William Gauger & Associates Blog

NEW YORK CITY-With 432 commercial real estate loans totaling
approximately $5.2 billion added to the tally, Fitch Ratings' CMBS
"loans of concern"--those that are in special service or whose
performance is declining--increased by 7% between June 1 and July 31,
the agency reported Thursday. Deteriorating property performance and
increasing CMBS defaults were the key drivers, according to Fitch.

A significant new entry to the list is the $227.9-million Resorts
International Casino Portfolio loan, secured by a three-hotel/gaming
portfolio in Atlantic City and Robinsonville and Tunica, MS. Fitch says
it transferred to special servicing on July 23 after the borrower failed
to make the July payment, citing significant declines in cash flow at
the properties, although the loan is performing.

"Properties directly tied to consumer spending, such as hotels, are the
first to exhibit signs of performance declines," says Adam Fox, Fitch
senior director, in a release.

As of July 31, Fitch had designated 5,993 loans totaling $80.7 billion,
or 17% of its US CMBS portfolio, as loans of concern. About 12% of
Fitch's loans of concern were originated in 2006 and 2007.
Seven-hundred-and-thirty-six of these loans have outstanding balances of
greater than $20 million, while 146 have balances greater than $100
million.

Fitch's currently rated CMBS portfolio encompasses 464 transactions with
an unpaid principal balance of $472.1 billion. As of July 31, the
agency's loan delinquency index for loans 60 days delinquent, in
foreclosure or REO was 3.04% on the basis of 1,857 such loans
representing $14.3 billion in UPB.

The ratings agency expects the LDI to reach 5% by year's end, as an
increasing number of loans roll over from 30 days' past due to 60 days.
Along with the usual suspects-stressed fundamentals due to economic
factors such as low consumer spending-Fitch also cites loans with low
debt service coverage that are close to depleting their reserves.

*Source: GlobeSt.com*

NEW YORK CITY-With 432 commercial real estate loans totaling
approximately $5.2 billion added to the tally, Fitch Ratings' CMBS
"loans of concern"--those that are in special service or whose
performance is declining--increased by 7% between June 1 and July 31,
the agency reported Thursday. Deteriorating property performance and
increasing CMBS defaults were the key drivers, according to Fitch.

A significant new entry to the list is the $227.9-million Resorts
International Casino Portfolio loan, secured by a three-hotel/gaming
portfolio in Atlantic City and Robinsonville and Tunica, MS. Fitch says
it transferred to special servicing on July 23 after the borrower failed
to make the July payment, citing significant declines in cash flow at
the properties, although the loan is performing.

"Properties directly tied to consumer spending, such as hotels, are the
first to exhibit signs of performance declines," says Adam Fox, Fitch
senior director, in a release.

As of July 31, Fitch had designated 5,993 loans totaling $80.7 billion,
or 17% of its US CMBS portfolio, as loans of concern. About 12% of
Fitch's loans of concern were originated in 2006 and 2007.
Seven-hundred-and-thirty-six of these loans have outstanding balances of
greater than $20 million, while 146 have balances greater than $100
million.

Fitch's currently rated CMBS portfolio encompasses 464 transactions with
an unpaid principal balance of $472.1 billion. As of July 31, the
agency's loan delinquency index for loans 60 days delinquent, in
foreclosure or REO was 3.04% on the basis of 1,857 such loans
representing $14.3 billion in UPB.

The ratings agency expects the LDI to reach 5% by year's end, as an
increasing number of loans roll over from 30 days' past due to 60 days.
Along with the usual suspects-stressed fundamentals due to economic
factors such as low consumer spending-Fitch also cites loans with low
debt service coverage that are close to depleting their reserves.

*Source: GlobeSt.com

Commercial real estate lending conditions in Denver remain better than
the nation as a whole, but Denver's rate of decline accelerated faster
than the national average during the second quarter, according to
quarterly data published by *Banc Investment Group*
.

"In Denver, the good news is that it hasn't deteriorated as much," said
Chris Nichols, CEO of Banc Investment Group.

"Particularly industrial properties and office properties, while they've
deteriorated, it's been less [than the nation]," Nichols said. "That's
the good news. The bad news is that the rate of decline in Denver has
picked up somewhat, and is accelerating more than the nation. We suspect
there's a lag in the Denver market versus the national."

Banc Investment Group (BIG) is the capital markets subsidiary of San
Francisco-based Pacific Coast Bankers' Bancshares. The BIG CRE Index is
a forward-looking benchmark of relative strength of commercial real
estate (CRE) lending conditions for community banks.

In the second quarter, the nationwide BIG CRE Index fell 9.3 points, or
11.5 percent, to 71.24. From the index's baseline period beginning April
30, 2007, lending conditions for community banks have deteriorated by
28.7 percent, according to the index.

In Denver, the office sector conditions index was at 83.54 in the second
quarter, compared with 78.73 for the nation. But Denver's office index
declined nearly 6 percentage points from the first quarter to the second
quarter, compared with a drop of 4.8 percent for the national index.

Denver's retail index fell nearly 18 percent to 66.55, while the
national retail index fell 15.8 percent to 65.99. Denver's multifamily
and industrial sectors also declined, to 85.63 and 62.92, respectively.

Denver is facing the same trends seen across the country, Nichols said.

"Mostly, it's just general economic decline, which means less demand for
office and industrial space," he said. "We're also seeing the secondary
effect of notes being sold at discounts, so less cash flow is required,
giving more catalyst to drop rents."

Investors who buy CRE notes at discounts don't have as much principal at
risk, and require less cash flow, Nichols said. That makes them more apt
to lower rents, which pressures rents on surrounding properties.

Source: Bizjournals

Bank of America Merrill Lynch has hired the whole team of ten real
estate bankers in Australia from rival UBS AG's (UBS) Australia real
estate origination division, according to an internal memo seen by Dow
Jones Newswires Friday, becoming the latest bank to poach rival real
estate bankers in that country.

Earlier this week, UBS hired a team of seven bankers from J.P.Morgan
Chase & Co.'s (JPM) Australia operations, including managing director
Tim Church, who will lead UBS's real estate banking division in
Australia, according to people familiar with the situation.

Friday's Bank of America Merrill Lynch memo said that Darren Rehn and
Simon Shakesheff will join as managing directors, and Adrian Sheldon and
Russell Cowley will join as directors.

Rehn was most recently UBS's Australia head of real estate and will take
up a similar position at Bank of America Merrill Lynch, it said. He will
report to Kevin Skelton, the U.S. bank's head of Australian origination,
the bank said.

The other members poached by Bank of America Merrill Lynch are Ben Boyd
and Emma Parker, who join as vice presidents; associates Paul Ryan and
Michael Ryan; analyst Steve Duncan; and Sarah John as support, the
document said.

They will all be based in Sydney. The new hires will add to Bank of
America Merrill Lynch's existing team of three real estate investment
bankers.

"The Australian real estate market is one of the areas where we see
tremendous opportunities in the region," said Jayanti Bajpai, Bank of
America Merrill Lynch's co-head of Asia Pacific Corporate & Investment
Banking.

Australia's sluggish real estate sector has seen a surge in
capital-raising activity this year with UBS's real estate team executing
some of the largest equity raisings for property developers and trust
companies there.

UBS handled GPT Group's A$1.7 billion capital raising in June, Mirvac
Group's A$1.1 billion offering in June, and the A$508 million
entitlement offer by Macquarie Office Trust in January.

Source: Wall Street Journal

A Federal Reserve program to spur commercial real estate lending may
provide a bit of a jolt, but the amount of financing will likely be
limited because the infrastructure needed to produce commercial
mortgage-backed securities in bulk is still broken. The Fed threw a
lifeline to the battered commercial real estate sector in June by
opening up its consumer and business lending program, the Term
Asset-Backed Securities Loan Facility (TALF), to commercial mortgage
backed securities (CMBS).

Through the TALF program, investors who buy newly issued CMBS can borrow
directly from the Fed. Investors in existing CMBS can also borrow under
the program. While there has been some participation for existing CMBS,
there have been no new commercial mortgage bonds available for the
program as it takes months to structure new CMBS.

Source: Reuters

HUD has established new rules limiting the percentage of units in a building that can get FHA loans. Developers cry foul, calling it a bias against affordable housing and density.

"[Developer] Diana Chevalier, owner of Project Approval Services, said she was so upset when she learned of HUD's new restrictions that she hopped the first plane to Washington, D.C."

"'I took a $1,000 flight, and I met with Margaret Burns,' Chevalier said of the director of HUD's Office of Single Family Program Development. 'What the FHA is doing is trying to limit their exposure in existing condos and new condos and this is their way of monitoring their exposure.'"

Full Story: HUD Rules May Hurt Builders Source: San Diego Business Journal, August 24, 2009