LEASED ANOTHER ONE! 999 Cattlemen Road.

This one was a double header: I sold this unit at 999 Cattlemen Road (Unit A) week prior to an investor and put a new tenant in the space on Friday for three years. Congratulations to Dance Artistry, Inc. on their new 2,280SF home. They look to be open on approximately July 1, so feel free to pay them a visit. The location is perfect for them - lots of glass and an endcap unit. Thank you!

Volume of CMBS Delinquent Loans Climbs

We're not anywhere near out of the woods yet but it seems all these assets we anticipated to come to market are finally doing so (or are at least well on their way). There is a lot of money sloshing around out there, and buyers eager for aggressively priced (read: discounted) prime bank assets. Once we can get these assets on the market and into the hands of people who will capitalize upon them, I think we'll all be better off. For me this is some of the best opportunity I've seen since I started selling commercial real estate. Bring it on!

Volume of CMBS Delinquent Loans Climbs to $47.8B in February
Mar 29, 2010 - CRE News

Another $1.9 billion of CMBS loans became delinquent in February, bringing the total volume of delinquent loans to $47.8 billion, or 6% of the total universe tracked by Realpoint.

That compares with a rate of 5.76% a month earlier. If you exclude agency loans and those that are less than a year old, the delinquency rate in February was 6.32%.

Delinquencies will continue to increase. That's indicated by the $76.13 billion of loans that are in the hands of special servicers. While not all of those are delinquent, they're all at high risk of becoming late. Realpoint classifies loans as being delinquent when they're more than 30-days late.

To that end, Realpoint has updated its projection for delinquencies and now expects them to hit as high as 12% of the CMBS universe by the end of the year under a heavily stressed scenario. It expects delinquencies to be between 8% and 9% by mid-year. The $3 billion of financing on Manhattan's Stuyvesant Town/Peter Cooper Village apartment complex was not deemed delinquent as of the end of February, but did not make its March payment. So next month's delinquent-loan tally will be bolstered by at least $3 billion.

In a change from recent months, the Horsham, PA, rating agency saw a decline in the volume of loans classified as 30-days late. In February, $6.8 billion of loans were in that bucket, down from $7.7 billion a month earlier. The 60-day bucket also saw a decline, although not as pronounced, to $4.7 billion from $4.8 billion.

All other delinquency categories saw an increase in volume, with the 90-day bucket growing the most, to $25.9 billion from $23.8 billion. Many loans sit in that category for substantial periods of time as their workout or foreclosure strategies are ironed out. An example is the $4.1 billion of debt on the Extended Stay Hotels chain. It became delinquent last November, so its more than 90-days late. And it will stay that way as the hotel company gets recapitalized.

The delinquency rate for securitized hotel loans was 10.2% last month, up from 9.5% in January. Apartment loans have a 7.04% delinquency rate, up from 7%, and retail loans a 5.4% rate, unchanged from a month ago. The office delinquency rate, which has remained lower than that for the other major sectors, punched through the 4% market in February, to 4.2%, from 3.7% in January.

A total of $461.8 million of loans were liquidated during February, marking the third straight month during which more than $300 million were eliminated. Of the total, $222.2 million were resolved with little loss. Most of those were refinanced after their maturity date.

The best example of that was the $165 million of debt on 63 Madison Ave., a 797,377-square-foot office building in the midtown south area of Manhattan. The loan had matured in January.

A $105 million piece of the debt was securitized through COMM, 2005-LNP5, and the remainder through GE Commercial Mortgage Corp., 2005-C1. The loan was refinanced after its maturity date with a $150 million mortgage from Bank of China. The remaining $15 million was raised by the building's owner, George Comfort & Sons, by tapping a $15 million letter of credit that a tenant at the building used to guarantee its lease.

That resolution resulted in a loss of 1% to the deals that owned the matured debt.

Meanwhile, 44 loans with a balance of $239.6 million were resolved with losses that averaged 64.7% of their balance.

The largest of those had a $42.5 million balance and was backed by 1650 Arch St., a 553,349-sf office building in downtown Philadelphia that is owned by Behringer Harvard. The Dallas investment manager bought the loan, which was securitized through Credit Suisse First Boston Mortgage Securities Corp., 2002-CKS4, at a discount to its face value. The loan's resolution resulted in a loss of $9.5 million to the CKS4 deal.

SOLD ANOTHER ONE! FORECLOSURE AT 999 CATTLEMEN RD

This bank owned asset took less than 3 weeks to sell from the time it hit the market. Deal was all cash and sold for $73.10 per square foot. Congratulations to the new buyer.

Good marketing = results!

SOLD ANOTHER ONE! Foreclosure Goes for $51ft

I sold this 3,180SF industrial condo at 752 Commerce Drive in Venice on 2/26/10. The buyer was all cash and it closed in less than two weeks. Value was approximately $51 per rentable square foot. It took me nearly 9 months to move it, too.

In 2010, Will Investors Who Hesitate Be Lost?

Good question.

None of us has a crystal ball, so it's tough to really determine if this is the case. Judging by my own experience, there are some fairly nice deals out there if you have access to money and are willing to keep the property until things recover. The problem with all of this is, without a good ability to predict what's going to happen, are these deals looking good because we're looking through the glass at prices now vs. 2006, or prices now vs. 2001? As I've stated before, I don't think certain assets can get any cheaper (while some certainly can). Seems as if my phone rings more with potential buyers as of late than potential tenants - something I haven't experienced since 2007. The banks I deal with on REO properties are behaving a little more proactively now than at this same time last year. One thing's for sure: we will not know when the bottom is here. THIS GUY (link) seems to think those who "overwait" the market for markedly lower prices than we have now will be sorely disappointed and miss the boat. I tend to agree.

From National Real Estate Investor (link at bottom of article).

In 2010, Will Investors Who Hesitate Be Lost?

Nov 1, 2009 12:00 PM, Sibley Fleming

While German and Chinese investors are already buying assets at discounted prices, many domestic investors are hoping to time the market to pick up even better deals.

With some $1.5 trillion in commercial mortgage debt expected to mature over the next three years and only $300 billion in equity sitting on the sidelines, more distress is imminent, according to Jeffrey Rogers, president and chief operating officer of New York-based valuation and consulting firm Integra Realty Resources.

Integra's clients include pension funds such as the California Public Employees' Retirement System, and investment banks like Goldman Sachs and Morgan Stanley.

“Whenever you're in that type of environment, where you don't have the liquidity to take out the mortgage debt, prices come down,” he explains.

The imbalance should result in a further decline in commercial real estate valuations. Over the next six months, Rogers predicts that property values will decline another 4% to 9%, on top of the 39% drop that's already occured since the peak in December 2007.

Currently, 48% of Integra's valuation assignments involve distressed assets, defined as real estate owned (REO), short sales, assets refinanced with an equity infusion, failed bank assets, assets resulting from bankruptcy, and assets with significant deterioration in operating income.
Real-life scenario

What will bring more distress to market? Rogers offers up this example: An investor acquired an office building in New York at the peak of pricing two years ago and didn't sign a personal guarantee. The property is underwater and its loan matures at the end of the year, but the bank is willing to extend.

Here's the sticking point: Although the property is 95% leased, a single tenant occupying 15% of the space is coming up for renewal at year's end. The big tenant says he'll leave unless the owner provides $2 million in tenant improvements.

“As an owner, am I going to put that money into an asset that I am under water on and having to extend my loan? No, I'm not going to do it,” Rogers maintains. “With my $2 million I'm going to go and buy a distressed asset and just write off whatever equity I have in that property.”

At this point the bank will have to decide whether to let the asset deteriorate further, to become an equity investor and retain the tenant, or to simply take the asset back and try to sell it. “This has already started to happen,” Rogers observes, “and is really at the crux of starting to get these defaults rolling.”   Read more.

Tough Times For Commercial Real Estate

Our local newspaper is figuring out what many of us have known for a while: the local commercial real estate market is pretty bleak. But that all depends on which side of the fence you're on. Interestingly, 2009 for me was a fairly busy one, with nearly all of my deals occurring on the leasing side. Last year I saw a lot of relocation...basically people moving from one leased space to another because of more favorable rents and aggressive tenant incentives. I did not see all that many startups, though. I do agree (as I had stated in this 12/19/09 post), GDP and employment will lead the way out of the recession. For the most part, however, asking rents are still way too high in some parts of town to attract new startups in such a tough economy. One thing's for sure, landlords who don't have particularly attractive or strategic locations, and who refuse to get aggressive are going to end up getting steamrolled. Story link below (Sarasota Herald).

Tough times for commercial real estate

By KEVIN L. McQUAID

Published: Monday, January 4, 2010 at 1:00 a.m.

To borrow a biblical expression, it may be easier these days to pass a camel through the eye of a needle than it is to get a commercial real estate loan.

Despite federal bail-out money intended to stimulate lending, loans for investment in office buildings, shopping centers, industrial sites and raw land are increasingly rare, the result of falling values and other factors.

Commercial property owners and mortgage brokers say the lack of capital also stems, in part, from new federal regulations intended to staunch foreclosures and halt the aggressive lending practices of the early 2000s.

"It's ironic that the federal government put all the stimulus money into banks, while another branch of the government is over-regulating capital reserve requirements on banks," said Brett Hutchens, chief executive officer of Casto Lifestyle Properties, a Sarasota development firm that owns shopping and lifestyle centers nationwide.

"The same government is providing both the carrot and the stick to lenders," Hutchens said. "It's created gridlock and made lending and borrowing very, very difficult."

"It's a Catch-22 the government has imposed," said N.J. Olivieri, president and owner of Sarasota-based Horizon Mortgage Corp. "They tell the banks to make loans but then tell the FDIC to tighten the restrictions on new lending."

New regulations notwithstanding, lenders say the pullback in available credit is appropriate, given the shaky economy.

"Banks are simply not looking to take extended risk today," said Charlie Murphy, chief executive of the Bank of Commerce, a Sarasota lender, and a board member of the Florida Bankers Association, a trade group.

"It's not unusual for banks, in bad economic times, to tighten their lending standards," Murphy said. "And regulators are not too happy these days about allocating new money to commercial real estate."

Other forces

Banks have been hurt, as well, by other forces beyond their control.

Most notable has been the exit from the lending market by risk-averse insurers and pension funds, typically a key source for permanent mortgages.

That has crippled commercial real estate owners seeking to refinance or simply shift loans from banks, as is usually done.

That, in turn, has forced banks to keep mortgages on their books, which further limits their ability to cut new loans -- especially in the construction and real estate sectors.

The precipitous drop in commercial real estate values -- combined with falling rental rates on nearly every property segment -- represents the largest factor in the dearth of lending, however.

Retail rental rates have fallen by as much as half, and many tenants remain unable to pay rent at all, part of the fallout from the longest economic recession since the Great Depression.

Vacancies, too, from super-regional malls to neighborhood-anchored strip centers, have risen dramatically.

"In many cases, shopping centers are full, but not all of the tenants are paying rent," Olivieri said. "Landlords don't want their space to go dark, so they're letting them stay put."

Office rents have also fallen, in Southwest Florida and nationwide -- by 20 percent to 30 percent in some cases.

"In some submarkets, there is an even greater devaluation of rents," said John Harshman, president of Harshman & Co., a Sarasota commercial real estate brokerage firm.

The lack of income, and decrease in values, has forced many property owners to come up with new equity on loans to satisfy lenders' re-appraisals, investors say, even on performing mortgages.

Regulators, too, are calling on banks to beef up reserves and loan coverages by thinning loan-to-value ratios.

Restrictions

Meanwhile, the few commercial real estate loans that are available come with excessive restrictions, including onerous equity requirements and repayment schedules, which are also the result of new federal regulations.

In many cases, lenders that once required investors to put down 20 percent or 30 percent equity are demanding twice those percentages -- and borrowers' personal guarantees -- before they will consider loaning money.

"We've gone from having an unsecured line of credit, on a performing loan, to getting a commitment for just one-year from the bank, and the terms are complex," said Andy Dorr, a senior vice president with Githler Development Co., a Sarasota real estate investment and development firm.

As a result, Horizon and others have begun lining up equity partners for developers or investors, Olivieri said.

At the same time, Dorr said, the costs associated with commercial real estate borrowing -- appraisals, origination fees, legal expenses and environmental analysis -- have increased in many cases.

The hiked fees and the lack of new capital are both tied, investors and lenders say, to the fear that a commercial real estate meltdown is in the offing. Already, development giants such as mall owner General Growth Properties have defaulted on commercial real estate loans -- a signal to some analysts that another wave of foreclosures is ahead. Next year alone, hundreds of billions of commercial real estate loans, many of which were cut during the real estate boom and required interest-only payments, will mature or come due nationwide. When that occurs, many predict, defaults will spike.

"Everyone keeps saying that commercial real estate is the next shoe to drop," Hutchens said. "Well, I have to agree: It's about to drop."

The answer, industry experts say, can be summed up in a single word: Jobs.

"We have to stimulate the economy with more jobs and small business," Murphy said. "When we have jobs, then businesses expand and the economy cycles upward. The opposite is also true, and it creates a vicious, self-fulfilling prophecy."

"People have to go back to work," Olivieri said. "Specifically, in construction.

"Construction has always led the way out of recession; it's key. It starts the employment cycle, and then retailers hire and the cycle returns to supply and demand. But if you don't have a job, if you don't know where your next dollar is coming from, then you don't spend," Olivieri said.

Unfortunately, for Florida, that job growth may be a long time in coming.

Unemployment in Southwest Florida stands at 12.7 percent, slightly above the 11.5 percent statewide average, which is at the highest level since October 1975. Nationally, unemployment is just under 10 percent.

Even more dire are some economists' predictions that Florida's unemployment rate will not fall to 6 percent -- within the range of a moderately healthy economy -- until 2018.

If that proves true, experts believe commercial real estate will remain depressed well into the future.

"The 12 percent unemployment rate in Sarasota and Manatee counties, and the 10 percent rate nationally, will create more commercial real estate vacancies," Harshman said. "And more vacancies will, in turn, further drive down commercial real estate values."

LINK

FDIC To Dump Nearly $5-Billion in Distressed Assets

Mostly note sales...

FDIC Launching Nearly $5B of Asset Sales

Sep 4, 2009 - CRE News

The FDIC is expected to shortly bring to market a whopping $4.7 billion of mixed quality residential and commercial real estate loans that it assumed from some 20 failed banks.

The assets will be offered through what the agency and its contractors call structured offerings, in that investors will buy only an interest in each portfolio sold, while FDIC will keep the remainder. And the agency is expected to include elements of federal government's proposed public-private investment partnership, or PPIP program, in that it might offer seller financing.

The largest of the offerings will involve $2.7 billion of residential acquisition and development loans that will be marketed through Keefe, Bruyette & Woods, which has handled a number of previous FDIC loan sales.

The other portfolios will each involve roughly $1 billion. Deutsche Bank will offer a package of commercial mortgages, while a venture of Midland Loan Services and Pentalpha Capital Group will handle the sale of a portfolio of commercial acquisition and development loans.

Each of the advisers is said to be close to formally distributing sales announcements, with bid dates expected to be in mid- to late-October.

The agency has so far sold $4.9 billion of assets through six similar structured sales. But it did not offer seller financing for those. It sold stakes of 20 percent and 40 percent in each portfolio, with the interests having a face value of $1 billion. Their sale has generated total proceeds of $209.8 million, or 20.7 percent of the interest's face value.

Those proceeds compare with the 47.7 percent sales price for the $2.9 billion of loans the agency has sold through whole-loan offerings, or what it terms cash sales. Those offerins have been conducted by DebtX and First Financial Network.

Click here for a listing of FDIC's completed loan sales.

But the agency's proceeds in the structured offerings could increase over time.

It's clear that the agency is selling assets at or near the bottom of the market. And investors understand that the agency must sell, especially since banks continue to fail, swelling the FDIC's workload. So the prices at which assets from failed banks sell could be artificially deflated. By keeping a stake, it could theoretically benefit when market conditions and values improve.

Meanwhile, the agency earlier this week took offers for a stake in a $1.4 billion portfolio of residential mortgages taken from Franklin Bank of Houston. The offering, handled by RBS, was the first that adopted the government's Legacy Loan Program, through which the FDIC would provide generous financing to buyers.

Investors competing for the portfolio were asked to bid a price for a 20 percent stake, if they didn't require financing, or 50 percent, if they needed financing. Like in all of FDIC's structured offerings, the investors' stake would grow to 40 percent if certain performance thresholds were met.

The buzz is that the RBS portfolio attracted a high bid of 60 percent of face value. But that could be explained by the fact that 70 percent of the portfolio was comprised of performing mortgages.

LINK

Commercial Activity Predicted To Pick Up, Values Stagnant

Latest report from The CoStar group shows we're possibly headed toward some increase in transactional activity. I'm busier than I've been in over a year and have plenty of prospects and deals in the pipeline - so many at this point that I'm able to cherry pick. The upcoming plays WILL be in distressed assets. That doesn't look too positive for the private sellers out there as they'll have to compete with the flood of foreclosed assets being unloaded.

CRE Sales Will Pick Up, But Values Expected to Stay Flat Through '12
Jones Lang LaSalle Study Finds Banks Will Eventually Be Forced to Stop Delaying REO Foreclosures and Begin Taking Back the Keys of Distressed Assets

By Randyl Drummer
September 9, 2009
Credit markets for office, industrial, retail, hotel and multifamily property should see the effects of a gradual return of liquidity during the second half of 2009, Jones Lang LaSalle predicted in its U.S. Midyear Capital Markets Bulletin released last week.

In it, and in a separate report on global market performance issued this week, JLL noted that several trends are expected to help begin to restore capital markets over the next year, including the $33 billion in equity raised and $5 billion in debt issued through the first eight months of 2009 by global REITs. Also, with the world economy starting to recover, JLL noted foreign real estate investors are again circling select U.S. markets, and real estate companies are finally tapping into government programs such as the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF). For the first time in what seems like ages, meanwhile, the gap in price expectations between buyers and sellers is starting to narrow in the third quarter, JLL executives said.

But while all that may sound great, "it is unlikely that any true debt liquidity will return to the market until mid-2010 at the earliest" with the recession and unemployment continuing to batter occupancies and drive down rents, cautioned Kenneth Rudy, president of Jones Lang LaSalle’s Capital Markets practice.

Still, that may be welcome news to investors battered by the dramatic decline in U.S. property sales and prices that occurred in the first half of 2009. According to CoStar data, the value of Class A office buildings declined by 57% in the first half of 2009 compared with prices paid at the peak of the market in 2007. Industrial and institutional-grade retail property sales declined even more sharply, falling 71% sand 86.5%, respectively, since their 2007 peaks.

By mid-2010, JLL predicts investor interest in U.S. markets will slowly begin to return. But transaction activity likely won't reach the dizzying levels of the 2005-07 market "for a generation or longer," Josh Gelormini, vice president of capital markets research, tells CoStar Advisor. And that may not be such a bad thing for players who manage to fight another day after surviving the current downturn, following an era in which cheap and easy credit and overzealous speculation led to the latest and worst commercial real estate price bubble.

"We're definitely still in early stages of the distressed asset game, working out the assets most likely to have been bought during the boom years, and it's going to take a while to work itself out," Gelormini said. "The fact that large investors around the world are starting to see attractive values and act on the opportunities will help speed the process some, but it will still take several quarters for sales activity to stabilize."

"Although we feel transaction volumes have very likely bottomed and will be turning upward the next quarter or two, values will still have some more downward pressure into next year before we see stabilization."

LINK TO REST OF ARTICLE

Proscenium Saga Continues

Just when you think you've seen it all, along comes the following:

Lien involving Proscenium targets land owners

By KEVIN L. McQUAID

Published: Friday, August 28, 2009 at 1:00 a.m.

Owed nearly $370,000 for design work on the ill-fated, 18-story Proscenium real estate project, a New York architect has filed a construction lien in circuit court for repayment.

But Perkins Eastman Architects PC is not going after the handful of limited liability corporations that are tied to the planned $1 billion project in downtown Sarasota and controlled by developer Zeb Portanova.

Nor is the firm suing Portanova, who is now liable for millions of dollars of unpaid debts to Proscenium lenders, contractors and consultants.

Instead, Perkins Eastman and law firm Shumaker Loop & Kendrick LLP are attempting to encumber the 20 property owners whose seven acres of land that had been slated for the Proscenium and its centerpiece Waldorf-Astoria Hotel -- even though the owners' involvement with the deal ended in May when their sales contracts lapsed.

The filing, in circuit court in Sarasota County, has sparked outrage among many of the property owners.

"They're just trying to play Russian roulette to see if anyone blinks," said Bob Johnson, an attorney representing one of the property owners.

Perkins Eastman, which claims it did $695,347 worth of work on its overall $12.83 million Proscenium contract, notes the property owners were "contract vendors" to a Proscenium group, 400 Tamiami of Sarasota LLC. Under Florida's lien law, vendors may be liable for debts incurred in some cases.

Attorneys for Florida Studio Theatre Inc., which owns 1245-1285 Fifth St., and property owner Cynthia Conway, do not believe the architectural firm's unpaid fee is one of those cases.

In an Aug. 24 letter sent to Shumaker Loop -- the firm that recently acquired Sarasota Abel Band law practice -- attorney John Patterson described Perkins Eastman's filing as a "fraudulent lien."

"The Claim of Lien is totally without merit," Patterson wrote to Shumaker Loop attorney Christian Van Hise. "I would like to assure you that our clients take this matter very seriously and will pursue it accordingly."

Steven Yates, a Perkins Eastman spokesman, declined comment, as did Van Hise.

Neither Portanova nor his attorney at the Williams Parker law firm, Will Schlotthauer, returned calls or e-mails for comment.

For property owners, the lien blocks any potential sale or major renovation until it is satisfied.

Victor Calderon, who owns a shopping center at 1222 Fifth St. and is planning to renovate it, said the lien put his efforts on hold.

"I had attracted a couple of tenants, and this blocked it," Calderon said, adding Thursday that his property was removed from the lien after he threatened a counter-lawsuit.

"I don't think it's unreasonable, after all that's been said and done, to be able to move on from this," he said.

Portanova, his ex-partners Gary Moyer and Karen Cook, and Proscenium partnerships had promised to pay property owners $300 per square foot for their land, bounded by U.S. 41, Fourth Street, Sixth Street and Coconut Avenue. At that price, the land would have brought at least twice the market value.

To keep the deal alive while financing could be arranged, the Proscenium partners even paid land holders roughly $5 million in purchase options.

But this spring, when it became increasingly clear that financing would not come, Portanova secretly began negotiating to acquire a 15-acre tract that had been the site of the Sarasota Quay, at 401 N. Tamiami Trail, for roughly $40 million. When the land holders discovered it, they broke off talks with Portanova. To date, Portanova has been unsuccessful in completing the Quay deal with lender Anglo-Irish Bank plc.

"To me, this is like the body that keeps coming out of the coffin," Johnson said. "It's like something out of a science-fiction horror movie. Every one of the land owners now has to pay somebody to clean up the mess that was created for no reason by Perkins Eastman."

CMBS Red Shoots, RealPoint Report

From RealPoint. Tell us something we don't already know.

And I quoteth:

In June 2009, the delinquent unpaid balance for CMBS increased by a substantial $9.87 billion, up to a trailing 12-month high of $28.65 billion. Overall, the delinquent unpaid balance grew for the 10th straight month, up an astounding 585% from one-year ago (when only $4.18 billion of delinquent balance was reported for June 2008), and is now almost 13 times the low point of $2.21 billion in March 2007. An increase in four of the five delinquent loan categories was noted in June, including a significant $6.82 billion increase in the 30-day delinquency bucket. Nearly one-half of this increase was driven by the reporting of $3.38 billion of GGP-sponsored but specially-serviced loans as 30-days delinquent (the ultimate resolution of such loans to be determined). In addition, the distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 19th straight month – up 32% from the previous month and over 411% in the past year.

The full report is here.

Commercial Real Estate: "Ticking Time Bomb"

A few videos I ran across this week underscoring the current stress going on in the commercial real estate market.

Mega-Project The Subject of Various Lawsuits

From the Herald Tribune...

Partners in Proscenium project suing for millions

By KEVIN L. MCQUAID

Published: Wednesday, July 1, 2009 at 1:00 a.m.
Last Modified: Tuesday, June 30, 2009 at 7:38 p.m.

SARASOTA - Two former partners in the Proscenium are suing developer Zeb Portanova for defaulting on a deal to pay them nearly $5 million -- the largest unpaid debt to date tied to the stalled downtown real estate project.

With the default -- compounded by promised financing that Portanova and representatives now acknowledge may never occur -- husband and wife Gary Moyer and Karen Cook contend Portanova also owes them an additional $11 million. That money is supposed to be paid in monthly installments beginning in December.

"We expect him to pay us," Moyer said Tuesday. "It's not an if, an and or a maybe. He's put us in a position where we now are unable to adhere to commitments we've made."

Moyer and Cook, partners in Lion's Gate Development Group Inc., face a pair of foreclosure lawsuits totaling $1.27 million, for unpaid loans on their Lakewood Ranch Country Club home and on a commercial space at the San Marco Plaza, in Lakewood Ranch, which Lion's Gate developed.

The pair's lawsuit, filed Monday in Sarasota County circuit court, marks the latest legal action swirling around Portanova and Proscenium, a nearly $1 billion, Waldorf-Astoria-anchored real estate development that has stalled amid a lack of financing.

In April, Cadence Bank N.A. filed a $3 million foreclosure suit against Portanova and the Proscenium, and a security company is seeking roughly $35,000 for lack of payment.

The lawsuit by Moyer and Cook also represents the largest in a series of mounting bills that Portanova has failed to pay and might be personally liable for.

More than a dozen contractors, real estate consultants, attorneys and other professionals are owed an estimated $3 million related to the Proscenium, designed as an 18-story tower with offices, retail and restaurants and an 800-seat theater.

Neither Portanova nor his attorney, William Schlotthauer at Sarasota's Williams Parker law firm, returned calls or e-mails for comment.

Despite the legal woes, Portanova continues to try and line up financing with a pair of Atlanta partners -- Nancy Edwards and Kim King -- whose lack of real estate finance experience and embellished pasts were highlighted in a Herald-Tribune story in May.

At the time, Portanova maintained that both Edwards and King were credible financiers capable of generating the money needed to acquire land for Proscenium.

Portanova provided King and her Greencastle Asset Management with $1 million last year, in exchange for securing $100 million in financing, court documents show.

But with no financing in place despite numerous promises, Portanova travelled to Atlanta earlier this month to meet with King.

"Ms. King is still optimistic that funding will occur but provided no specific date," Schlotthauer wrote to Moyer's attorney last week. "We have repeatedly heard this story from Ms. King so we do not have much confidence at this point. The partners are currently reviewing their options as it relates to the Funding Agreement with" Greencastle.

Schlotthauer said Portanova is now seeking other financing sources as well.

Portanova, meanwhile, also continues to negotiate with Anglo-Irish Bank to acquire the former Sarasota Quay property at 401 N. Tamiami Trail.

Sources with knowledge of the deal said Portanova faces a Sept. 1 deadline to complete the estimated $40 million transaction to buy the 15-acre site.

Moyer and Cook's lawsuit could impinge on those plans, though. Anglo-Irish officials have declined comment on the negotiations.

At the heart of Moyer and Cook's lawsuit is a November 2008 agreement in which Portanova bought out Moyer's 45.5 percent interest in the Proscenium, which Moyer had conceived four years earlier.

The agreement calls for Portanova to pay the pair $4.92 million by March 30 of this year.

Only $80,000 of the amount has been paid, the lawsuit states.

Additionally, the agreement states the Proscenium would pay Moyer $32 million from project income "before distribution of any profits to the members of the Proscenium Development or their affiliates."

Since its signing, the agreement has remained unfulfilled and been extended twice, most recently on May 30, court records show.

Moyer is owed more than $10 million on July 22, the documents state.

"We've put three years of our life into this, it's like a child we've given birth to," Moyer said of the Proscenium. "All the progress that was made, and the tenants arranged, to see that go by the wayside is so disheartening."

LINK

Bloomberg on The Coming Pain

Recent clip from Bloomberg TV and an interview with Price Waterhouse's Susan Smith regarding what the coming months will have in store.



And on a lighter note...(maybe not?)

Long, Hot Summer

CoStar recently polled some real estate experts and their findings are less than encouraging for the COMRE market. In fact, some of this is downright scary, depressing stuff. Below is an excerpt, follow the link below to read the entire article.

Despite Promising Signs, Many Wary that Recession's Knockout Punch Could Still Come
Commercial Real Estate Industry Says Recovery is Not Around the Corner

By Mark Heschmeyer
June 17, 2009
The End Is Near (for This Recession).

So read some of the economic placards that have been trotted out in policy statements these days with catchphrases such as 'Sustainable Recovery.' 'Recession Is Coming To An End.' 'Policy Actions Having an Effect.' 'Seeing Green Shoots of Growth.' and 'The Crisis Has Stabilized.' Many pointed to the more than 2,000-point climb in the Dow Industrial Average over the last three months as proof that federal stimulus measures appeared to be having an effect in rousing the slumping economy.

Just this week, chief economists from JPMorgan Chase & Co., Wells Fargo & Co., PNC Financial Services Group, Morgan Stanley and others said they expect the economy to "recover from its deep slump by late summer." The group that makes up the Economic Advisory Committee of the American Bankers said they expect the nation's gross domestic product (GDP) to increase 0.5% in the July-September quarter -- this after falling a projected 1.8% in the April-June period.

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No Consumer, No Recovery

The bottom has not been reached in retail. Vacancies in the Whittier area are increasing and rents are still headed downward.
David Johnson, Partner at Johnson, O'Neill & Associates Inc. in Downey, CA

An alternative opinion to a quick 1.5- to 2-year recovery touted by many groups is that there can be no recovery because of the decline in consumer spending due to an individual's perceived loss on their net worth based on their home value.
Brian H. Strout, Acquisition Manager at Sciens Real Estate Management in Greenville, SC

The long and short of it is that so far, this seems like a recovery without the consumer. And I just don't think that in an economy driven 70% to 80% by the consumer, that a consumer-less recovery is possible. The credit card default rates are another telltale sign of mounting problems. Americans are running out of spending power from every angle (home equity, personal credit and now, income loss from job losses). And we haven't even seen the bubble start to burst in commercial.
Tony O'Neill, Broker at Voit Commercial Brokerage in San Diego, CA

I represent Healthy Fast Food Inc. They have a new branded concept they are opening up across the country called U-Swirl Frozen Yogurt. From a tenant point of view, HFFI along with my other clients are still very concerned about consumer spending, unemployment, consumer confidence, foreclosures, and the economy as a whole. If we have hit the bottom, then it is our view that we are going to stay there and bounce for quite a long time. U Swirl is only doing screaming deals. The kind where the landlord is screaming, not the tenant.
Ron Opfer, CCIM, Broker with Coldwell Banker Premier Realty in Henderson, NV

My assessment is that the economy will pick up starting fourth quarter of 2009 but the employment situation will only start to increase during first quarter of 2010. I think the worst of the commercial real estate market is still yet to come. Commercial markets will be in recession through mid next year.
KC Sanjay, Senior Economic and Real Estate Analytics at Guaranty Bank in Dallas, TX
Property Fundamentals Weak and Getting Weaker

I don't think the end is anywhere in site for a commercial real estate bottom. The CMBS market has yet to even start clearing the defaults. when these sales really start, they will dwarf the RTC volume. What these properties will sell for in a market without leverage is anybody's guess. My feeling is that the 25% percent down of years gone by will remain the same, although in the future, that will be the whole price! Just when things may hit bottom in a year or two, we will most probably be faced with hyper inflation, which is at best a forced savings account for performing assets, but at worst an additional huge stress for non-performing real estate. What will a half empty office building be worth in a declining market when prime is 14%? It is a scary thought.
Andrew J. Segal, President of Boxer Property in Houston, TX

I do not believe the end of the recession is in sight yet. The new 90-day moratorium on residential foreclosures commencing just [this week] will only exasperate a more severe response of the residential markets' attempt for correction upon expiration of the 90-day moratorium. The commercial real estate correction has only just begun and it will be a painful and significant correction. I believe 2009 will prove to be the worst single year of the last 50 years. Keep in mind; every office job loss represents a minimum of 250 rentable square feet, which goes idle and far more in other property types. When you do the math - it's staggering. Now factor in deleveraging the CRE universe, increased cap rates likely to settle in the 9% - 11% range based on stabilized income, increased cost of capital, high vacancy/availability rates, additional unemployment each month including continued historical layoff's post-bottom with a beginning recovery and the lack of debt and equity needed to help a correction along. . . what do you have? Answer = we have the "perfect CRE storm" and much restructuring to accomplish with no end in sight soon.
Richard A. Hawthorne, Principal of Hawthorne Cos. in Santa Monica, CA

The capital and debt markets for real estate remain dysfunctional. Moreover, there remains a large gap between the expectations of sellers and buyers. This means that virtually no arm's length commercial real estate sales are taking place. The small numbers of sales transactions that are reported mostly have been distressed sellers or workouts and do not establish an "arm's length" price or even a trading market. Until properties trade freely and with frequency, investors will remain reluctant to bid on acquisitions from fear of "catching a falling knife".
Louis J. Rogers, CEO of Rogers Realty Advisors LLC in Glen Allen, VA

Read the entire article here

Get Sarasota Commercial Foreclosure Listings on Twitter

Go to http://twitter.com/srqcom if you're interested in updates on Sarasota and Bradenton commercial foreclosure properties I'm taking over, new listings, price reductions, etc. I will post my foreclosure assignments on Twitter first even if I do not yet have a price from the bank. Everything is going to go here first. This is a lot easier than calling everyone who shows interest in these things, there just isn't enough time. Email is a little too formal for that. I also plan on broadcasting closed sales and leases here - something I will not do via email.

Anyway, go here to sign up and follow me.

What is Twitter?

Twitter is a free social networking and micro-blogging service that enables its users to send and read other users' updates known as tweets. Tweets are text-based posts of up to 140 characters, displayed on the user's profile page and delivered to other users who have subscribed to them (known as followers). Senders can restrict delivery to those in their circle of friends or, by default, allow anybody to access them. Users can send and receive tweets via the Twitter website, Short Message Service (SMS) or external applications. The service is free to use over the Internet, but using SMS may incur phone service provider fees.

Commercial REITS Back On The Move

Recharged REITs

Peter Slatin, 06.03.09, 06:00 PM EDT
Forbes Magazine dated June 22, 2009

Excitement has returned to the market in anticipation of the bargains to be found in distressed commercial buildings.

When it comes to investor interest, the resilience of real estate never ceases to amaze me. Despite the recent devastating downturn in demand for space, real estate investment trusts are coming back with a vengeance. There have been $10 billion in new equity offerings this year, mostly since March. According to research firm SNL Financial, the median price gain for REITs that sold equity was 35% from Mar. 31 through May 26. SNL's Equity REIT index, representing all U.S. publicly traded REITs, has gained 28%. This rebound comes after a devastating two years in which REIT shares lost 75% of their value.

What you are seeing is more than a turnaround in investor attitudes and a need by issuers to deleverage their balance sheets. Many REITs intend to finance the purchase of distressed commercial real estate at bargain prices. My firm, Real Capital Analytics, has more than $90 billion of commercial property listed as "troubled" in its database.

Among the REITs raising equity capital: mall giant Simon Properties, mall and office building owner Vornado and shopping center landlord Kimco. Joining them are smaller companies like Acadia Realty Trust ( AKR - news - people ), Digital and Kite Realty. All these companies are sending a message that they intend to be players in the newly reshaped realty market. The public entities, interestingly, are having a field day at a time when private equity partnerships are hard-pressed to raise new capital.

You are witnessing another phenomenon at work. The REIT world is beginning a Darwinian bifurcation into companies that will, and companies that won't, make the transition from an old-style business model rife with opacity, cowboy swagger and good-old-boy networks into a transparent and more efficient business platform. For real estate investors the new reality will be no less hard-knuckled or even ruthless than it has been for decades. For many years real estate has been a shadowy business. It's often been difficult to understand just where the money comes from or where and how it is spent. Public vehicles, while still capable of cloaking a lot of activity, are inherently more accessible and visible than private investment funds.

Before you charge headlong back into REITs be aware that the business is not yet out of the woods. The global recession is real and commercial; office and residential REITs will continue to feel pain. The average REIT will see a small shrinkage this year in earnings, as measured by adjusted funds from operations (net income plus depreciation, minus maintenance-level capital expenditures).

Two REITs that recently tapped capital markets that I favor are shopping center REIT Regency Centers (34, REG) and industrial property owner AMB Property (17, AMB). Both have smart management, high-quality properties and strong balance sheets. They are now clearly ahead of their peers. Regency is priced at 13 times likely adjusted FFO for 2009. AMB also goes for 13 times likely adjusted FFO.

Link

Banks Troubled CRE Assets Double to $34 Billion

Rising Nonperforming CRE Loans, Foreclosures Dull Otherwise Good Quarter for Nation's Banks

By Mark Heschmeyer
June 3, 2009
The amount of troubled loans on income producing commercial real estate property is rising rapidly at the nation's bank and thrift institutions. The total is now more than double what it was a year ago with the bulk of the increase coming in the first quarter of this year.

The nation's FDIC-insured banks reported carrying $22.3 billion in nonperforming office, industrial and retail property loans on their books at the end of the first quarter and another $4.3 billion in multifamily loans. That is up from $15.7 billion and $3 billion respectively from three months ago - increases of more than 40% in both cases.

The nation's FDIC-insured thrifts reported carrying $2 billion in nonperforming office, industrial and retail property loans on their books at the end of the first quarter and another $842 million in multifamily loans. That is up from $1.5 billion and $591 million respectively from three months ago - increases of more than 33% and 42% respectively.

In addition to those nonperforming assets, U.S. banks were carrying $3.3 billion in foreclosed office, industrial and retail properties on their books and $1.3 billion in foreclosed apartment properties. Thrifts carried $327 million and $142 million respectively.

The FDIC (Federal Deposit Insurance Corp.) also noted that other asset-quality indicators continue to decline. Insured institutions charged off $37.8 billion in bad loans in the first quarter, almost twice the $19.6 billion of a year earlier. The amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) rose by $59.2 billion during the quarter, and are $154.3 billion higher than a year ago.

"Troubled loans continue to accumulate, and the costs associated with impaired assets are weighing heavily on the industry's performance," said FDIC Chairman Sheila C. Bair. "Nevertheless, compared to a year ago, we see some positives. Net interest income is higher, and noninterest revenue is up at larger banks, particularly trading revenues. Realized gains on securities and other assets improved, too. But these positive factors were outweighed by higher expenses for bad loans and for goodwill impairment."

The commercial real estate numbers blighted what otherwise was a positive quarter for commercial banks and savings institutions that rebounded from losing money in the fourth quarter of last year. Banks and thrifts reported net income of $7.6 billion in the first quarter of 2009, a decline of $11.7 billion (60.8%) from the $19.3 billion that the industry earned in the first quarter of 2008.

Higher loan-loss provisions, increased goodwill write-downs, and reduced income from securitization activities all contributed to the year-over-year earnings decline. Three out of five insured institutions reported lower net income in the first quarter and one in five was unprofitable.

In fact, the FDIC's list of problem institutions continued to grow during the quarter from 252 to 305 institutions, and the total assets of problem institutions increased from $159 billion to $220 billion.

The number of problem thrifts was 31, up from 26 in the previous quarter.

The number of FDIC-insured commercial banks and savings institutions reporting financial results declined from 8,305 to 8,246 in the first quarter. Mergers absorbed 50 institutions, while 21 insured institutions failed.

This is the largest number of failed institutions in a quarter since the fourth quarter of 1992. Thirteen new charters were added in the first quarter, the fewest since the first quarter of 1994.

"The first quarter results are telling us that the banking industry still faces tremendous challenges, and that going forward, asset quality remains a major concern," Chairman Bair noted. "Banks are making good efforts to deal with the challenges they're facing, but today's report says that we're not out of the woods yet."

"As I see it, we're now in the cleanup phase for the banking industry," Bair added. "It will take some more time. But in the end, we'll have a stronger banking industry that's better able to meet the demand for credit as the economy recovers."

Insured institutions set aside $60.9 billion in provisions for loan losses in the first quarter, an increase of $23.7 billion (63.6%) over the first quarter of 2008.

The U.S. thrift industry rebounded too in the first quarter of 2009, but still reported losses of $47 million. That is still their best performance since September 2007, the Office of Thrift Supervision (OTS) reported.

"We are seeing encouraging signs in the performance of the thrift industry," said Acting Director John E. Bowman. "Although it's too early to say we've hit bottom or that the industry's troubles are behind us, fundamentals such as solid capital, strong levels of loan loss reserves and improving operating income give the industry a solid platform for the future."

During the quarter, 74% of thrifts were profitable, up from 65% in the fourth quarter of 2008. The improved profitability reflected lower loan-loss provisions of $5.8 billion in the quarter, down from $9.3 billion in the previous quarter. Although loan loss provisions declined, they remained elevated and were the fifth highest on record.

No Movement in Commercial, Report Says

Commercial real estate still frozen, upcoming report says

By Arleen Jacobius
May 15, 2009, 9:55 AM ET

The gale-force winds that have struck U.S. real estate could shake loose some bargains within the next year or two, but investors and money managers shouldn’t crawl out of the root cellar just yet.

Commercial real estate loans are tough to come by, with lenders reluctant to offer debt for transactions worth more than $50 million, according to a soon-to-be-released study by ING Clarion Real Estate. Lenders are requiring a lot more cash in the loan-to-value ratios (the comparison of the size of the mortgage to the value of the deal). The ratio has dropped to 50% to 60% in March from 70% to 90% in 2006, according to ING Clarion Research & Investment Strategy, ING Clarion’s research unit.

The cost of debt in commercial real estate loans in the U.S. also has increased, to 7.5% in March from 5.5% in 2006. This means that the return investors need to earn also has gone up, to 10% from 8%, ING Clarion’s research showed.

This combination — more cash required and a higher cost of debt — is devastating for commercial real estate investors because most investment hinges on the availability of affordable debt, the survey noted. The average transaction cap rate for all properties worth more than $5 million in the fourth quarter rose to 7.2%, according to data from Real Capital Analytics cited in the ING Clarion report. By March, the cap rate — which measures how fast an investment will return capital — was up to 8.5%, the ING Clarion study indicated.

ING Clarion anticipates that cap rates for core properties — the most stable but lower-return set of real estate investments — will stay in the range of 7.5% to 8.5% for the next 18 to 24 months.
Prices down but deals not up

“It’s a very serious crisis,” said David J. Lynn, managing director at ING Clarion Real Estate, New York. “There is a perfect storm and real estate fundamentals (such as rent and demand) will continue to decline.”

All of these factors are causing prices to decline but transactions have not yet picked up. Buyers and sellers have not had a meeting of the minds on value, mainly because the market adjustments and the exceedingly low number of transactions are making it almost impossible to price a property, Mr. Lynn explained.

Properties are producing less income because owners are cutting deals on rents to retain tenants, one of the strategies ING Clarion considers a top priority for real estate owners for the near term. The Catch-22 of this strategy is that it’s adding to the bid/ask spread standoff between potential buyers and sellers of commercial real estate.

Also adding to that standoff is that most investment managers aren’t all that eager to sell properties in their portfolios at loss.

“Many of these guys have low-cost debt” that will not have to be refinanced for another few years, Mr. Lynn said. This means the cost of keeping the properties in their portfolios is relatively low.

“They are content to hold,” he said.

Defaults on commercial loans are projected to grow to 5% to 6% during the next 18 to 24 months. Right now, mortgage defaults are 2%, Mr. Lynn said. Defaults on commercial mortgage-backed securities are growing too, but most of those securities won’t start coming due until sometime later this year. When default rates rise more, investors will be able to get equitylike returns for senior debt. Buying cheap debt on property could be a good way to end up owning the real estate.

In the coming 18 to 24 months, investors will be able to buy loans at a discount, he said. But not yet.

“It’s a different horror movie than in the early 1990s,” Mr. Lynn said. “It happened really quickly (then). There were huge opportunities and it was all for sale. Now there will be huge opportunities, but a lot of people are holding on.”

Link

22 Deals in One Month

No, that is not a typo. My month has been, well, let's just say it's been pretty encouraging. The tally consists of 3 leases (in excess of 11,000SF, retail and office only) and 19 closed commercial sales. Several of these were the purchase of non-contiguous foreclosed lots, an office building, etc. I am closing out the month of April with a small retail lease that was completed yesterday morning.

As far as I can tell right now, buyers are still able to obtain financing. I personally witnessed this occur several deals. I've also seen some banks behave as if they actually want to lend but make the process so arduous that it's all but impossible to get a loan. I would just prefer if these folks fessed up and not wasted everyone's time. It's going to be a while before I'll feel comfortable recommending them again.

Most of the leasing I've been involved with consists of new start-up business taking advantage of the current rental climate and companies shuffling to similar chunks of space where the rent is cheaper. I don't blame many of them as retail and office rents are down as much as 50%-60% in many places. The Sarasota vacancy report was released earlier in the week and the numbers are not good. Lots of negative absorption out there. I expect this to continue throughout the summer and am hopeful things will turn around in the fall.\

No, that is not a typo. My month has been, well, let's just say it's been pretty encouraging. The tally consists of 3 leases (in excess of 11,000SF, retail and office only) and 19 closed commercial sales. Several of these were the purchase of non-contiguous foreclosed lots, an office building, etc. I am closing out the month of April with a small retail lease that was completed yesterday morning.

As far as I can tell right now, buyers are still able to obtain financing. I saw this on several deals. I've also seen some banks behave as if they actually want to lend but make the process so arduous that it's all but impossible to get a loan. I would just prefer if these folks fessed up and not wasted everyone's time. It's going to be a while before I'll feel comfortable recommending them again.

Most of the leasing I've been involved with consists of new start-up business taking advantage of the current rental climate and companies shuffling to similar chunks of space where the rent is cheaper. I don't blame many of them as retail and office rents are down as much as 50%-60% in many places. The Sarasota vacancy report was released earlier in the week and the numbers are not good. Lots of negative absorption out there. I expect this to continue throughout the summer and am hopeful things will turn around in the fall.

I'm often asked why some properties are moving and others are not. There are a variety of factors in play here, but the most significant is pricing. If landlords and sellers aren't eager to make deals happen, there's no real point in even listing a property for sale at all. Yes, there is a lot of pain - and sometimes anger - involved in coming to terms with what your property may be worth. The problem is, it's only worth what someone will pay. As agents, we do not set the prices, the market does. And the market is changing on a daily basis. If you're a landlord, it's best to bring some some cash in than none at all. If you have a premium location you'll certainly be able to obtain marginally better rents.

At Wa-Mu, EVERYTHING Was Approved

The stories are just starting to trickle out. Meth-snorting loan officers approving pretty much anything. Of particular interest locally because it mentions Bay area Wa-Mu locations, including Sarasota.

In 10 years there will be plenty of books written and plenty of perspective on exactly how insane the whole thing was.

From the New York Times (registration required):

The Reckoning
By Saying Yes, WaMu Built Empire on Shaky Loans
By PETER S. GOODMAN and GRETCHEN MORGENSON

“We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”

— Kerry K. Killinger, chief executive of Washington Mutual, 2003

SAN DIEGO — As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes.

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.

“I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs.

While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said.

“In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”

At WaMu, getting the job done meant lending money to nearly anyone who asked for it — the force behind the bank’s meteoric rise and its precipitous collapse this year in the biggest bank failure in American history.

On a financial landscape littered with wreckage, WaMu, a Seattle-based bank that opened branches at a clip worthy of a fast-food chain, stands out as a singularly brazen case of lax lending. By the first half of this year, the value of its bad loans had reached $11.5 billion, nearly tripling from $4.2 billion a year earlier.

Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans that produced such results. While that sample may not fully represent a bank with tens of thousands of people, it does reflect the views of employees in WaMu mortgage operations in California, Florida, Illinois and Texas.

Their accounts are consistent with those of 89 other former employees who are confidential witnesses in a class action filed against WaMu in federal court in Seattle by former shareholders.

According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion — not least, Kerry K. Killinger, who was WaMu’s chief executive from 1990 until he was forced out in September.

Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

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