 }
Life insurance companies continue to exceed ex-
pectations in the commercial mortgage originations
space. Insurer MetLife said recently that its Real Estate
Investments department originated over $11 billion in
commercial mortgages in 2011, compared to more than
$8 billion that the company originated in 2010. And
according to a MetLife spokesperson, those 2010 num-
bers were twice those seen in 2009.
In Manhattan last year, the companys volume was bol-
stered by several high prole originations, including $350
million for 1540 Broadway and a $374 million loan issued
for Boston Properties 601 Lexington Avenue, where Pru-
dential Mortgage Capital Co. and New York Lifes contri-
butions brought the loan total to $735 million.Robert Merck, senior managing director and head
of real estate investments at MetLife, sees the in-
surers strengths as being tied to its reputation, size,
nancial strength and the speed at which it can ex-
ecute transactions.
MetLife has built its commercial real estate lending
business on key guiding principles, which enabled us to
strategically navigate through the economic downturn
during the past few years and remain an active lender
in the market, Mr. Merck said in a prepared statement
about the loan origination volumes. Our commitment
to prudent risk management and our long-term invest-
ment approach has allowed us to take advantage of
attractive opportunities in the U.S. and internationally,
and we will continue to focus on top quality properties
in major markets in 2012.
The company, which had a total commercial mort-
gage portfolio of $40 billion as of the end of 2011,
was able to originate top quality loans at yields that
provided a pick-up of more than 100 basis points over
comparable risk corporate bonds, according to Mark
Wilsmann, managing director and head of MetLifes
mortgage lending group.
MetLifes increase in originations volume is in linewith the industry as a whole, based upon data from the
American Council of Life Insurers. The group reports
total commitment volume of $45.42 billion for 2011, a
48.23 percent increase from the previous year.
For the remainder of 2012, the company says it will
focus on expanding its commercial mortgage activity
across the globe, but particularly in the United King-
dom, where it views market conditions as particularly
favorable. It targets ofce, multifamily, industrial and
retail properties in top markets.
$33 Million WilliamsburgTrade Shows Hotel CrazeFiltering to Boroughs
The trade of a boutique hotel in Brooklyn is the latest
indication that the New York City hotel market contin-
ues to be on re. And the co-developers on the project
werent even looking for a buyer.
Hotel Williamsburg, a 64-key, full-service hotel
that opened its doors just last November, was bought
by King & Grove on March 8 for over $33 million. Re-
named King & Grove Williamsburg, the hotel, at 160
North 12th Street in Williamsburg, has followers of the
citys hotel sector abuzz.
Daniel Lesser, presidentand CEO of LW Hospitality
Advisors, told The Mortgage
Observer that the deal speaks
to the citys overall health. Its
a brand new hotel in a really
dynamic marketWilliams-
burg is very much a happening
place, Mr. Lesser said. Its
very emblematic of the funda-
mental health of New York and
how all parts of the city have
been, and continue to be, gen-
tried. Mr. Lesser also pointed
to areas like Long Island City,
where ten to twenty years ago, there wasnt a whole lot
happening.
The hotel was co-developed by Minneapolis-based
Graves Hospitality Corp. and Williamsburg-based KSK
Construction Groupdeveloper of the GEM Hotel
Union Square.
According to a statement from Graves Hospitality,
the developers hadnt anticipated selling. Rather, they
planned to indenitely operate the property, untilthe markets overwhelmingly enthusiastic response to
the high-prole project attracted a non-solicited pur-
chase offer that was simply too good to refuse.
Benjamin Graves, president of Graves Hospitality,
said that the sale highlights the companys skills at
understanding the intricacies of specic locations and
submarkets, identifying the right concept and develop-
ing relevant, high-quality projects to drive demand and
protability.
Mr. Lesser, at LW Hospitality, referenced a New
York metropolitan renaissance, the benets of which
are making their way to the outer boroughs. Thats
what were seeing in Brooklyn and thats why were
MetLifes Commercial MortgageVolume Hit $11 Billion in 2011
Note sales, investments, mortgage originations, mergers, aquisitions
Hotel Williamsburg.
1540 Broadway.
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9/36
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THE MORTGAGE OBSERVER APRIL 201216
Fleet of foot, with a concentration on maintaining its focus on community banking and
an ownership mentality, M&T Banks performance during the financial crisis might give
competitors pause. Now, with May 2011s acquisition of Wilmington Trust, the bank is
branching out, providing high-wealth owners of real estate in New York and elsewhere with
wealth management and services.
The Secrets BehindM&Ts Lending MightBY CARL GAINES
PHOTOS BY HANNAH MATTIX
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APRIL 2012 the MORtGAGe OBSeRVeR 1717
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THE MORTGAGE OBSERVER APRIL 20126
The European commercial real es-
tate market is being dominated by U.S.
and Canadian investors, with several
New York-based asset managers pur-
suing routes into real estatelike debt
portfoliosthat others pass by.
According to data from CBRE,
North American investors were
responsible for 30 percent of invest-
ments in European commercial real
estate last year. This was up from 21
percent in 2010. Of this capital in 2011,
Euro 9 billion was from the U.S. and
Euro 2 billion was from Canada.
Michael Haddock, a London-based
senior director, EMEA Research and
Consulting, at CBRE said that inves-tors tiptoe around the countries hardest hit by the
European debt crisis. He said that the general trend is
investors looking for core real estate in core markets
and avoiding the risk associated with distressed assets.
But there is a small group of investors, he pointed
out, who do actively seek out risk in the hope of get-
ting very good returns. Part of this is due to a different
mindset, Mr. Haddock pointed out.
With somebody like Blackstone, its quite interest-
ing that theyre pursuing quite a number of different
routes into real estateso Blackstone [Group] has been
quite prominent as buyers of debt portfolios, as well as
direct real estate, he said. Thats reasonably typical
of U.S. investors. That they have the ability to think in
multiple dimensions about ways mar-
kets operate.
Blackstone Real Estate Debt Strate-
gies, a division started in 2008, cur-
rently has $4 billion of assets under
management, according to the compa-
ny, whose total real estate assets under
management as of December 31, 2011,
were $42.9 billion.
The increase in non-European buy-
ers of European commercial real estate
caused a 7 percent increase in overall
investment activity in the market. It
rose from Euro 110 billion in 2010 to
Euro 118 billion in 2011.
After the UK, the next most popular
market for North American investorswas Germany, Mr. Haddock said. That has certainly
been the case for the last couple of years, he added.
Next largestpretty much equally for last yearwere
France and Russia. And then it trails off pretty quickly
after that. To that point, the CBRE data showed only
about Euro 350 million in Italy, Euro 170 million in
Spain and nothing Mr. Haddock could see in Portugal,
Ireland or Greeceamong the weakest of the Euro
zone markets.
Though the investment activity was spread across
markets in countries least impacted by economic tur-
moil, the London ofce market fared the best. Central
London took 18 percent of total North American capital
invested in Europe in 2011.
CBRE: Investments in EuropeanCRE Flowing from North America
seeing hotels like this get built in the rst place, and
then secondly they end up trading at some very healthynumbers, Mr. Lesser added. These are evolving mar-
kets on the upswing.
$325 Million Ref or 100West 33rd Street
Vornado Realty Trust has renanced its 100 West
33rd Street buildinghome of Manhattan Mallfor
$325 million. The REIT realized $87 million of net pro-
ceeds in the process.
The new loan, at an interest rate of LIBOR plus 2.5
percent, matures in March of 2015 and has two one-
year extension options built in. Net proceeds were real-
ized upon paying off the existing loan and closing costs
for the current renancing.
The 12-story building sits on the entire eastern block
of Sixth Avenue between 32nd and 33rd Streets. It is 1.1
million square feet and includes the mall, at 243,000
square feet, and 847,000 square feet of ofce space.
Retail tenants at the Penn Plaza district building in-clude JC Penney, Victorias Secret and Gamestop. Ofce
tenants include Draftfcb and Polo Ralph Lauren.
Deutsche Bank BerkshireMortgage Acquired
Real estate nancial services company Ranieri Real
Estate Partners and private equity funds afliated with
New Yorks WL Ross & Co. have completed their acqui-
sition of Deutsche Bank Berkshire Mortgage.
Jeffrey Day, DBBMs CEO, will continue in that role
at the company, which has been dubbed Berkeley Point
Capital. It originates multifamily loans for Fannie Mae,
Freddie Mac and the Federal Housing Administration.
Berkeley Point services a $29 billion portfolio of mul-
tifamily loans and, according to a release, is the second
largest originator of Fannie Mae loans.
Jon Vaccaro, founder of Ranieri Real Estate Partners
and head of real estate at Ranieri Partners, lauded the
value of the acquisition. A high-quality acquisition ofthis scale within the multi-family sector is unique and
rare, Mr. Vaccaro said in a prepared statement about
the deal. The new Berkeley Point provides us with an
excellent in-place team, that we know well and is ca-
pable of much more. With the benet of the strong WL
Ross and Ranieri partnership, we believe Berkeley Point
is poised for growth.
Mr. Vaccaro was previously global head of commer-
cial real estate at Deutsche Bank, a position he held
from 1997 to 2010. DBBM was a subsidiary of Deutsche
Bank.
According to James B. Lockhart III, vice chairman
of WL Ross and former director of the Federal Housing
Finance Agency, Berkeley Point did over $3 billion in
multifamily originations last year. He added that WL
Ross looked forward to working with Mr. Day and his
team to help them grow in this critical part of our na-
tions housing market.
Enterprise, Bellwetherorm JV and Eye $1.5Billion in Mortgages
Enterprise Community Investments mortgage -
nance business is merging with Bellwether Real Estate
Capital, The Mortgage Observer has learned. The new
company, Bellwether Enterprise Real Estate Capital, is
aiming for $1.5 billion in mortgage production volume
this year, some of that based here in the tristate region.
The merger is expected to be completed by the end
of May or June, Lamar Seats, senior vice president of
Enterprises Multifamily Mortgage Finance business,
told The Mortgage Observer. Mr. Seats will head up the
newly formed entity as its CEO. Bellwether Real Estate
Capitals Ned Huffman will serve as its president.
Mr. Seats said that the two companies have verylittle overlap and will bring different strengths to the
table.
They bring a very strong commercial lending plat-
form through over 25 life companies to the new orga-
nization, and thats everything
from ofce, retail, hospitality
and industrial, and they also
bring a very robust multifam-
ily platform, he said of Bell-
wether. As for Enterprise, we
are solely multifamily focused
and our core focus is really low
income and affordable hous-
ing, which we execute through
NEWS EXCHANGE
Michael Haddock.
Lamar Seats.
W Fl hi B k l di d
-
8/2/2019 Observer Mortgage 2012
13/36
Multi-Family andMixed-Use Mortgages1
Apartment Buildings Underlying Co-ops Competitive Rates
Cash ManagementServices
Remote Deposit Cash Manager Direct Lockbox Services
Business CheckingPlus Interest
1.25%APY2On balances of $15,000 or more
1 All mortgages, loans and lines o credit are subject to approval. Certain ees and restrictions may apply. Flushing Bank is a portolio lender with wide range o loan programs oering various rates and terms. All loan rates and oers are s ubject to change and termination withoutany prior notice. 2 New accounts with new money only. A new business checking account is defned as any new business checking account that does not have any authorized signatures in common with any other existing Flushing Bank business checking account(s). An existingchecking customer is defned as anyone who currently has or has had a Flushing Bank checking account within the last 24 months. New money is defned as money not currently on deposit with Flushing Bank. The annual percentage yield (APY) or the Business Checking PlusInterest is 1.25% or daily account balances o $15,000 and greater. This rate will remain in eect or 90 days ater account opening. At the end o this 90-day Guarantee Rate Period the rate will revert to the standard tier pricing or the account. Please reer to the FlushingBank Business Fee Schedule or more details. The APY is eective January 3, 2012. You must maintain a daily balance o $15,000 or greater or the statement cycle to receive the disclosed yield. You must deposit a minimum o $100 to open this account. Nominimum balance is required to avoid a monthly maintenance ee. The rate and oer are subject to change and early termination without prior notice at any time. Other ees and restrictions may apply. Speak with a Flushing Bank Business Banker or moredetails and inormation. Flushing Bank is a trade name o Flushing Savings Bank, FSB.
At Flushing Bank, were small enough to know you and large
enough to provide you with the competitive lending and banking
solutions you need. For more information visit your local Flushing
Bank branch, call 800.581.2889 or go to www.FlushingBank.com.
Were Flushing Bank, your lending andbanking specialist.
-
8/2/2019 Observer Mortgage 2012
14/36
APRIL 2012 THE MORTGAGE OBSERVER 31
the scheduleThe commercial mortgage and real estate industrys 10 biggest tickets for April
MONDAY, APRIL 2
Dont be the last to understand the pipeline of
new taxation, real estate and sustainability law
coming down the pike. Join the Real Estate Board
of New York as it gathers a host of panelists at
its Proposed Law and Real Estate panel.Real
Estate Board of New York Proposed Law and Real
Estate seminar, REBNY Mendik Education Center,
570 Lexington Avenue, 5:30-8:30 p.m., contact Indi
Jaipal at [email protected] for info
MONDAY, APRIL 9
This New York Real Estate Salesperson class is
scheduled to meet for 10 days, Monday through
Friday, April 9-20, between 9 a.m. and 5:30 p.m.The nal exam will take place on Friday, April 20.
The New York University Schack Institute of Real
Estate 75-hour New York Real Estate Salesperson
Course, April 9-20, Midtown Center, 11 West 42nd
Street, Fifth Floor, contact Sal Gulino at 212-992-
3305 or [email protected] for more info.
THURSDAY, APRIL 19
Prudential Douglas Ellimans
Faith Hope Consolo will be
among the honorees receiving
Mercy Colleges Trustee Medal
at the schools 31st Annual
Trustees event.Mercy College
Annual Trustees Scholarship
Dinner, the Plaza Hotel, 6:30-
9:30 p.m.,
TUESDAY, APRIL 24
Learn the inside secrets of top brokers when
the Real Estate Board of New York hosts its In-
side Secrets of Top Brokers seminar.Real Estate
Board of New York Inside Secrets of Top Brokers
seminar, REBNY Mendik Education Center, 570
Lexington Avenue, 5:30-7 p.m. call 212-532-3100 for
more info
TUESDAY, APRIL 3
Metropolitan Transportation Authority Chair-
man Joseph Lhota will be the guest speaker when
the New York Building Congress hosts its next
breakfast forum at the Trianon Ballroom at the
Hilton New York.New York Building Congress
breakfast forum, Hilton New York, 1335 Avenue of
the Americas, 8-9:30 a.m., visit www.buildingcon-
gress.com for more info
SUNDAY, APRIL 15
These quiet tree-lined streets near the Hudson
River from West 96th Street to West 110th Street
boast some of New Yorks nest remaining turn-of-the-century row houses, apartments, institu-
tional structures and public monuments, often
designed by leading architects.Municipal Art So-
ciety Bloomingdale Blocks walking tour, meeting
place will be provided upon registration, 2 p.m., call
212-935-2075 or visit www.mas.org
SUNDAY, APRIL 20
Thousands will attend the International Coun-
cil of Shopping Centers event when it comes to
Las Vegas this year.International Council of Shop-
ping Centers, Las Vegas Convention Center, Las
Vegas, May 21-23, visit www.icsc.org/2012RECON/
index.php for more info
THURSDAY, APRIL 26
Massey Knakal Realty Services is hosting the
second annual Commercial Real Estate Invest-
ment Summit, with guests that will include head-
liner Michael Fascitelli of Vornado Realty Trust.
Commercial Real Estate Investment Summit, New
York Bar Association, 42 West 44th Street, 8:30 a.m.
to 3:30 p.m., visit http://mkcresummit.com/register
WEDNESDAY, APRIL 4
The White Plains regions new organizer of
commercial real estate information and network-
ing events, CapRate Events, will present the
Northern Metro Multifamily & Mixed-Use CRE
summit. The Northern Metro Multifamily & Mixed
Use Commercial Real Estate Summit, White Plains
Performing Arts Center, White Plains, NY.,
TUESDAY, APRIL 17
The 25th Annual Commercial Real Estate Awards Gala
will be presented by the New Jersey Chapter of the Na-
tional Association of Industrial and Office Properties. Rob-ert Lieb of the Mountain Development Corp. will receive
the Lifetime Achievement Award and Andrew Merin of
Cushman & Wakefield will receive the Impact Award.
National Association of Industrial and Office Proper-
ties 25th Annual Commercial Real Estate Development
Awards, The Palace at Sommerset Park, Somserset, N.J.,
visit www.naiopnj.org/25gala for more info.
2
9
19
24
3
15
20
26
4
17
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the MORtGAGe OBSeRVeR APRIL 201232
of interest
A
AG Net Lease Fund II 15
Albanese Development
Corp. 30
Alexico Management
Group 10
American Council o Lie
Insurers 4
Angelo, Gordon & Co. 15
Anglo-Irish Bank 12
Ariel Property Advisors
9-10
Australian Stock Exchange
12
B
Bank o America 10, 22
Bank o Boston 21
Bank o Ireland 12, 20-21
Baydala, Terry 12
Bellwether Enterprise Real
Estate Capital 6, 8
Bellwether Enterprise
Community Investment 6Berkeley Point Capital 6
Blackrock Group 12
Blackstone Group 6
Blackstone Real Estate
Debt Strategies 6
BNB Bank 8
Bolivian Consulate 15
Boston Properties 4, 30
Buet, Warren 18
Burdale Capital Finance 21
Burdale Financial Holdings
Limited 21
C
Canyon-Johnson Urban
Funds 10
Capital One 21
CBRE 6
Chai, Nelson 21
Chase Bank 15, 21
Cherryland Mall 28
Chestereld 28
CIT Group 12, 20-21
CIT Real Estate Finance12, 22
Citrin, Jerey 10
College Green Branch 12
Compo Acres 10
Cotter, Joseph 21
Criimi Mae 12
Cushman & Wakeeld
Sonnenblick Goldman 10
CVS 10
D
DArcy, Peter 18-19
Darinor Plaza 10
Davis, Jerey 20-21
Day, Jerey 6
Deutsche Bank 6
Deutsche Bank Berskshire
Mortgage 6
Draf/Foote Cone &
Belding 6
Duncan, Pat 10
E
Eastgate Realty 15
Edgewater Habor 21-22
Ehlinger, Mark 10
EMEA Research &
Consulting 6Emmes Asset
Management 12
Enterprise Community
Investment 8
Extell Development 22
F
Fannie Mae 6
Farrell, Melissa 30
Federal Housing
Commission 6
Federal Housing Finance
Agency 6
Feldstein, Thomas 12
Fitch Ratings 12
Fleet 21
Forest Avenue Shopping
Center 10
Fox, Adam 12
Freddie Mac 6
G
Galligan, Matt 20-22
Gamestop 6
Garodnick, Daniel 15GEM Hotel Union
Square 4
German American Capital
Corp. 10
Gore, Lawrence 19
Graves Hospitality Corp. 4
Great West Lie 30
GTIS Partners 12
Guardian Lie 30
Guggenheim Partners 20
H
H & R REIT 30
Haddock, Michael 6
Harbors at Haverstraw 15
Helios Capital Advisors 8
Heyman Properties 10
HFF 15
Hilton Orlando 22
Hotel Williamsburg 4
HSBC 15, 22
Human, Ned 6
I
Invesco Advisors 10
J
Jahnke, Nicholas 30
JC Penney 6John Hancock Financial 30
Jos. A. Bank 10
K
Kauman, Randi 12
KBS Realty Advisors 12
Kelly, Kitty 21
Kimco Income Operating
Partnership 10
Kimco Realty Group 10
King & Grove 4
Klein, Michael 15
Kohls 10
Krueger, Liz 15
KSK Construction Group 4
L
LandesBank 15
LaSalle Hotel Properties 10
Lesser, Daniel 4, 6
Lindwalk, Chuck 12
Lipiec, Jason 18-19
Lockhart III, James 6
LW Hospitality Advisors 4
MM&T Bank 16-19
Madison Realty Capital
8-9, 12
Malka, Josh 8
Manhattan Mall 6
Manulie Financial Corp. 30
Manulie Real Estate 30
Marcus & Millichap Capital
Corp. 15
Martocci, Gino 18-19
Mayrose Holdings LLC 15
McCahill, William 21
McCarthy, Brian 10
McDonnell, Paul 21
Merck, Robert 4
Meridian Capital Group 12
MetLie 4, 30
Miami Equity One 10
Michaels 10
Monoghan, John 12
Morgan Stanley Mortgage
Capital Holdings 15
Mortgage Bankers
Association 30
Mountain Development
Corp 10N
National Resources 21
New York Lie 4, 30
New York State Teachers
30
Northeld Bank 8
Northwestern Investment
Management 30
Northwestern Mutual Lie
Insurance Company 30
NYU Schack Institute o
Real Estate 24
O
O-market RADAR 10
Old Navy 10
One57 22
Orvis 10
P
Pacic Lie 30
Pariser, Evan 15
Park Central Hotel 10
Park Hyatt Hotel 22
Parkside Apartments 15Payless Shoes 10
Polo Ralph Lauren 6
Post Road Plaza 10
Principal Insurance
Company 30
Prudential Capital Co.
Prudential Mortgage
Capital Co. 4, 30
Prudential Real Estate
Investors 30
Q
Queens Place Mall 30
R
Ranieri Real Estate
Partners 6
Ratner, Jonathan 12
Real Estate Capital
Revlon Consumer
Products Corp. 15
Richter & Ratner 12
Riverbank 30
Rock, Steven 15
Roseland Property Co. 30
S
Schultz, Steven 8
Seats, Lamar 6, 8Shapiro, Tom 12
Shulman, Ben 8
Silverstone Property
Group 9
Sinatra, Frank 21
SJP Properties 30
SL Green Realty 30
Solomon, Craig 10
Sozio, Victor 9
Specialist Business
Banking 12
Square Mile Capital 10
Stein, Joshua 28
Stoler, Michael 30
Sunkyo Mahikari 15
T
The American Council o
Lie Insurers 30
The Corner 30
The Moinian Group 15
The Platinum 30
The Solaire 30
The Verdesian 30TIAA-CREF 30
Tishman Speyer 12
TJ Maxx 10
Trader Joes 10
Two Gotham Center 30
U
USAA Real Estate Co. 10
U.S. Bank 15
V
Vaccaro, Jon 6
Victorias Secret 6
W
Wells Fargo 21
Werhane, Charles 8
W. 27th Street Rental
LLC 15
Westside Congregration
o Jehovahs Witnesses Inc.
15
Wilmers, Robert 18
Wilmington Trust 16-19
Wilsmann, Mark 4
Wind-Up Entertainment 15
WL Ross & Co. 6, 10
Woodwell, Jamie 30
ZZegen, Joshua 8-9
Zi, Simon 24
#
10 Exchange Place 30
100 Wall Street 15
100 West 33rd Street 6
1000 Madison Ave 10
11 Times Square 30
1510 Lexington Ave 30
1540 Broadway 4
160 North 12th Street 4
200 West 72nd Street 30
2100 Round Pointe Drive 15
211 East 43rd Street 15
2121 State Route 27 15
2300 Broadway 30
374 Post Road East 10
425 Park Ave 30
430 Boston Post Road 10
45 Park Avenue 30
500 Connecticut Avenue 10
537 West 27th Street 15
601 Lexington Ave 472 Madison Avenue 15
870 Seventh Ave 10
992 Madison Ave 10
A comprehensive index of all the people, places,addresses and companies mentioned in this months issue
10. 21. 30. 6. 15. 6.
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8/2/2019 Observer Mortgage 2012
16/36
THE MORTGAGE OBSERVER APRIL 201212
work force
Madison Capital has hired
Jonathan Ratner as a director
of asset management. He was
previously a VP at Emmes As-
set Management. Mr. Ratner
works on capitalization, nanc-
ing, leasing, capital program-
ming and strategic planning
at the rm, which invests in
retail and mixed-use properties
in New York and other urban
markets.
At Emmes, Mr. Ratner managed the rms $500 mil-
lion New York City portfolio, which included 40 assets
and two million square feet. Other responsibilities at
Emmes included the development and execution of
value-enhancing strategies for the rms retail, ofce,
multifamily and industrial assets. He also previously
worked as a project manager for Richter+RatnerCon-tracting Corp.
u
John Monaghan, formerly a director in the Bank of
Irelands U.S. Property Finance division, has moved to
CIT Group as a director at CIT Real Estate Finance.
He rejoins a group of former
Bank of Ireland employees
who moved to CIT when the
bank spun off its U.S. real es-
tate holdings.
Mr. Monaghan had previ-
ously worked as a manager in
the Property and Tax Unit at
Specialist Business Bank-
ing in Dublin and also as a
business manager at College
Green Branch, also in Dublin,
where he helped to manage a
portfolio of over 200 small to medium-sized businesses.
u
GTISPartners has hired ThomasFeldstein as
general counsel and managing director. Hell be based
in New York, at the companys headquarters, and will
report to TomShapiro, the companys president.
Ive known Tom personally for almost 25 years,
said Mr. Shapiro. Having him ll the role of general
counsel is a natural extension
of the work Tom is already
performing for us and an im-
portant addition to GTIS as we
continue our growth.
Before joining GTIS Part-
ners, Mr. Feldstein was an
attorney in private practice
representing a number of cli-
ents, including GTIS, providing
them with transactional legal
services. For several years,
from 2002 to 2009, he was a managing director at Tish-
man Speyer, where he was responsible for overseeing
legal activities in the Midwest and western U.S. He then
served as CEO ofTishman Speyer Ofce Fund, which
is listed on theAustralian Stock Exchange.
u
Terry Baydala, a former senior vice president at An-
glo Irish Bank, has joined Meridian Capital Group as
an executive vice president. He heads the structured -
nance division at Meridian. At Anglo Irish Bank, where
he worked for nearly ve years, Mr. Baydala helped to
lead the team that originated and syndicated U.S. com-
mercial property loans.
Once Anglo Irish Bank sold off its portfolio of U.S.
commercial property loans, Mr. Baydala was one of
several employees whose positions were phased out.
u
Fitch Ratings has rearrangedAdam Fox within the
organization. Mr. Foxwho joined Fitch in 2003 from
Rockville, Md.based REIT CriimiMaehad been work-
ing as a CMBS surveillance analyst.
Now, however, hes heading a
three-person team on the rating
agencys Operational Risk Group.The group is charged with CMBS
primary, master and special
servicer ratings. No word yet on
who will replace him in the posi-
tion he vacated at Fitch Ratings.
Standard & Poors recently
moved its managing director
and lead analytical manager for
Structured Finance Ratings in
Asia-Pacic, Peter Eastham, to its U.S. Commercial
Mortgage-Backed Securities team as head of CMBS
Ratings.
Mr. Eastham joined the team at S&P in 2000. His
work spans all structured nance asset classes with
a specialization in commercial real estate and asset-
backed securitizations in Asia and Australia. Prior to
S&P, Mr. Eastham worked in the treasury department
in the Australian government. He holds a bachelors in
commerce and a graduate diploma in nance and in-
vestment from Australian institutes.
u
Natixis, the global asset manager, has hired Chris
Reillyin its New York ofce, where hell serve as a
managing director on the real estate nance team.
His past employers include Fitch Ratings and Morgan
Stanley, though for the past ve years he had been over-seeing the large-loan operation at UBS. Last year, Mr.
Reilly also served as interim group head in the commer-
cial mortgage backed securities group at the bank.
u
KBS Realty Advisors, the private equity real estate
company and Securities Ex-
change Commission-registered
investment advisor, has ap-
pointed Randi Kaufman as
senior vice president and asset
manager in the California-based
rms New York ofces.
Ms. Kaufman, who previously
served four years at Blackrock,
where she was a vice president
and asset manager, will oversee
all asset management functions
associated with KBS properties in New York, New Jersey,
Massachusetts, Ohio and Pennsylvania.Randi has an impressive track record with an eye
towards reaching property performance goals, said
Chuck Lindwall, KBS regional president, in a prepared
statement. Her wealth of experienceboth from an as-
set management and geographic standpointwill bode
well for KBS in adding value to its portfolio.
Send news and tips to Carl Gaines at cgaines@ob-
server.comAdam Fox.
Jonathan Ratner.
John Monaghan.
Tom Feldstein.
Randi Kaufman.
Hirings, promotions, deections, frings
-
8/2/2019 Observer Mortgage 2012
17/36
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APRIL 2012 the MORtGAGe OBSeRVeR 19
Wilmington Trust and afliates brought with them some $50 billion of assets man-
aged for an array of nancially substantial individuals and corporations, increasing our
year-over-year revenue from trust related services by 171 percent, Wilmers wrote in the
report.
The sale went through in May 2011 for a reported price of $351 million and made M&T
Bank the largest bank in Delaware. It added $10.8 billion of assets and $8.9 billion of de-
posits to its balance sheets.
Notably for New York tri-state, however, was the access it gives M&Ts high net worthclientsvenerable, large family owners of commercial real estateto trust and estate
planning. Lawrence Gore, president of Wealth Advisory Services at Wilmington Trust,
told The Commercial Mortgager that the rms two major focus areaswealth and invest-
ment managementdovetail nicely with M&Ts roster of wealthy tri-state clients.
The environment that we live in today where theres a lot of volatility, Gore pointed
out, people are more focused on preservation of capital and they seek out rms like
ours. People are seeking out additional information, theyre benchmarking their existing
vendors and providers for those types of things and theyre also very concerned about
mitigating risks.
Mr. Gores team in New York is 26 strong, Mr. Martocci added, which will allow it toserve those bank clients looking to mitigate the risks that Mr. Gore referenced.
We have a great many clients who weve been banking since the 80s and 90s and Id
say they were worth $15 million or $20 million back in the 90s, Mr. Martocci said. Well
theyre worth $250 million today. To varying degrees theyve done their estate planning
some not at all, some a great dealto varying degrees theyve got good wealth manage-
ment. Typically a lot of real estate guys dont put a lot of money in equities because they
feel like they have enough risk, but nevertheless many still do. But everybodys in need of
good estate planning, good succession planning. And Wilmington Trust really brings that
to the table in a world class way, in a way frankly that M&T really didnt have up until this
acquisition.
Another bonus for the bank The Commercial Mortgager wanted to hear about was itsadvisory board in the tri-state area. The mortgage investment committee, as Mr. Martocci
calls it, is made up of eight outside directors, as well as some internal directors. They vote
on every loan made in New York City and Long Island.
Its been a tremendous asset, Mr. Martocci said of the committee. Because of this
board, you think about a piece of real estate differently than most bankers. Sometimesthe news for a potential borrower is good, sometimes its not what they might have
wanted to hear, but because of the committees insights it that news always includes some
clues the borrower might use the next time around.
Youve sort of given a man a sh in that moment but youre also teaching a man to sh
because the next time that they go back, theyre thinking about that, said Mr. Martocci.
Or the next time that they have a conversation with a client, theyre thinking in a way
that a mortgage committee member might be thinking about a piece of real estate. Now
thats leavened with obviously the banks credit culture and the discipline of banking, but
the expertise or the understanding of a piece of real estate is greatly enhanced by having
this committee asking the questions of the relationship managers and group managers.
Were all there and its just a huge benet to the team, not only as a piece of information
and also an informational advantage as it relates to real estate.
The environment that we livein today where theres a lot ovolatility. People are more ocusedon preservation o capital and theyseek out frms like ours. People areseeking out additional inormation,
theyre benchmarking theirexisting vendors and providersor those types o things andtheyre also very concerned aboutmitigating risks.
Lawrence Gore
Gino Martocci.
Power Profile
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the MORtGAGe OBSeRVeR APRIL 201218
Power Profile
In New York, M&T Banks real estate portfolio has grown signicantly over the past
few years. Executives cited, between 2009 and 2011, an increase of $1.1 billionup to $5.6
billion.
To get some insight into the banks success, The Commercial Mortgager met with some
of its top executives who gave an unfettered glimpse into the approach that has helped
keep the bank a lending powerhouse.
We really started out here as a multifamily lender but its really evolved into a much
broader set of commercial real estate products and its really across the board, Gino Mar-tocci, the banks regional president for New York City and Long Island, said in his ofce
recently. In fact our largest concentration is in urban retail. He added that after retail
comes ofce, multifamily, other and hotel.
As a subset of other well do construction and transition real estate as welltransition
dened as it needs to be repositioned somehow.
Mr. Martocci described the banks approach as pretty conservative, but was quick to
add that it doesnt shy away from deals that contain an appropriate level of risk. Asked
what that might include, he pointed back to the transitional real estate deals that it put
together several years ago, as the nancial crisis gripped many lending institutions.
We were one of the few lenders out there willing to do an asset that required res-
positioning during 2010, even 2011, he said. Its changing to some degree now, but we
made a good many loans. Or construction loans in 2011we were one of the more active
construction lenders for the right sponsors, for the right people that weve done business
with for a very long time.
Recurrent themes in its lending strategy seem to include the familiarity that Mr. Mar-
tocci mentioned, as well as the maintenance of a healthy balance sheet. In some ways
both have helped it to maintain calm in the midst of chaos. Peter DArcy, a group vice
president at the bank and a senior group manager in the Commercial Real Estate division,
pointed out that top players rely on it for both.
The last four or ve yearswe were so clean because the competition was so broken,
Mr. DArcy said. The top names in the marketplace needed exibility but they also need-ed a company with a balance sheet and we made so many client acquisitions thatwe sort
of came into our own from a size standpoint, where our capabilities of what we could do
for the top tier of New York City as a bank really wasnt different from a hold standpoint
or an underwriting ability than many of the big money center banks.
The company is smaller, yet less bureaucraticconservative, yet opportunistic.I think the point is that weve always been conservative and the consistency is what
some of these bigger clients like, added Jason Lipiec, a group vice president in Com-
mercial and Private Banking at M&T. In good times were not the most aggressive but
they know if we give them the deal, the deals going to close. And in bad times no one else
is out there and because of the safety of our balance sheet and the fact that we didnt get
ahead of ourselves, we were able to be there for them.
DArcy added that the banks approach has provided a good mixture for the market-
place. Weve expanded the names of who we deal with over the last couple of years in a
way that we havent since Ive been here, he said. Which leads to the concept of institu-
tional memory. Many of the top executives at the bank have been there for decadesMr.
Martocci joined 17 years ago, Mr. DArcy the same, and Mr. Lipiec 15 years ago.
One of the things that really differentiates M&T from a lot of the lenders, Mr. Mar-
tocci said, is that management has been the same management for 25 years. The low
turnover allows for a great deal of institutional memory, and institutional memory is criti-
cal for protecting your balance sheet and making loans and making sure youre choosing
not only the right kinds of loans but the right people to do business with.
He estimated that roughly 25 percent of the bank is held by insiders. These include
Warren Buffett as well as the chairman and CEO of the bank, Robert Wilmers and Mr.
Wilmers original investment committee and management. For an $11 billion or so, $10.5
billion market cap, Mr. Martocci said, it is highly unusualhighly unusual, to have such
a great deal of insider ownership.So how does the bank keep a fresh and talented group of newcomers streaming in?
Martocci cited its Executive Associate Program, which he said has been crucial since Mr.
Wilmers arrived in 1983.
Our EA program recruits people from some of the best graduate schools in the coun-
tryWharton, Northwestern, Columbia here in New York and NYU, he said. We bring
them in to the bank early and we help foster their growth and promote them to senior
positions as appropriate and as they prove themselves so this keeps the talent and the
blood owing and the intelligence level and the intellectual capital high.
He then named a number of high-level executives that had come through the pro-
gramincluding the banks current CFO Rene Jones and vice chairman Mike Pinto.
In M&T Bank Corp.s 2011 Annual Report, Mr. Wilmers highlighted many of that yearsmost notable events across the bank and one that stands out, and which will provide ad-
ditional services to clients, executives said, was the acquisition of Delawares Wilmington
Trust Corp.
In good times were not the mostaggressive but they know if we
give them the deal, the dealsgoing to close. And in bad times no
one else is out there and becauseof the safety of our balance sheet
and the fact that we didnt get
ahead of ourselves, we were ableto be there for them.Jason Lipiec
Lipiec, Martocci, Gore and DArcy.
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APRIL 2012 The MORTGAGe OBSeRVeR 23
The driver there ischaracterI the peopleare going to do the rightthing when its easy towalk away and leaveus with a property and
perhaps a loss.
Matt Galligan,CIT Real Estate Finance
project. Theres no specic dollar limit on it, he
said. Its pertinent to the project. Were generallygetting 30 percent or more equity in the deal up front
and very often theyre using third-party sources of
capitalprivate equity money or one of the other
sources out thereso its not necessarily all their
capital. And it varies by transaction as wellthe
larger transactions, if youre doing a $100 million deal
you might want $50 million in capital where if youre
doing $25 million deals you might want $8 million.
As CIT Real Estate Finance forges ahead, and
looks to carve out its place alongside the banks other
businesses, Mr. Galligan seemed calm about his lateststartup, and having taken on something new, though
familiar.
I really like the early stagesparticularly of de-
veloping a business, he explained. One of my key
strengths is that Im able to get people to really give
their all to what they do and thats one reason I try to
be enthusiasticif Im giving my all to this, then per-
haps its also what they do.
CIT Real Estate Finance is of toa ast start. Heres a look at somerecent deals that Mr. Galligan andhis team there have closed.One57CIT Real Estate Finance closed on a $50 million commitmentin a $700 million syndicated construction loan. Bank o America wasadministrative agent on the deal. The loan is unding 50 percent o theconstruction costs associated with putting Extell Developments 90-story,mixed-use residential and hotel tower up. One57 will include a 210-room Park-Hyatt Hotel topped by 95 luxury residences.
Hilton OrlandoIn a deal that Mr. Galligan conceded was a bitoutside the fnancings his group will ordinarily target, CIT Real Estate Financerecently closed on a $50 million commitment in a $285 million syndicated termloan to refnance the original construction loan or the Hilton Orlando. HSBCwas administrative agent or the 1,417-key, our-star hotels loan.Edgewater HarborThis $25 million construction loan will be usedto partially fnance the 70-unit condo conversion o the NationalRE/Sources project.
HANNAHMAT
TIX
contents
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APRIL 2012 the MORtGAGe OBSeRVeR 1
contents
2 Editors letter
4 news exchange
12 work force
14OriginationsThe Mortgage Observers picks or 5 deals overand under $30 million
16 m&t bank
The secrets behind M&Ts lending might
20 power profileCITs new real estate nance division
24 Q&AThe M.O. chats with Simon Zif
26 The scheme of things
Monthly mortgage charts
28 Steins law
29 the basis point
30 in-depth lookMichael Stoler on insurance companies
31 the schedule
32 of interest
Cover photo by Hannah Mattix
321 West 44th Street, New York, NY 1 0036
212.755.2400
Jared Kushner, Publisher
Barbara Ginsburg Shapiro, AssociAte Publisher
Robyn Weiss, Director of reAl estAte
Jotham Sederstrom, eDitoriAl Director
Carl Gaines, eDitor
Dan Geiger, Daniel Edward Rosen,
stAff Writers
Sam Chandan, Joshua Stein,
columnists
Peter Lettre, Photo eDitor
Mark Stinson, Designer
Lisa Medchill, ADvertising ProDuction
Christopher Barnes, PresiDent,
observer meDiA grouP
Barry Lewis,
executive vice PresiDent,
observer meDiA grouP
The basis point
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APRIL 2012 the MORtGAGe OBSeRVeR 29
By Sam Chandan, phd
A slow increase in bank lending, competition to -
nance apartment trades, and hopes for a deeper CMBS
pipeline dene the outlook for commercial mortgage
markets in early 2012. Offsetting these sources of mar-ket optimism, threats range from the potential for rising
interest rates to waves of maturating loans from the
markets bacchanal days.
Months of improving economic data and the coin-
ciding stock market rally have failed to lift the Federal
Reserves dour assessment of downside risks to growth.
The language coming out of the March FOMC meeting
acknowledged the improving indicators but also held
fast to historically accommodative monetary policy.
Extending the commitment to its current targets
into 2014, the Fed has put its credibility with investorson the line. Borrowers and bond buyers expect short-
term rates to remain low for another two years, even
if the crisis that called for extraordinary interventions
recedes further.
The Fed has far less control over long-term Treasury
yields. Washingtons dereliction in addressing the na-
tions scal imbalance and our cowardice in encamping
on the Cisalpine bank of the Rubicon constrains mon-
etary policy.
The maturity extension program is soaking up a sur-
plus of bond issuance but its mettle has not been tested.
At least for the time being, the failure of European
governance is doing more to keep American interest
rates low. If the sovereign debt crisis abates, stanching
demand for Treasuries, Operation Twist will prove its
ineffectiveness.
Over the last two weeks, as Greece has stepped back
from the brink, free market mechanisms have made a
rare appearance. Rattling investors and providing fod-
der for the broadsheets, long-term Treasury rates have
inched up from their historic lows. Markets have beenrattled by their rst taste of an inevitable and much
larger shift in the cost of capital.
The challenges are most acute in the apartment sec-
tor, where the cost of nancing
has plumbed new depths with the
support of government guarantees,
fomenting excesses in pricing that
are observable in remarkably low
cap rates.
Asset price bubbles arise
when prices diverge from levels
consistent with a market that is
functioning efciently. In this ef-
cient market scenario, currently
available information with regard
to the future performance of an
asset is reected rationally in its
price. Since mispricing is therefore
rooted in irrational expectations
with respect to the present valueof future cash ow, the ex ante identication of bubbles
is elusive in practice. By denition, the identication
of bubbles will be contrary to the markets widely held
views until such time as it deates. A correct identica-
tion may be rejected incorrectly because the market
deems it a false positive result. Since the bubble is
largely a behavioral phenomenon, a purely statistical
exercise cannot settle the matter conclusively.
In spite of the inherent complications, the identica-
tion of bubbles is not limited in its relevance to policy
applications; it has real implication for lending and
investment strategy, as well. As the housing crisis has
demonstrated, property price bubbles are particularly
pernicious. Because of the widespread use of lever-
age in property markets, the impact of a sharp drop in
assets prices may cascade through a mature, interde-
pendent nancial system, impacting the availability of
credit in unrelated sectors. While the lesson is readily
apparent as relates to single-family houses, the market
may now be fomenting a bubble in the rental market.
As house prices have fallen and households tenurebias has shifted in favor of renting, apartment fun-
damentals have necessarily improved. But prices of
apartment properties have been rising relatively faster
than property income, reecting
expectations of continued growth
in property cash ow and the avail-
ability of low-cost nancing. The
latter is endogenous in the former
since leverage is increasing as a
function of fundamentals projec-
tions. Exacerbating this dynamic,
the government-sponsored enter-
prises position as the dominant
source of apartment nancing has
introduced a unique feature to the
market pricing of apartment credit
risk.
Has the virtuous dynamic of ris-
ing fundamentals and exception-
ally low-cost credit developed anindependent momentum? Across a range of interest
rate and underwriting scenarios, my tests of more than
$12 billion in fourth quarter 2012 apartment loans show
that individual properties are systematically projected
to outperform investors expectations for the market
as a whole. A state of cognitive dissonance is allowing
each investor to believe that he has outsmarted every-
one else.
The credit policy implications of these nding relate
principally to the renancing capacity of newly origi-
nated loans. Higher rates of balloon default imply costs
that will be borne by agency guarantees and on bank
balance sheets, albeit not until current loans mature.
For investors in the apartment sector, the ndings em-
phasize a need to identify and circumnavigate segments
of the market where nancing conditions and aggres-
sive cash ow assumptions have inated values and
where agency nancing may recede from the landscape
as housing nance reform progresses.
Sam Chandan, PhD, is president and chief economistof Chandan Economics and an adjunct professor at the
Wharton School. H ecan be reached at dsc@chandan.
com. The views expressed here are the authors own.
The basis point
The Smartest Guy in the RoomHas cognitive dissonance allowed investors to believe theyre outsmarting each other?
In-depth look
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the MORtGAGe OBSeRVeR APRIL 201230
by michael stoler
Special to the Mortgage Observer
With investment sales volume across the major prop-
erty types in the U.S. expected to grow by 50 percent toapproximately $300 billion according to some sources,
theres a real need for the lending community to pro-
vide funds for acquisitions and renancing.
The Mortgage Bankers Associa-
tion expects loans for commercial
real estate to surge this year. The
group reported that U.S. commer-
cial mortgage originations are pro-
jected to hit $230 billion this year,
up 17 percent from $197 billion last
year. Commercial and multifamily
originations are expected to grow to
$265 billion in 2014 and will prob-
ably reach $290 billion by 2015.
Life insurance companies,
once the lifelines of commercial
mortgage nancing, are expected
to increase their debt and equity
placements to meet the demand.
Approximately 23 percent of the
commercial mortgages originated last year were provided bylife insurance companies. The American Council of Life In-
surers reported total commitment volume of $45.4 billion in
2011, a 48.2 percent increase from the previous year.
Our forecast anticipated continued strength in lend-
ing by life companies and the GSEs, increased lending
by banks and others, and a slow but steady return in
CMBS activity, MBA vice president of Commercial
Real Estate Research Jamie Woodwell said about the
groups predictions.
Of the $45.4 billion in commercial mortgage loans origi-
nated by insurance companies, the most active lenders
were companies based in the NYC metro area. Leading
the pack was MetLife, which reported that it had originat-
ed $11 billion in commercial mortgages in 2011, compared
to the more than $8 billion that it originated in 2010. New
Jerseybased Prudential Mortgage Capital Co. originated
$9.7 billion surpassing its 2010 level of $9.1 billion, making
it the companys third-largest production year ever. The
company announced that it is looking to provide up to
$11.6 billion in nancing for 2012.
Other active life insurance companies include TIAA-CREF, New York Life, Guardian Life and Pacic Life,
as well as Northwestern Mutual Life Insurance Com-
pany and Principal Insurance Company.
Nicholas Jahnke, director at Northwestern Investment
Management, told me that the company originated ap-
proximately $4.7 billion in debt and $2 billion in equity in
2011. The company was active in the local market originat-
ing about $850 million for variety of asset classes.Everyone is in the market to lend and provide
equity, Mr. Jahnke said. Lots of competition in the
market is driving rates down to sub 3.5 percent for ve-
to seven-year, and 4 percent for 10-
year money.
Last year Northwestern provided
nancing for residential rental apart-
ment buildings, including a $60
million loan on the apartment build-
ing Riverbank on West 42nd Street
and $115 million in nancing for the
apartment building at 1510 Lexington
Avenue. The insurer provided $270
million in nancing for the Staten
Island Mall and $87 million for Forest
Citys Queens Place Mall. In a club
deal with Great West Life, the com-
pany provided a $250 million loan to
the Canadian REIT, H&R REIT, for
its purchase of the 670,000-square-
foot ofce building Two Gotham Center.Melissa Farrell, managing director at Prudential
Mortgage Capital Co., concurred with Mr. Jahnke, say-
ing everyone is after the same type of deals, making
the market very, very competitive.
The insurance companies are working together club
deal or syndicating deals over $300 million, she added.
This was evidenced a number of times last year with
one major deal specically, the club deal of MetLife,
Prudential Mortgage Capital Co. and New York Life
for the $725 million loan on Boston Properties ofce
building at 601 Lexington Avenue. Prudential provided
$200 million, with MetLife providing $375 million
and New York Life with the balance of $150 million in
nancing. The xed rate loan, with a 10-year, seven-
month term, was secured by the 59-story, 1.6-million-
square-foot, Class A ofce tower and retail property.
Another insurance company that has continued to pro-
vide nancing in the market is Pacic Life. Last year, the
West Coast insurance company teamed up and originated
a $500 million xed rate nancing for the joint venture
of SL Green Realty and New York State Teachers on theClass A ofce building at 919 Third Avenue.
As I mentioned earlier, many of the major life insur-
ance companies are active purchasers and provide joint
venture equity for commercial real estate transactions.
For example, Northwestern Mutual has been a partner
with the Albanese Development Corp. in the develop-
ment of rental properties in Battery Park City, including
its latest buildingthe Verdesianas well as the Solaire,the rst luxury residential property constructed in Lower
Manhattan since the 9/11 terrorist attacks.
New Jerseybased SJP Properties entered the New
York City marketplace in the ground-up development
of 45 Park Avenue, a condominium at Park Avenue and
37th Street. Its second condominium development was
the Platinum on Eight Avenue and 46th Street, and its
the developer of the 1.1-million-square-foot 11 Times
Square. SJPs equity partner in all of these develop-
ments was Prudential Real Estate Investors.
Prudential is also a joint venture equity partner with
Roseland Property Co. on many of its residential devel-
opments, including the Monaco in Jersey City, which
was nanced by Northwestern Mutual.
TIAA-CREF is a leading nancial services organization
with $440.7 billion in combined assets under manage-
ment. Last year, it purchased the residential rental com-
ponent of the Corner, a luxury rental apartment building
at 200 West 72nd Street, for $209 million. A few weeks
later, the pension fund manager and institutional investor
purchased the land beneath the ofce building at 425 ParkAvenue for $315 million. And earlier this year, it purchased
the retail condominium at 2300 Broadway at 83rd Street
in the residential condominium tower, paying $44.73 mil-
lion. In the summer of 2010, TIAA-CREF purchased the
559,000-square-foot, 33-story ofce tower at 685 Third
Avenue, paying about $190 million.
In December, Manulife Real Estate, the global real
estate arm of Canada-based Manulife Financial Corp.,
one of the largest life insurance companies in the world
and parent of John Hancock Financial, acquired three
real estate assets, totaling $555 million. They included
10 Exchange Place, a 748,000-square-foot ofce tower
acquired for $285 million. The acquisition represented
Manulifes entry into the New York City metropolitan
real estate investment market and its second acquisi-
tion in New Jersey.
With yields on 10 year treasuries at 2 percent, these life
insurance companies and others are evaluating opportunities
to purchase and make direct equity investments in com-
mercial real estate around the nation and in the metropolitan
area. Expect this trend to continue for the foreseeable future.
Michael Stoler is managing director of Madison Realty
Capitol, president of