observer mortgage 2012

8/2/2019 Observer Mortgage 2012

1/36

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


2/36

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3/36

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


4/36the MORtGAGe OBSeRVeR APRIL 20122

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?


6/36THE MORTGAGE OBSERVER APRIL 20128

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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NEWS EXCHANGE

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For Sale117-119 West 21st Street

Rare Vacant ChelseaRedevelopment Opportunity

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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.


8/36THE MORTGAGE OBSERVER APRIL 20124

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.


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


11/36

APRIL 2012 the MORtGAGe OBSeRVeR 1717


12/36


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


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.


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


15/36


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.


16/36


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


17/36

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18/36

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20/36


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


21/36


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.


22/36

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


23/36


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


24/36


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


25/36


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

observer mortgage 2012

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