The Mortgage Observer February 2014

FEBRUARY 2014 | $10

POWER PROFILE

PRISCILLA ALMODOVAR

» 10 TOP WOMEN IN COMMERCIAL REAL ESTATE SHARE SECRETS TO SUCCESS

MAYOR DE BLASIO’S AMBITIOUS PLAN FOR AFFORDABLE UNITS TMO.0214.CS3.Cover.indd 1

Q&A: GE CAPITAL’S DEBBIE RILEY ON HER TEAM’S 2013

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Meridian was ranked the #2 Commercial Real Estate Finance Intermediary for CMBS loan production by the Mortgage Bankers Association in March 2013.

Meridian has also closed several of the most notable CMBS transactions of 2013 and acts as an advisor to many of the countryโ s most active and sophisticated real estate owners and developers.

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Cover photograph by Michael Nagle

February 2014

34

/ Contents

321 West 44th Street, New York, NY 10036 212.755.2400

Carl Gaines Editor

16

Damian Ghigliotty Staff Writer Sam Chandan Joshua Stein Columnists

21 Editor’s Letter 02

36 26 Stein’s Law 12

Leasehold financing and the mortgage priority

News Exchange 04

Mortgage originations, note sales, investments and industry research u From the Vault: Already a swank address, the Carlton House, at 680 Madison Avenue, has a rich history. uIndustry Research: CMBS delinquencies continue to decline—Fitch Ratings. u Industry Research: 91 percent of top 50 commercial and multifamily firms say loan originations will rise this year—MBA.

by Joshua Stein

Even with growth, way forward for new Fed chair murky

Emily Assiran Photo Editor

by Sam Chandan

Work Force 14

Hirings, promotions, defections and appointments

investor interest.

by Matt Egan

Women in CRE 21

Monthly charts of commercial real estate financings in the boroughs

Top women in the industry share their backgrounds, current responsibilities and some words of advice.

by Carl Gaines and Damian Ghigliotty

Mayor de Blasio’s Affordable Housing Push 26 Industry experts weigh in on the possibilities,

PHOTOGRAPHS BY MICHAEL NAGLE; GETTY IMAGES; ILLUSTRATION BY JACK HUGHES

FEBRUARY 2014 | $10

and limitations.

by Damian Ghigliotty

Q&A 32 GE Capital’s Debbie Riley

by Carl Gaines POWER PROFILE

PRISCILLA ALMODOVAR

» �� TOP WOMEN IN COMMERCIAL REAL ESTATE SHARE SECRETS TO SUCCESS

MAYOR DE BLASIO’S AMBITIOUS PLAN FOR AFFORDABLE UNITS

TMO.0214.CS3.TOC.indd 1

Q&A: GE CAPITAL’S DEBBIE RILEY ON HER TEAM’S ����

YOU’VE EARNED IT: ART TIPS FOR YOUR PLUM OFFICE SPOT

Barbara Ginsburg Shapiro Associate Publisher Lauren Draper Art Director

The J.P. Morgan Chase exec on helping to facilitate more affordable housing

Scheme of Things 10

Nadia Croes Copy Editor

The Basis Point 13

Lower Manhattan’s office towers are drawing

by Michael Stoler

Suzanne Weinstock Klein Contributing Writer, Culture

conundrum

Priscilla Almodovar 16

In-Depth Look 08

Michael Stoler Contributor

The Sked 34 Our picks for the month’s must-attend events

Culture 36 Art to spruce up your plum corner office

by Suzanne Weinstock Klein

Mark Stinson Senior Designer Lisa Medchill Advertising and Production Manager OBSERVER MEDIA GROUP Jared Kushner Publisher Joseph Meyer CEO Michael Albanese President Ken Kurson Editorial Director Robyn Reiss Vice President of Sales Zarah Burstein Marketing Manager Tom D’Agostino Controller Tracy Roberts Accounts Payable Manager Ian McCormick Accounts Receivable For real estate advertising, contact Robyn Reiss at rreiss@observer.com, or call 212-407-9382.

For financial advertising, contact Barbara Ginsburg Shapiro at bshapiro@observer.com, or call 212-407-9383.

To subscribe to Mortgage Observer Weekly, The Mortgage Observer’s companion PDF delivered directly to your inbox every Thursday, call 212 407-9371.

1/24/14 9:15:51 AM

Editor’s Letter / February 2014

Valuable Insights developer clients to increase the number of affordable housing units in the city. Damian Ghigliotty expands on the topic of affordable housing, talking to industry insiders about the liklihood that Mayor Bill de Blasio will be successful in his ambitious affordable housing initiative.

Lastly, with many more men in commercial real estate than women, we wanted to once again look at the issue.

We spoke to 10 heavy hitters, in a variety of job functions, and actually found a lot of similarities as well as career advice valuable to anyone.

photograph by Fernando Pereira Gomes

Putting together the February issue of Mortgage Observer fell right in the middle of the Commercial Real Estate Finance Council’s January 2014 conference, in Miami Beach. There were more than 1,550 registered attendees—a record for the group. There were lots of CMBS folks in attendance, and sentiment was overwhelmingly positive about what the rest of the year would hold in store.

The conference was a great opportunity to meet GE Capital’s Debbie Riley, who was nice enough to take time out of her busy schedule to participate in this month’s Q&A. For the Power Profile, Matt Egan writes about J.P. Morgan Chase’s Priscilla Almodovar, who heads Community Development Banking and works with her

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News Exchange / February 2014

SPOTLIGHT Deutsche Bank Refinances 680 Madison Avenue Co-op Conversion To cap off a highly active year, Deutsche Bank originated a $350 million loan for the former Helmsley Carlton House hotel at 680 Madison Avenue, which Extell Development Company and Angelo, Gordon & Co. purchased in 2010 for $164 million and are converting the upper floors of into luxury co-op apartments.

The three-year loan, made to the joint owners, closed on Dec. 30 and refinanced a $200 million loan from M&T Bank that closed in December 2012. Mortgage Observer reviewed a copy of the building’s offering plan, which shows that the refinanced M&T loan had a maturity date of July 2015 with an option to extend to July 2016.

The borrowers presumably found a more suitable and larger financing arrangement with Deutsche Bank and paid off the M&T

BY THE NUMBERS loan early. In each case, the collateral was only the residential part of the project, which is Amount of Deutsche a long-term sublease.

Bank loan for Carlton Angelo, Gordon & Co. House conversion and Deutsche Bank declined to comment on the transaction. Extell could not be reached in time for publication.

The finished conversion of the 16-story building’s upper floors will contain 69 luxury units.

Extell and Angelo, Gordon & Co. are now adding two floors on the building’s roof to create a nearly 9,000-square-foot duplex penthouse that will go for $65 million. The more than $350 million total conversion is due to be completed in the summer of 2014.

Down below, Qatar-based clothing retailer

$350M

Deutsche Bank’s Frankfurt headquarters.

QELA signed a 6,230-square-foot lease for space on the Upper East Side building’s first and second floors, Commercial Observer reported earlier this month. The Middle Eastern luxury fashion company is planning to open its Madison Avenue store and first U.S. store in the fall of 2014.

Thor Equities purchased the building’s block-long retail space for $277 million in January 2013, one of the highest prices ever paid for a single retail property on Madison Avenue.

The New York-based developer beat out Vornado Realty Trust, which had placed a competing $280 million bid for the 35,000-square-foot space that contains multiple storefronts. M&T provided an additional $115 million in financing for the acquisition of the space.

“Madison Avenue is so closely identified with luxury and class that the name itself has become synonymous with high-end, so much

so that it is essential for any retailer calling itself a ‘luxury brand’ to have a presence on this thoroughfare,” Joseph Sitt, Thor Equities’ chief executive, said in a prepared statement at the time. “The opportunity to market this remarkable space to the best of the best of luxury retail brands was simply too incredible a possibility to pass up.”

The Helmsley Carlton House was designed

by Kenneth B. Norton in 1950 and constructed in 1951. The building located between East 61st and East 62nd Streets originally contained 161 units and was first conceived as a residential property before it was converted to a hotel.

Architecture firm Beyer Blinder Belle is in charge of renovating the residential portion of the building, after getting the all-clear for the project from the Landmarks Preservation Commission in 2011.

4

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February 2014 / News FROM THE VAULT

Exchange

UPS & DOWNS Nontraded REIT Boom Nontraded REITs raised $19.6 billion in 2013, up from $10.3 billion in 2012, setting a new record, The Wall Street Journal reports, citing data from New Jersey investment bank Robert A. Stanger & Co.

Time Warner Center Sale A venture of Related Companies, the Abu Dhabi Investment Authority and Singapore’s GIC acquired the office space of Time Warner Inc. at the Time Warner Center for $1.3 billion, the seller announced on Jan. 16.

Climbing the Ladder Former head of Jones Lang LaSalle’s brokerage division Greg O’Brien has been named the firm’s new chief executive officer for its Americas business. Going forward, Mr. O’Brien will report directly to JLL’s president and CEO, Colin Dyer.

680 Madison Avenue The Astor Estate, according to an article in The New York Times, plans a large hotel, Carlton House, at 680 Madison Avenue, to add to its stable. The hotel inherits its name from another building, farther down Madison Avenue in the 40s, which is soon demolished.

1951 Carlton House, which will be run by the Ritz-Carlton Co., is completed.

1958 Vivian Beaumont Allen, an heiress, theater patroness and future namesake to Lincoln Center’s Vivian Beaumont Theater, is profiled in The New York Times on the heels of a $3 million donation to Lincoln Center. A “vivacious philanthropist,” she lives in a “gray and gold penthouse,” atop Carlton House. She is one of many high-profile residents.

1964 Harry Helmsley and Lawrence Wien, who

would later found Wien & Malkin Securities, buy Carlton House from the Astor Estate.

1966

The vacancy rate for office properties around the country remained unchanged in the fourth quarter at 16.9 percent, a sign that the sector is struggling to rebound at the same rate as hotel and multifamily properties.

Records show Mr. Helmsley takes out a new mortgage for $1.6 million from Morgan Guaranty Trust Company of New York, a merger between J.P. Morgan and Guaranty Trust Company.

PHOTOS: NICKY LOH/GETTY IMAGES (SINGAPORE); HOBERMAN COLLECTION/UIG VIA GETTY IMAGES (MIAMI)

1950

Office Market Blues

2010 The estate of the late Leona Helmsley sells the hotel to a joint venture between Angelo, Gordon & Co. and Extell Development for roughly $166 million. The partners plan to convert the upper floors into luxury co-op apartments.

2013 Deutsche Bank originates a $350 million loan toward the end of the year to fund the conversion of the 16-story building’s upper floors. The high-profile sale of the building’s block-long retail goes to Thor Equities in early 2013.

Time Warner Center.

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News Exchange / February 2014

Industry Research

U.S. CMBS Market Poised for Fewer Delinquencies in 2014

by Damian Ghigliotty There is more good news on the horizon for borrowers, lenders and investors in the securitized debt market.

The U.S. CMBS delinquency rate is poised to drop below 4 percent by the end of 2014, assuming the current pace of resolutions continues and new issuances remain strong, recent data from Fitch Ratings shows.

CMBS delinquencies fell by just over 2 percentage points in 2013, starting the year at 8 percent and closing out at 5.98 percent, following nine straight months of declines, according to the global rating agency. Multifamily CMBS showed the best performance in 2013, with delinquencies falling by 3.6 percentage points on the year, Fitch Director Scott Pritchard noted in a mid-January newsletter.

In December 2013, “resolutions of $1.1 billion outpaced additions to the index of $717 million,”

according to that weekly report. Last year’s decline in the CMBS delinquency rate was fueled in part by an active December for new CMBS issuance, “with a post-recession high of 11 Fitch-rated deals totaling $9.3 billion coming to market.”

As Mortgage Observer reported last month, U.S. CMBS origination is believed to have increased 89 percent to around $84 billion in 2013, and forecasters are anticipating another bump to about $100 billion this year.

If those positive trends continue in 2014, a yearend delinquency rate under 4 percent would mark the lowest level for the CMBS market since October 2009. Some of the factors likely to contribute to a further drop in delinquencies could include bulk asset sales by CWCapital, sales of real estate owned inventory and a relatively small pipeline of Fitch-rated loans under $20 billion coming due this year, according to Fitch.

Among all asset classes, hotel CMBS could

potentially see the largest drop in delinquencies in 2014 by as much as 4 percentage points, while delinquency rates for the other asset classes are expected to fall by around 2 percentage points each. Hotel properties also saw significant gains in 2013 with delinquencies falling 2.4 percentage points from 8.87 percent to 6.96 percent. Industrial CMBS saw the least improvement last year compared to 2012, with delinquencies falling just slightly from 8.61 percent to 8.5 percent.

One potential risk to the U.S. CMBS market going forward is the decline in underwriting standards. In the December report, Fitch Ratings noted a tendency for “poorer-quality properties and loan structures” to find their way into preliminary pools. “Often, they do not make the final pool cut, but the trend is another example of declining underwriting standards,” the credit firm wrote. Fitch also highlighted a concern that pools are being filled with small-balance, lowquality properties that “improve diversification but reduce property quality.”

Industry Research

Report: Loan Originations Expected to Rise as Lenders Show Increased Appetite

by Damian Ghigliotty Liquidity may well be on the rise in 2014.

As real estate and capital markets in many of the county’s largest cities continue to rebound, the majority of the top 50 commercial and multifamily lending firms expect loan origination volumes to increase this year, a recent Mortgage Bankers Association survey shows.

“Commercial and multifamily lenders anticipate a market in which lending continues to grow and their firm gets a bigger piece of the pie,” said Jamie Woodwell, MBA’s vice president for commercial real estate research.

A notable 91 percent of the top firms surveyed expect origination volumes to increase this year, with 48 percent of those lenders anticipating an increase of 5 percent or more, according to the report. Nearly two-thirds of the firms surveyed expect their own loan originations to increase by 5 percent or more.

The outlook this year weighs in favor of lenders having a larger appetite than borrowers—a major turnaround from the peak of the financial crisis when few lenders were willing to provide debt for commercial real estate. While 65 percent of the firms surveyed anticipate a “very strong” appetite among lenders to provide loans in 2014, only 23 percent anticipate a “very strong” appetite among borrowers to take out loans.

On the bright side of the market, CMBS, bank and life company loan origination volumes are are all expected to rise this year, the report shows. As indicated by last year’s news of federal cutbacks in GSE lending, Fannie Mae, Freddie Mac and FHA loan origination volumes are all expected to decrease.

Another area of concern among the lenders surveyed is the expectation that loan risk will increase this year along with the rise in originations. A considerable 88 percent of the respondents classified the loans made in 2013 as “medium” to “somewhat low”

risk. In 2014, 89 percent of the respondents expect loans to be “medium” to “somewhat high” risk. Those lenders were surveyed on a scale of very low, somewhat low, medium, somewhat high and high.

“Borrowers’ appetites to take out new loans are expected to remain strong but perhaps drop a bit from 2013 levels,” Mr. Woodwell said. “The resulting competition to lend leads originators to expect loan risk to increase marginally in the face of moderating returns.”

The 2014 MBA CREF Outlook Survey was conducted between Dec. 11 and Dec. 20, 2013. The survey request was sent to heads of the top 50 commercial and multifamily mortgage origination firms, as determined by the industry trade group’s 2012 Annual Origination Rankings Report. The survey had a response rate of 64 percent. The percentages shown were calculated based on applicable responses, while nonresponses and “N.A.” responses were excluded from the percentage denominator.

6

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In-Depth Look / February 2014

A comprehensive take on CRE finance trends

by Michael Stoler Investors from around the world are keen to own commercial real estate in lower Manhattan, as marked by the number of office towers in the area that have recently sold—some for conversion into residential and hotels.

According to a January 2014 report from CBRE on Downtown Manhattan, more than 17 million square feet of office space have, in fact, been converted to other property types since 1995, spurred by increased investor interest and a dearth of potential new development spots.

In December 2013, John Hancock, the U.S. division of Manulife Financial Corporation, the world’s third largest life insurer by market value, purchased the 21-story office tower at 100 William Street.

It paid $166.5 million for the 422,000-squarefoot, Class A office building, acquired from Mitsui Fudosan America. The property was built in 1972 and substantially renovated in 2012.

“There’s quite a bit of activity right now converting Class A offices in the Financial District into residential,” Manulife Chief Investment Officer Warren Thompson told Bloomberg News at the time. “That conversion starts to reduce the supply. We think it’s going to be an interesting market for commercial rates. There should be some pricing over time.”

The previous month, in November, real estate investor William Macklowe agreed to purchase the 12-story office building at 156 William Street from Capstone Equities for $62.5 million. Mr. Macklowe, CEO of the William Macklowe Company, appeared on Bloomberg TV and announced plans to convert the property into medical office space. The 250,000-square-foot property is very close to New York Presbyterian Downtown Hospital.

That same month, a joint venture between Korman Communities, Shorewood Real Estate Group LLP and Prodigy Network announced the acquisition of 84 William Street. The partners will convert the property into AKA Wall Street, which will feature

140 spacious suites ranging in size from 450 to 1,100 square feet.

Prodigy Network also late last year entered into a contract to purchase 17 John Street. According to the company’s website, Prodigy and its partners plan to expand the height of the building and construct 191 furnished units, including studios and one- and twobedroom apartments.

This past summer, Northwood Investors paid $150 million to buy the 380,000-square-foot office building at 100 Broadway from Meadow Partners and Madison Capital. Also last summer, CIM Group

acquired the 335,000-square-foot 5 Hanover Square for $104 million, and Emmes Asset Management agreed to pay $154 million for the 509,000-squarefoot office tower at 180 Water Street.

A number of other properties have been sold during 2013 in lower Manhattan. William Street, one of the oldest streets in Manhattan, registered another sale when East End Capital and GreenOak paid $133 million, or $233 per square foot, for the more than 500,000-square-foot office building at 123 William Street.

Brookfield Office Properties, one of the largest

owners of office buildings in 1ower Manhattan, purchased the 16-story, 580,000-square-foot Nymex building at 1 North End Avenue in Battery Park City, near its Brookfield Place in Battery Park City, paying $200 million.

The highest price for an office building to trade in lower Manhattan in 2013 was the sale, by J.P. Morgan Chase, of the 2.2-million-square-foot 1 Chase Manhattan Plaza to China-based Fosun Group for $725 million, or $325 per square foot.

A majority interest in the landmarked, 29-story office tower at 195 Broadway, formerly the home of AT&T and owned by L&L Holding Company and Beacon Capital Partners, was sold to institutional investors advised by J.P. Morgan Asset Management.

Commercial Observer reported that L&L and its partners purchased the property for $206 million in 2005.

Even the City of New York joined the list of sellers of office buildings reaping profits in 2013 in lower Manhattan. The Peebles Corporation paid $160 million for 346 Broadway, and the Chetrit Group purchased 49-51 Chambers Street for $89 million— both historic buildings bought from the City of New York.

Commercial Observer reported that the Peebles Corporation, with its partner, Elad Group, plans to redevelop and transform the 418,000-square-foot space into luxury residential space, which may include luxury condo units, a boutique hotel and personalized parking spaces.

The purchase represented the largest single building sale in the New York City Economic Development Corporation’s history.

Investor Joseph Chetrit’s plans for the 200,000-square-foot former Emigrant Industrial Savings Bank include building high-end residential with retail on the ground floor.

Lower Manhattan is truly a 24/7 live, work, shop and tourist community. With nearly a half-million square feet of brand new retail, the Fulton Street Transit Center and millions of square feet of new Class A office buildings expected in the near future, investor interest in this vibrant market should continue well into 2014 and beyond.

Lauren draper/new york observer

Investors Bullish on Lower Manhattan Office Towers

8

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Scheme of Things / February 2014

Monthly charts of commercial real estate financings across New York City

Mortgage Charts Data courtesy of

» February 2014’s data reflects

Top 10 Lenders

mortgages recorded by the New York City Department of Finance as this issue was going to press. As the end of the year approached, and other pressures increased—such as a changing of the guard at City Hall—activity across most of the metrics studied here reflected an uptick in activity between the months of November and December 2013.

New York Community Bank provided a $11.5 million mortgage to Baruch Singer to fund its acquisition of a multifamily building at 3660 Waldo Avenue in the Bronx, which closed Dec. 30, public records show. The transaction was just one of the many that the bank closed during the month that brought it to the top of the lenders.

BANK

Refinances vs. Purchases Bucking last month’s trend, both refinances and purchases rose, with the greatest uptick seen in refinances.

NOVEMBER 2013

BANK

DECEMBER 2013

Signature Bank

156

New York Community Bank

116

New York Community Bank

52

Investors Bank

78

Capital One

31

J.P. Morgan Chase

65

M&T

28

Signature Bank

51

Flushing Bank

26

Flushing Bank

39

Astoria Federal Savings Bank

24

Capital One

34

J.P. Morgan Chase

24

Dime Savings Bank of Williamsburgh

30

People's United Bank

22

Bank Of New York

24

TD Bank

21

BankUnited

21

Investors Bank

20

TD Bank

21

Wells Fargo

15

People's United Bank

20

846 590 253

367

NOV DEC

NOV DEC

REFINANCES

PURCHASES

Most Active ZIP Codes—Financing A lonely swath of Manhattan’s Upper East Side had the only zip code to register on the list of most active zip codes for the month of December 2013, landing in the second slot.

ZIP CODE

Total Sales by Borough Sales rose between November and December 2013 in all the boroughs M.O. and Actovia looked at, save Manhattan, where they were off by nearly 50.

716

414

NOV 2013

ZIP CODE

DEC 2013

10026

57

A

11237

85

10027

24

B

10029

48

11211

20

C

11211

43

11222

20

D

11207

40

10003

19

E

11102

30

10031

19

F

11221

27

10019

18

G

11238

23

11221

18

H

11206

23

11237

17

I

11201

23

J

11226

19

B

E 14T HS T

C

323 152

105

36

105

136

H

183 90

NOV DEC

NOV DEC

NOV DEC

NOV DEC

NOV DEC

ALL

MAN.

BRONX

BROOK.

QUEENS

Catholic Charities: Our Lady of Good Counsel Supportive Housing, at 800 Madison Street in Brooklyn, was refinanced with nearly $20 million—provided by the city and HFA.

A

I

F

G

D

J

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© 2013, Forbes Media LLC. Used With Permission

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M.O. Columnists / February 2014

Stein’s Law

Leasehold Financing and the Mortgage Priority Conundrum It starts by recognizing that, when the parties When you structure a ground lease, the tencreate a ground lease, they fundamentally convert ant’s mortgage needs to be ahead of the landlord’s a single piece of real property into two pieces of mortgage, doesn’t it? Otherwise, maybe it’s not a real property. First, there is the tenant’s long-term first mortgage—or something like that. But what right of possession on hopefully atabout the landlord’s mortgage? Isn’t tractive terms—a “leasehold.” Second, that supposed to be ahead of everyone there is the property owner’s right to else? Otherwise, maybe it’s not a first receive a hopefully attractive longmortgage. Who comes first? term stream of rental income, followed These questions arise again and eventually by full possession of everyagain in ground leases and leasehold thing, including the tenant’s building, loans. Usually, they start when somewhen the ground lease ends. That’s a one announces the tenant’s mortgage “leased fee.” Each of those positions must be prior to the landlord’s mortshould have its own value and constigage or the landlord’s mortgage must Joshua Stein tute a reasonable investment asset and be ahead of everyone, though the reasonable collateral for a loan. lender will graciously give the tenant When a mortgage lender finances either the nondisturbance protection. Often, these discusleasehold or the leased fee, the lender’s collateral sions lead to tail-chasing driven by nonnegotiable consists of only the leasehold or the leased fee— edicts, coupled with a misunderstanding of the nothing more. If the landlord defaults on its loan, logic of ground leases. the landlord’s lender or a foreclosure purchaser These issues matter. If the parties get them should end up acquiring the leased fee without in wrong, then the landlord or the tenant—in the any way affecting the leasehold. After the forecloworst case, maybe even both—may find themselves sure against the landlord, the tenant will just keep seriously constrained in their ability to obtain paying rent to a different landlord. Conversely, if mortgage financing or a favorable exit. And these the tenant defaults, the lender or purchaser should issues arise again and again, because leasehold figet just the leasehold without affecting the leased nancing plays a huge role in major development fee. A different tenant will just keep paying rent to and investment transactions in New York City and, the same landlord. Each lender must be comfortto a lesser degree, elsewhere in the United States. able with that result—i.e., comfortable with its There is a right way to resolve these issues.

collateral—or else not make its loan.

That means the tenant’s lender should receive a mortgage that attaches only to the leasehold. And the landlord’s mortgage should attach only to the leased fee, in a way that cannot possibly hurt the leasehold. That means the landlord’s mortgage needs to be “subordinate” to the ground lease, which in turn means that a foreclosure under the landlord’s mortgage will not affect the ground lease in any way. This is exactly the desired result. If such a foreclosure occurs, it should have no impact on the ground lease at all, because the ground lease should be “prior” to the landlord’s mortgage.

But when the landlord’s lender accepts the landlord’s leased fee as collateral, doesn’t that lender need to have a first priority mortgage, ahead of everyone else, including the ground lease?

No. When a mortgage lender finances a leased fee, the mortgage lender needs to understand and accept that its collateral consists of only the leased fee—the incoming rent stream and the possible windfall at the end of the lease—but not the entire interest in the property, i.e., both the landlord’s and the tenant’s positions. So when a lender accepts a mortgage on the leased fee, the lender needs to accept that, when it forecloses, it will acquire only the leased fee, subject to the lease. Thus, the lender’s mortgage needs to be subordinate to the leasehold. If the lender can’t live with that, it should not finance a leased fee.

What if the landlord’s lender gets a first priority mortgage but gives the tenant nondisturbance protection, i.e., an agreement not to terminate the lease if the lender ever forecloses? Yes, major national retailers do accept that arrangement, but careful tenants under ground leases, and their lenders, do not like it at all. Too much can go wrong.

Why should they have to worry about it?

As the last piece of the puzzle, should a mortgage on a leased fee be prior to a mortgage on the leasehold? Or the reverse? Answer: neither. Each mortgage has different collateral, and never the twain shall meet. As long as the leasehold stays prior to the landlord’s mortgages, it all works. But what about condemnation clauses? That will have to wait for a future issue.

Joshua Stein is the sole principal of Joshua Stein PLLC. The views expressed here are his own. He can be reached at joshua@joshuastein.com.

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February 2014 / M.O.

The Basis Point

Even With Growth, Way Forward for New Fed Chair Murky uting factor in the housing bubble.

If timing is everything, then for Janet Yellen, the For the immediate future, policymakers are untiming of her ascendancy to the chairmanship of constrained by inflationary pressure. The majority the Federal Reserve may be particularly fortuitous. is unconvinced by forewarnings of asset bubbles and When Ben Bernanke returned to the Fed from the the unintended consequences that Council of Economic Advisors in may follow experimental market in2006, the economy was nearing its terventions. In the case of the former, cyclical peak, and the groundwork for prices appear stable and are expected crisis had been set. In seeing beyond to remain so based on the most curthe moment, the wisdom of the marrent data. Even next year, when growth ket was utterly lacking in prescience. is projected to surpass 3.0 percent, the Reinforcing the limits of the dismal FOMC anticipates that its preferred science, the minutes of the Federal measure of inflation will remain well Open Market Committee meeting just within bounds. The inflation hawks one day before Professor Bernanke Sam Chandan should not be dismissed. Faced with a took office said, “The expansion in very short list of institutions working economic activity appears solid.” to encourage growth, the Fed can err on the side of Eight years after the Fed’s last change of leaderaccommodation for a while longer. ship, the economy is pulling out of a deep recession The retreat from accommodative policies will rather than inching closer to one. We should be furtake place on more than one front. Earliest and ther along in that process, both in terms of economic most visibly, monthly purchases of treasuries and activity and job gains. After all, the recession has mortgage-backed securities are being ratcheted been over for much longer than it lasted. Instead, down—thus far from $85 billion per month to $75 we have lingered on the cusp of momentum. If the billion. Tapering will continue throughout the year, market has it right, that is set to change. Barring when the program is expected to end, and should unexpected shocks or ripples from a further detecorrelate with higher risk-free yields and residential rioration in the functioning of government, baseline mortgage rates. Overbought stock markets, overprojections for growth are biased to the upside. The priced segments of the commercial property market central tendency of the Fed’s economic projections and housing markets will balance against new headshows the economy growing between 2.8 and 3.2 winds. percent in 2014, at its strongest pace in nearly a deNot all adjustments will happen over the shortcade. and medium-term. The Fed’s balance sheet, which Even if growth prospects are fully realized during has increased in size roughly fourfold since the bethe new chairman’s freshman year, monetary policy ginning of the financial crisis, will shrink on a much will be anything but a cakewalk. One of the Fed’s prilonger timetable as its asset holdings mature. Before mary tasks over the next few years is the unwinding that legacy has faded, short-term interest rates will of its extraordinary policy interventions. There was have migrated to a neutral range. As of December little precedent for the enactment of those policies, 2013, the better part of the FOMC expects policy and there is little precedent for navigating their sunshould begin firming in 2015. Its sense of the timeset. The stakes are higher than generally believed. table puts the year-end target Fed funds rate around Keeping rates too low for too long in the aftermath 1 percent in 2015, 2 percent in 2016 and 4 percent in of the dot-com recession is now viewed as a contrib-

Columnists

the long run. Hold onto your hats: Short-term rates will be higher than today’s long-term.

For the foreseeable future, the job market will serve as the principle guidepost for monetary policy in the United States. With that in mind, it’s not entirely surprising that policy remains extraordinarily accommodative even though extraordinary conditions no longer exist in financial markets. The intended beneficiary of monetary policy today is the labor market, where the more persuasive voices at the Fed might argue we still encounter near-crisis conditions. In assessing those conditions, the unemployment rate is cited publicly as a benchmark, because it is part of the lingua franca. It is approaching levels that indicate tighter policy sooner. On it’s own, however, it is a notoriously misleading gauge of overall labor market health.

By the numbers, most of the jobs lost during the downturn have now been recouped. But to call that milestone an indicator of success is to set the bar very low indeed. Participation in the labor market has not improved meaningfully, and by some measures, it has barely moved from its 30-year low. Consumer confidence levels have improved, but that captures restored wealth from a run-up in stocks and rising house prices more than a reduction in the tally of the unemployed.

The Fed expects that its actions are encouraging economic activity and influencing labor market outcomes by extension. The return on investment in unconventional monetary policy has been low. Running its engines at full throttle, the Fed has not been able to elicit a comparable response in employment.

The necessary conditions for job growth have not been in place, which has rendered monetary policy less effective in promoting real activity and more effective in altering capital flows. Once the right conditions are in place, prevailing monetary policy could distort asset prices unduly, presenting a challenge to the new chairman.

The narrative of the market holds that the new Fed will be an extension of the old, at least in terms of its policy bias. A committee, not one individual, rules the FOMC. Nor should the market dismiss the new Fed chairman’s capacity for independent decision-making. Independent thinking across the voting members is the more important consideration for policy and a source of uncertainty. The minutes of the most recent Fed meeting indicate general consensus about the road map for 2014. Bigger differences appear in the assessment of appropriate monetary policy next year. If only the Fed’s tools were more precise or more effective, but that would be a different world entirely.

Sam Chandan, Ph.D., is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School. The views expressed here are his own. He can be reached at dsc@chandan.com.

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Work Force / February 2014

Hirings, promotions, defections and appointments

CBRE has hired Bernard Haddigan as a senior managing director in its capital markets group.

He’ll be based in Atlanta, where his responsibilities will include working to expand services offered to private, noninstitutional investors.

Mr. Haddigan worked Haddigan for 28 years at Marcus & Millichap, where he led the Southern California office and subsequently launched Marcus & Millichap’s national retail group.

“Bernie’s addition to our team reflects CBRE’s commitment to providing comprehensive, marketleading services to investors across the price spectrum,” said Christopher Ludeman, CBRE’s global president of capital markets.

Greg O’Brien has been tapped as chief executive officer of the Americas at Jones Lang LaSalle. He’ll report to JLL’s president and CEO, Colin Dyer.

John Gates has been named to Mr. O’Brien’s previous post heading the Americas markets business, the company said. As CEO of markets, Mr. Gates will oversee brokerage, capital markets, project and development, as well as other businesses.

“As a member of our Americas leadership for many years, Greg has been a key contributor to setting the Americas strategy and driving its execution through our businesses,” said Mr. Dyer. “Drawing on his deep experience and impressive results as a leader of multiple businesses and in his direct work with clients, he will be able to drive productive growth throughout the Americas by continuing to implement the long-term strategies set in place over the last year.”

CBRE has also added Randy Anderson as the head of research in the Americas. Mr. Anderson has an extensive history in real estate investment, finance and management.

“We are very excited to have Randy lead our research efforts in the Americas,” said Nick Axford, global head of research at CBRE. “He has a proven ability to develop practical strategies and insight from complex market data. This talent is vitally important as strategic analysis increasingly underpins real estate decision-making for both occupiers and investors. Global trends are having an ever greater impact on local markets, and Randy will be a valuable addition to our research leadership team as we

develop an integrated global approach to addressing these issues.”

Prior to joining the firm, Mr. Anderson served as a principal of Blue Rock Real Estate LLC. The company focused on real estate investments in the southeastern region of the United States. Mr. Anderson also worked at the University of Central Florida as a professor.

Marie Head has joined Prudential Huntoon Paige Associates as a principal, a homecoming of sorts for Ms. Head, who left Prudential in 2011 for a position at the U.S. Department of Housing and Urban Development.

Head In her new position at Prudential Mortgage Capital Company’s FHA business, she’ll work to originate new FHA loans across the country, the company said.

“Marie’s extensive experience in and considerable knowledge of the FHA lending business, along with her familiarity with Prudential Mortgage Capital Company and Prudential Huntoon Paige, once again make her a valuable addition to our team,” said Paige Warren, the managing director and head of Prudential Huntoon Paige. “We are proud to have her back with us and look forward to her contributions toward helping us expand our multifamily FHA portfolio.”

Ms. Head served as deputy assistant secretary for multifamily housing programs at HUD when she left her position at Prudential in 2011.

Greystone is growing its portfolio lending group, with the addition of two senior executives.

In Austin, Texas, Jef Elm has joined as managing director of production. He reports to Marty Lanigan, the head of the portfolio lending group in Greystone’s New York headquarters.

“Having previously worked alongside Jef twice in the past, I am thrilled that he’s joined us at Greystone, where his market expertise and client reach will serve as a terrific complement to our existing production platform,” said Mr. Lanigan. “With the portfolio lending group’s current talent and resources, we look forward to reaching and surpassing $1 billion in bridge loan production for 2014.”

Matt Grodd has also been hired as a senior vice president in the firm’s New York office. He also

reports to Mr. Lanigan. Mr. Grodd was previously at TriLyn Investment Management, responsible for originating, underwriting and structuring subordinated commercial real estate debt.

Commercial mortgage and advisory shop Hybrid Capital has added Yaron Cohen as director of originations. He was previously a senior real estate associate at investment adviser Sinoi & Partners.

In his new position, he’ll help arrange commercial mortgages for recapitalizations, acquisitions and development projects, the firm said.

“Yaron is a respected industry professional, and as our business expands, we are pleased to have someone with his experience join our team,” said Hybrid CEO Bobby Bakhchi.

Law firm Pryor Cashman has announced several promotions.

In the firm’s real estate group, Danielle Schechner has been elevated to partner. She joined the firm in 2006 and focuses her practice on areas Schechner that include real estate finance. Additionally, Benjamin Teig, who joined the firm’s real estate group in 2005, has been promoted to of counsel.

Situs has hired Eric Smith as business development leader to further expand its West Coast operations.

Mr. Smith will be based out in the San Francisco office and will work with clients in areas such as liquidity, valuation, capital, financing, servicing and investment, the company, which provides commercial real estate advisory services and integrated technology solutions, recently added.

He reports to Kenneth Segal, head of Situs’ bank and loan advisory group, joining from the loan value group, where he was a managing director.

“As we continue to expand our global reach, including the regions across the United States, there is a strong demand for our core offerings in the West Coast,” said Mr. Segal. “By integrating Eric’s impressive background and track record with our innovative offerings, we are confident that it will spur further growth with our suite of services and bolster our presence within this target region.”

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1/24/14 9:35:07 AM

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1/23/14 11:58:41 AM

Power Profile / Febraury 2014

Banking on Community With a passion for affordable housing and a big bank to back it up, a J.P. Morgan Chase exec continues to help expand the city’s stock.

by Matt Egan

PHOTOGRAPH BY MICHAEL NAGLE

A first-generation American daughter of Puerto Rican parents, Priscilla Almodovar has a corner office with jaw-dropping views on the 45th floor of a Manhattan skyscraper—home to one of the most powerful banks in the world. The native of Sunset Park, Brooklyn, is working tirelessly to deploy J.P. Morgan Chase’s colossal balance sheet in the section of the real estate world she’s most passionate about: the less-than-glamorous but increasingly important affordable housing industry.

“I am exhibit A for the American dream,” Ms. Almodovar told

Mortgage Observer during an interview at her office in January.

As a managing director and head of community development banking at J.P. Morgan Chase, Ms. Almodovar is one of the most powerful women in the commercial real estate market. And she’s not afraid to use that platform to push for more inclusion of women in the work force.

“I can’t wait for the day when we don’t have to talk about women’s issues. That’s when girl power has truly arrived,” she said. “Until then, we will continue to talk about it.”

A former partner at white shoe law firm White & Case and official in the Spitzer administration, Ms. Almodovar believes she is proof of the great amount of progress that has already come for women.

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January 2014

/ Power Profile

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Power Profile / Febraury 2014

“I am so optimistic. Every year, it gets better,” she said while rattling off the names of newly powerful women in finance, such as Federal Reserve Chair Janet Yellen, General Motors chief Mary Barra and J.P. Morgan Chief Financial Officer Marianne Lake.

“Even at my age, when I see a woman reach that level of success, it makes you think, ‘Gosh, maybe I can do that,” said Ms. Almodovar, who is 46.

Asked if Wall Street will see its first female CEO in the next decade, Ms. Almodovar said, “Absolutely.”

“Women need to be at the table when decisions are being made about other women. Companies that value that perspective make better decisions, because we’re half the population,” she said.

But the Columbia Law School grad also feels passionately that more work needs to be done to advance women, especially into the highest ranks of the financial and legal worlds.

Women make up 54.2 percent of the work force in finance but represent only 12.4 percent of the executives and less than 1 percent of the CEOs, according to a 2013 report by employment research firm Catalyst. In the legal world, women represented just 23 percent of the equity partner promotion committees as of 2011, according to a report by the National Association for Female Executives and Flex-Time Lawyers.

As a mother of two children, Ms. Almodovar knows firsthand how difficult it can be for women to balance their professional and home lives. She credits a “very supportive” husband, “unbelievable” in-laws—who conveniently live two blocks away in the Village—and a supportive employer.

“My secret is I work very close to home” and try not to “sweat the small stuff,” she said. “If I need to work 24/7 to get something done, my employer knows I will, but if I need to go to my children’s assembly, I can do that too.”

On top of being a powerful advocate for women, Ms. Almodovar was recently named one of the 100 Most Influential Hispanics in the U.S. by HispanicBusiness.com. At White & Case, her Latin heritage was seen as a real strength, allowing her to conduct business with the firm’s Spanish-speaking clients. In fact, Ms. Almodovar leveraged her diverse background and infectious enthusiasm by traveling to Chile for a long-shot attempt at landing a new client when few other partners wanted to make the trek. She ended up winning the business of the Chilean company, which turned out to be owned by a Spanish conglomerate that became a major client of White & Case. This became a coveted piece of Ms. Almodovar’s legacy at the firm.

“It showed she was willing to step into something that was outside her comfort zone,” said Maureen Brundage, general counsel at Chubb Group and a

‘

You get hooked very quickly with affordable housing. It’s just as complex and just as tangible as any ground-up development.

former White & Case partner.

At first, Ms. Almodovar questioned why her background was an issue at all. But later in her career, she realized she had a responsibility as a role model to help dispel biases and mediate cultural differences.

“As I’ve gotten older, I’ve embraced it a lot. I’m very proud of my heritage,” said Ms. Almodovar.

Perhaps this background helps explain Ms. Almodovar’s unbridled enthusiasm for affordable housing. She doesn’t even try to hide the smile that washes over her face when speaking about Via Verde, an award-winning development project in the Melrose section of the Bronx that cost $99 million to build and is a joint venture between Jonathan Rose Companies and Phipps Houses. J.P. Morgan provided $73.6 million of financing for the project, which has 151 units of mixed-income rental housing, 71 affordable co-op units, 7,200 square feet of retail and community space, solar panels and rooftop gardens.

And then there’s the East Harlem Center for Living & Learning, a development under construction in East Harlem that is set to feature 89 units of affordable rental housing, 5,800 square feet of office space for Harlem RBI, a sports-related nonprofit, and 45,000 square feet for a K-8 charter school. Monthly rent for the one-bedroom, onebathroom apartments ranges between $533 and $855, compared with average market rates of about $2,200. Harlem RBI is being developed by Jonathan Rose Companies, which recently closed on a financing deal with J.P. Morgan worth $27 million.

The bank has also deployed capital to help finance rehabilitation projects, such as four buildings on Crescent Avenue in the low-income University Heights section of the West Bronx. Ranked No. 5 on the city’s list of the 100 most distressed properties, the buildings had badly deteriorated and were marred by leaks and mold. J.P. Morgan and Morgan Stanley recently agreed to provide $14.6 million for this $28.6 million project, which is currently under construction.

’

“In New York City, there’s only so much land,” Ms. Almodovar pointed out. “We’ve got to fix what’s there and make sure it doesn’t come out of what’s affordable.”

Ms. Almodovar’s biggest clients include developers such as Jonathan Rose Companies, Dunn Development Corp. and Ron Moelis’ L+M Development Partners. She also works closely with nonprofits such as Phipps Houses, Self Help Community Services, Common Ground and Fordham Bedford Housing Corporation.

“The developers in New York City are not faint of heart. They will take on any challenge—and the resources are there,” said Ms. Almodovar.

Ms. Almodovar knew little about affordable housing before 2007, when she became president of the New York State Housing Finance Agency, which provides financing to for-profit and not-forprofit developers to construct affordable housing and rehab existing properties.

“Within 90 days, she understood all of the major issues facing the state of New York and the country as it relates to affordable housing,” said Judd Levy, who served as chairman of the agency during Ms. Almodovar’s tenure. “It was remarkable to see someone go from zero to 60 in such a short time. It was all because of her energy and her intellect.”

Colleagues credit Ms. Almodovar with bringing credibility and a sense of direction to the agency.

“The agency up until that point hadn’t been seen as a real engaged partner in the affordable housing community. She made sure she changed the way people perceived us,” said Marian Zucker, who worked with Ms. Almodovar at the agency. “Her energy was infectious and ultimately transformative to the organization.”

“When you’re in government, you drive behavior based on a need,” Ms. Almodovar said of her time at the agency.

The need Ms. Almodovar saw was stable and safe housing for the thousands of low-income families that live in the state.

“You get hooked very quickly with affordable

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1/23/14 9:43:45 PM

Quality Makes All The Difference

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Power Profile / Febraury 2014

‘

It’s in our interest to make these neighborhoods better neighborhoods.

housing. It’s just as complex and just as tangible as any ground-up development, but you have the added benefit of addressing a very critical need,” Ms. Almodovar said.

According to the advocacy group Community Service Society, 30 percent of New York City households spend more than half of their income on rent. At the same time, the group also said that, between 2002 and 2011, there was a 39 percent drop in the total number of apartments, including subsidized ones, affordable to a family with an income at 200 percent of the federal poverty line.

Low-income housing projects used to be considered public housing that was government owned, but today these developments are largely owned and managed by private investors who are incented by the government to step in. That explains why today’s affordable housing developments don’t look or feel like the public housing projects of the 1960s.

Under the Community Reinvestment Act of 1977, banks are expected to help meet the financing needs

of the communities in which they operate, including low- and moderate-income neighborhoods. Federal regulators enforce this legislation by examining lenders’ CRA financing track record when weighing approval of mergers, charters and branch openings.

The federal government also encourages banks to make affordable housing financing available by providing lucrative tax credits. These credits are allocated to the states and then awarded to developers who raise capital or equity by selling them to investors, including big banks such as J.P. Morgan, Citigroup and Wells Fargo. Thanks to the tax credits, these properties have lower amounts of debt, allowing the owners to charge below-market rents and still generate a profit. In New York City, the difference between market-rate rent and affordable rent can be 50 percent to 60 percent.

Ms. Almodovar, in fact, said that affordable housing is the best-performing asset class in commercial real estate in terms of occupancy and foreclosure rates.

Today, roughly 90 percent of housing built for

PHOTOGRAPH BY MICHAEL NAGLE

’ low-income families and seniors originates from low-income housing tax credits from the federal government.

Other credits include the new market tax credit, which was established by Congress to drive the creation of nonhousing projects such as clinics, grocers, charter schools and commercial space. This federal program has allocated more than $36 billion in tax credit authority since its inception in 2000.

Since Ms. Almodovar joined J.P. Morgan in 2010, the bank has provided roughly $3 billion of equity investments in economic development projects in low-income housing and almost $5 billion in lending for housing affordable to low-income families and seniors in more than 80 different cities.

J.P. Morgan focuses its affordable housing efforts on its biggest retail markets, which include California, Chicago, Columbus, Houston, New York and Seattle.

“We’re going to be in these communities for a long time,” Ms. Almodovar reflected. “It’s in our interest to make these neighborhoods better neighborhoods.”

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February 2014

/ Women in CRE

Women in Commercial Real Estate Interviews by Carl Gaines and Damian Ghigliotty

Go to any commercial real estate industry event, and the disproportionate numbers of men versus women in attendance are hard to overlook. That commercial real estate— and the finance end of the business, in particular—can be a lucrative career path begs questions about why women remain so outnumbered.

To get a little insight, Mortgage Observer sought out 10 industry heavy hitters who are at the top of their

Marcia Diaz

MANAGING DIRECTOR Prudential Mortgage Capital Company Marcia Diaz oversees Prudential Mortgage Capital Company’s loan production across the United States as a managing director.

She is responsible for loan production and overseeing loan officers who are originating for various capital sources—but mostly Prudential’s general account. These loan officers, however, also originate CMBS loans for a joint venture with Liberty Island Group and Fannie Mae, Freddie Mac or FHA agency business.

“I also wear a credit hat for the western region,” she added. “And so I price the deals for the West Coast for the general account.”

games to see if there were commonalities in what drew them to the industry and what helped them progress in their careers.

Right away, there were several themes among those we spoke to for 2014’s women’s issue. These included a prevailing sense of optimism, the flexibility to remain open to the unexpected, a love of the commercial real estate industry and, predictably, hard work. Lots and lots of hard work.

Though she had wanted to be a buyer in retail, and spent time working for one of the big department stores, she told Mortgage Observer that she fell in love with real estate in business school, at the University of California, Berkeley.

“I loved that it combined the quantitative side, analytical side,” she said, “which was something I thought was missing from being in retail.”

Ms. Diaz joined Prudential in 1990 and has worked in a variety of roles at PMCC, as well as at the Prudential Realty Group and Prudential Securities. She says her first real job was working at PMCC in Los Angeles right out of school.

Relationship development, which is important in the industry, is another draw for her.

Asked about her early days and if anyone in particu-

lar mentored her or helped to shepherd her career, she credited David Twardock, who retired early last year from his position as president of PMCC. “There were a couple of instances in my career where he gave me some opportunities; one was working on a reorganization of the Prudential Realty Group, which was at the time the side that did the equity asset management,” she remembered. “At another point, he helped me find a job at Pru Securities in their realty group.” She also said that Mr. Twardock was instrumental in bringing her back to PMCC.

Jenna Gerstenlauer

FOUNDER AND MANAGING PARTNER Sound Mark Partners “When I graduated from college, I started working in commercial real estate debt,” explained Jenna Gerstenlauer, who founded Sound Mark Partners in September 2013 after leaving CBRE Capital Partners the previous month of her work in commer-

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Women in CRE / Febraury 2014

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cial real estate. “I’ve been in it my whole career.”

She worked at Natixis for eight years running the portfolio and asset management of the commercial real estate group. It was a small group, she said, which allowed her to work on all aspects of the business, including origination, underwriting, securitization and warehouse lending.

Of her career spent on the debt side of the business, Ms. Gerstenlauer credits it to her interest in math and finance. “I think I like real estate and real estate debt, because it’s hard assets, and obviously working on deals is very exciting,” she said. “I also like the capital markets side of the business, which is why I worked in securitization at the beginning of my career.

Though Sound Mark Partners is only several months old, Ms. Gerstenlauer said that the firm has already raised and deployed some cash. “We have closed on two larger deals,” she said. “And by about Feb. 5, we will have closed on two more deals.” She said that, in addiJenna Gerstenlauer tion to putting money out, Sound Mark, which is four people strong at the moment, was “working on some other asset management opportunities also.”

Because the firm is a registered investment adviser with the SEC and an open-ended fund, she was unable to disclose how much money the fund has raised or any intended targeted amount.

However, she did say that the firm has “plenty of capital to deploy” and was targeting the 60 to 95 percent LTV. “We will do any geographic location in the U.S., and we even have a small allocation outside of the U.S.,” she said. “Our target is also debt, but, again, we have a small allocation where we could do some equity.”

She said that, though she had primarily worked for men during her career and hadn’t had a typical mentor relationship, she has managed to over the years build a solid group of female colleagues.

“Here at Sound Mark, of the four of us, three of us are women,” she pointed out. “And when you look at the two people I’m hiring who are starting in April, one of them is a woman. So whether by choice or by accident, I love working with women.”

Laurie Grasso PARTNER Hunton & Williams

For Laurie Grasso, a partner in the real estate group at Hunton & Williams, networking and taking advantage of speaking engagements has been key.

“If you’re a woman coming up in the industry, there’s really nothing holding you back,” she said. “My advice to a young associate—be it a male or a female—would be that you have to work hard and learn your craft and you have to network.”

She added that finding a mentor is essential as well.

When Mortgage Observer spoke to Ms. Grasso for last year’s inaugural women’s issue, she said that she was anticipating a busy year, which did, in fact, end up being the case.

In the beginning of 2013, Ms. Grasso, representing a joint venture of Eastbridge Sarl, Rose Associates and AG Insurance, closed the $300 million construction loan for 70 Pine Street. And toward the end of the year, she saw the closing of World-Wide Group’s

THE MORTGAGE OBSERVER FEBRUARY 2014 4.5 W X 11 H HALF-PAGE VERT. 4C

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February 2014 $110 million construction financing for its 421-unit multifamily building at 41-42 24th Street in Long Island City.

“My year was kind of bookended by these big development projects,” she said. “And then within 2013, I represented Savanna Partners in the sale of 2 Rector Street and 5 Hanover Square, which were big office buildings downtown.”

Observer Media owner Jared Kushner bought 2 Rector Street with CIM Group.

“My practice is the big development deals, and then I do have a lot of fund clients and equity clients, and so it was a nice mix of both of those for 2013,” she said. “And I do think 2014 will be same type of mix for me.”

California to Maine. “We’ve already closed one loan, and we have a couple more closing in February.” 2013’s total hit $1.8 billion, and she added that she expects her 2014 total volume of business to surpass, or come close to, that figure.

Asked if given her small town roots she ever finds herself shocked by the number of deals and large dollar volume of business she transacts, she paused and then said, “Certainly. Who would have guessed?”

Sharon Kline

As an undergraduate studying bioengineering and finance at the University of Pennsylvania in the early 1990s, Heidi Learner had a Wall Street job on her radar but no thoughts of commercial real estate.

“It’s funny how what you think you’re going to do in life often ends up being something completely different,” the chief economist at New York-based commercial real estate brokerage firm Studley said. “My first job out of school was at Salomon Brothers. Certainly, the math has helped over the years, but I don’t think there’s been one time that I’ve used anything specific to my bioengineering studies.”

After leaving a vice president role at State Street Corporation, Ms. Learner joined Studley in May 2012, where she uses real-time evaluations of supply and demand for office space to help clients understand the economics of major commercial real estate markets. The information she analyzes on a daily basis runs the gamut from CMBS data to labor market statistics to annual financial reports issued by cities and states. Her research supports the brokerage firm’s 25 domestic offices, as well as the company’s more than 60 global offices.

“I had spent almost 20 years on Wall Street in a variety of capacities, so this Heidi Learner was a relatively new career switch for me,” she said. Among her previous roles, Ms. Learner has worked as an analyst focused on foreign exchange rate and interest rate hedging and a vice president focused on emerging markets. During her early years in New York’s financial industry, she received her master’s degree in mathematical finance from Columbia University.

Ms. Learner noted that the obstacles she has faced in her career have never been the result of gender differences. “Certainly, I’ve had my fair share of challenges, but as far as challenges specifically because the industry tends to be male-dominated, no,” she said. “Of course, it’s important to recognize that women have different communication styles and that you need to know how to play in the sandbox with people who have both styles.”

The Weston, Mass., native said her goal looking ahead is to make sure her coverage area grows as Studley continues to expand geographically and potentially into new lines of business.

Executive Vice President CBRE Capital Markets Rural Indiana—Camby, to be exact—was home for Sharon Kline, an executive vice president at CBRE Capital Markets who grew up in the small town located southwest of Indianapolis.

“My ending up in commercial real estate was really happenstance,” Ms. Kline told Mortgage Observer. After graduating college, she was working as a secretary at the National Bank of Detroit in the trust research department. She was moving to Columbus, and her boss’ boss, a member of the board of directors of Nationwide Life Insurance Co., facilitated a meeting with an executive there.

“I ended up in the mortgage department at Nationwide—I was the first woman officer,” she recalled. “I started out servicing residential loans, and I serviced commercial loans, and then I got into production and making new mortgages across the country.”

Ms. Kline pointed out that, though the recommendation got her foot in the door, she worked extremely hard thenceforth. After Nationwide, she spent a year in MetLife’s Houston office before leaving for United California Bank (later First Interstate Mortgage Company) for nine years. Another eight years were spent at Northland Financial Company—now NorthMarq Capital.

“I’ve been here at CBRE—I just finished up my seventeenth year,” she said.

I think my story is maybe a little different than a lot of women in the industry,” she said, “in that I started young in the business, I was one of the few female mortgage banking executives and even life company people and I have to say that I had great male mentors my whole entire career.”

Still, she said that building a network of female colleagues—through groups such as CREW—has been an important factor.

Based in the company’s Newport Beach, Calif., office, Ms. Kline is responsible for generating mortgage loans, she said. Over the past 10 years, she has been involved in more than $5 billion in business.

“We actually have a very strong pipeline going in to 2014,” she said, noting that this includes loans from

Heidi Learner Chief Economist Studley

/ Women in CRE

Melanie Meyers

Partner Fried, Frank, Harris, Shriver & Jacobson A land use attorney in Fried Frank’s Real Estate Group, which she joined as a partner in 2003, Melanie Meyers works on entitlements for developments, as well as on the planning side of development.

Her roster of clients includes such boldface names as the Rudin family, Forest City Ratner and Related Companies—for St. Vincent’s, the Atlantic Yards and Hudson Yards, respectively.

A former architect, she said that her move to the legal profession had been a logical one, since her interest was increasingly drawn to how design works within the infrastructure of a city.

“The architecture firm I worked at was also a planning firm,” she told Mortgage Observer. “So I was sort of already in that world. I was going between the design of buildings and the organization of buildings in a larger framework.”

Ms. Meyers said that she is still spending a significant amount of time on the implementation of Atlantic Yards, which was planned to unfurl in several phases.

In addition, she has also represented Cornell University for its land use approvals for the applied sciences campus—Cornell NYC Tech—on Roosevelt Island, and she just finished the land use process on behalf of Park Tower Group for its residential project along the Greenpoint-Williamsburg Waterfront.

“There are many more women who have a role on the developer side,” she pointed out, naming Maryanne Gilmartin, Melissa Pianko, Helena Durst and Samantha Rudin. “There are actually a lot of females in the real estate world. From a lawyer’s standpoint, you need to know yourself, you certainly need to know your business, and you need to know your clients. My advice is that you need to work from your strengths.”

When asked if she preferred larger scale, more headline-grabbing assignments, Ms. Meyers said that every project was unique. “And developers—they’re entrepreneurial, they’re optimists. They want to see things get done,” she continued. “When you solve a small problem or get a question answered on a project which is 70,000 square feet as opposed to 70 million square feet, there’s a lot of satisfaction in that.”

Nicoletta Pagnotta Vice President Meridian Capital Group

Nicoletta Pagnotta manages a significant pipeline of deals for Meridian Capital Group in the specialized world of underlying condo and co-op finance. The firm, in fact, credits her with being instrumental in the $1.6 billion of this type of business it transacted in 2013. And no wonder: She worked on about $800 million of that.

“What’s unique about Meridian is that we have these proprietary products. We’re constantly in the market working with our lenders to improve what they’re

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Women in CRE / Febraury 2014 able to offer,” she told Mortgage Observer. She explained that Meridian is able to carve out products with the lenders it works with to best suit the needs of the borrowers in this niche. “Every condo and co-op board member, sponsor, managing agent—they should really know that Meridian is the best partner out there in this market to address those needs.”

Ms. Pagnotta, who has been at Meridian for roughly 10 years now and focuses on underwriting, origination and placement, has been known to go the extra mile for her clients—literally.

“When Superstorm Sandy hit, we were working with a new lender. It was an important first deal for the company,” she explained. “And it was a deal that was ratelocked, had a maturity date—every deadline you could imagine.”

With the city shut down and transportation opNicoletta Pagnotta tions limited, the loan still had to fund. Ms. Pagnotta hoofed it to the assigning bank to pick up the papers and walked over the Brooklyn Bridge into Manhattan to hand deliver them to the title company. Everything closed on time, and all the deadlines were met.

Women’s organizations—and events—have been important for Ms. Pagnotta as well. For example, she cited AREW, the Association of Real Estate Women. She counsels younger women coming up behind her “to always ask questions,” relying on more senior colleagues.

As for her interest in real estate, she said that it started at home.

“My parents came from Italy,” she pointed out. “And they came for the American Dream. So I got to see them become homeowners and become, themselves, landlords and realized from a young age how much real estate affects every person, whether they rent or they own.”

Janice Stanton Senior Managing Director, Capital Markets Cushman & Wakefield Janice Stanton, who started out in the bond and stock industry working for MetLife in the mid to late 1980s, has spent much of her career pushing for increased transparency in real estate. She discovered her love for the business after getting a clearer look at how it operates.

“I got into real estate as a spy,” the senior managing director in Cushman & Wakefield’s capital markets group said jokingly. “I had a bond and stock portfolio for a big investment manager, and every once in a while, they’d slide in some real estate to get better documentation.” She said that, after going in to real estate, she “loved it and never went back.”

In her current role, Ms. Stanton advises global investors on the capital markets and private real estate markets. Those clients include institutional investors— domestic and foreign—and hedge funds. While her job requires a certain level of secrecy, she has remained a proponent of openly sharing information for the better of the real estate industry.

“Bonds and stocks are very efficient, and there’s very little arbitrage in the market,” she said. “Real estate back when I got started, and still to some extent now, is one of the markets that isn’t super efficient. You can make a lot of money and do really well with better information, better insights and better due diligence.”

In between her roles at MetLife and C&W, Ms. Stanton and a group of four colleagues started their own minority- and women-owned business in 1995, a real estate investment manager called Equinox Investments.

C&W was a seed capital partner in that business and brought Ms. Stanton on board in 1998. The New York native, who received her bachelor’s degree in art history and economics from Wellesley College, said as a woman in real estate there is more focus on what you do.

“It’s pretty clear that you can look across the room at a commercial real estate event and not see a proportionate share of women,” Ms. Stanton, a recipient of the YWCA’s Academy of Women Achievers Award, said.

“In the end, you can make that a negative or a positive.

As a woman in real estate, you are more memorable, because there are fewer of you.”

Laura Walker

Senior Vice President Citibank Laura Walker is a senior vice president at Citibank, as well as the current president of the 100-member New York chapter of the CREW network — a nearly 9,000-strong group “dedicated to advancing the achievements of women in commercial real estate.”

Ms. Walker works in the specialty sales and products group within Citi’s commercial bank. A 20-year veteran of the bank, she joined as a financial analyst.

“Several people,” she said when asked if there was anyone who mentored her during the course of her career. “I’ve benefitted so much from having mentors, both within Citi and externally as well, male and female.

It’s who we work with and who is within our circle who we can learn from everyday.”

Her responsibilities include managing commercial clients within the bank, including property managers, owners, developers, title companies and insurance companies. She said she helps these businesses manage their operating cash.

Though she declined to provide specifics, recent deals she has coordinated are “$100 million or more” for commercial properties located in New York City, as well as the deposits related to those transactions.

Last year, she was president-elect of NYCREW, and she is also currently involved in two other committees on the national level of the CREW network.

Asked about why she thinks NYCREW is important, she characterized the group as “a door opener for many, many things,” including other professionals to learn from, do business with and mentor.

“It’s always a terrific tool, and I leverage that with my colleagues and my clients, because I manage the largest commercial clients that Citibank has,” she said.

“It’s another way to learn and get access to people. And our programs are value-added. We had a 63 percent increase in membership in 2013 because of the value out there. Time is money for everybody.”

Ms. Walker said, as for challenges faced as a woman in a male-dominated industry, “You just continue to work and get better all the time and learn from everybody. It’s CaN-I: Constant and Never-ending Improvement. I want to get better all the time at what I do.”

Meggan Walsh Managing Director and Deputy Group Head CIT Real Estate Finance Meggan Walsh, managing director and deputy group head at CIT Real Estate Finance, got her start in real estate just a few years out of college in January 1984. Her first gig was working as an apraiser for a subsidiary of Bank of America, where she acquired “the broadest set of skills,” including market research and discounted cash-flow skills.

“The other big part of it was living in Manhattan,” she said looking back. “I’m married to an architect, so we used to spend our early days walking around on the weekends and taking it all in.”

Ms. Walsh and several colleagues joined CIT’s newly restablished real estate group from Bank of Ireland in October 2011. The New York-based financial company acquired her team after losing out to Wells Fargo on a Bank of Ireland portfolio.

Ms. Walsh’s areas of expertise working under CIT Real Estate Finance’s president, Matt Galligan, include commerical loans, construction loans, bridge loans and acquisition loans. The Ithaca College graduate oversees a loan origination, underwriting and portfolio management team that provides financing for construction loans on commercial projects and investment loans secured by cash-flow-generating real estate.

Ms. Walsh noted that the greatest challenge she has faced as a woman building her career in a largely maledominated industry has been one of “sheer numbers.”

“I remember walking into meetings when I first started out, and there would be a meeting of 100 people, where four of them were women,” Ms. Walsh, a longstanding member of the invitation-only assosocation Women Executives in Real Estate, said. “The real challenge when you’re starting any career is understanding how the whole thing operates.

“One of the things I’ve learned in retrospect is that you go out and you get the opportunity; you don’t wait until your skill set is completely refined and you feel ready,” she added. “At least in my particular generation, I don’t think that’s something that came naturally to women.”

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Affordable Housing / February 2014

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February 2014

/ Affordable Housing

The 200,000 Unit Question New York’s real estate community sees the challenges facing Mayor de Blasio’s affordable housing plan as it waits to see if the money—and units— will come

ILLUSTRATION BY JACK HUGHES

by Damian Ghigliotty There is a long road ahead—that much is certain.

Mayor Bill de Blasio’s plan to create 90,000 new units of affordable housing and preserve an additional 110,000 units over the next 10 years will require the support of not only Albany and Washington, D.C., but also many of the real estate industry’s key players in addition to city resources.

Several New York-based lenders, developers and housing experts Mortgage Observer talked to over the month of January voiced concerns about the potential hurdles the de Blasio administration faces from a financing and policy perspective. Among those concerns are available sources of subsidy capital, accessible land and the ability to process such a goal in time.

“If you look at the toolbox for affordable housing, it includes HOME

and CDBG from HUD, both of which have been cut in recent years,” said Rick Lazio, partner and head of Jones Walker’s affordable housing and housing finance practice, referring to the HOME Investment Partnerships Program and the Community Development Block Grant Program. “I would anticipate they would face continued reduction for the next several years.

“Then there is the Low-Income Housing Tax Credit, which is an incredibly useful tool but is basically capped,” added Mr. Lazio, a former U.S. representative and Senate candidate for the Republican Party in New York. “That is going to be under pressure as well with more of those tax credits being used for public housing conversion purposes.” He also noted “considerable fiscal pressures” on the state government coinciding with shrinking federal resources and limited tax credits.

The LIHTC Program, which was created under the Tax Reform Act of 1986, has become the primary source of equity for low-income deals.

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Affordable Housing / February 2014

‘

Mayor de Blasio’s approach is to use every tool in the toolkit to ensure more affordable housing is produced for New Yorkers.

The federal tax credit program now accounts for about 90 percent of all affordable housing development in the U.S., government data shows.

New York State signed its own low-income tax credit program into law in 2000.

Under the Bloomberg administration, which set out to create and preserve 165,000 units of affordable housing in New York over a 10-year span ending in 2013, low-income housing tax credits played a fundamental role. During the early years of the financial crisis industry, trade groups cited a drop in the price of those tax credits as a contributing factor to a delay in the former mayor’s plan. That plan is now 97 percent complete and on track to meet its target by June 2014, according to a Bloomberg press release from Dec. 21, 2013. “[The Low-Income Housing Tax Credit] is and will continue to be the mainstay for affordable housing,” said Keith Rosenthal, the president of Phoenix Realty Group, a New York-based real estate firm that acquires, develops and upgrades affordable and market-rate housing around the country. “The real question in New York, where you typically need multiple layers of subsidy layering to make the deals work, is: Where will the additional financing come from?”

Bringing in additional equity presents a challenge for affordable housing developers, due to the required allocation of tax credits to any ancillary investors, Mr. Rosenthal, the former president of Lehman Brothers subsidiary Lehman Housing Capital, said. The majority of those developers need to rely on debt from public and private lending sources to cover the remainder of their costs. At the same time, “there has been a limitation on the resources of the state and the

city to provide subsidy,” he noted.

In November 2012, Phoenix Realty Group and partner New Era GP obtained a round of financing to acquire and upgrade the affordable housing property Willoughby Court Apartments located in Bedford-Stuyvesant, Brooklyn. The financing included $23 million of New York State HFA bonds, a $2.5 million loan from the New York City Department of Housing Preservation and Development and $17 million of equity from an institutional investor. That investor is due to receive federal and state tax credits on a 10-year schedule. The new owners acquired the 267-unit, three-building property for $19 million and expect the total project to cost $53 million.

Mayor de Blasio’s affordable housing plan, which has not yet been fully outlined, calls for the creation of 50,000 units by requiring developers to build apartments for low- and middle-income families when developing residential projects in neighborhoods rezoned for higher density. The mayor has also said he wants to use $1 billion of the city’s $144 billion in pension funds to preserve 11,000 units over eight years.

One high-level executive in New York City’s affordable housing market said on background that some of the tools Mr. de Blasio talked about during his campaign were hard to swallow.

“Pension fund money is not going to become a huge source of subsidy capital,” that person said, adding that the mayor’s plans to implement mandatory inclusionary zoning is unlikely to produce a significant number of new units of affordable housing.

“One of the most important things that can happen would be for the mayor to continue to shift

’

the balance of financing affordable housing away from public sources and toward private sources,” this person said. “This administration might also be more inclined to do a better job of utilizing available property that NYCHA owns than the last administration.”

Deputy Mayor for Housing and Economic Development Alicia Glen told Mortgage Observer by email that “too many people and families are facing an affordability crisis in New York City” and that rising housing costs are a fundamental cause. “Mayor de Blasio’s approach is to use every tool in the toolkit to ensure more affordable housing is produced for New Yorkers, including leveraging the private sector and private capital and a thorough review of what land is available for development,” she said.

Todd Gomez, a senior vice president at Bank of America Merrill Lynch and the bank’s Northeast regional market executive for community development banking, said that Mr. de Blasio’s plan creates an opportunity for banks and other private lenders. Under the mayor’s plan, he predicted they’d be able to play a bigger part in financing affordable housing development and preservation.

In 2013, the Charlotte, N.C.-based banking giant provided debt and equity financing for more than 1,000 units of affordable and mixed-income housing in the city. Those projects included 87 units of housing in Crown Heights, Brooklyn, for residents earning less than 60 percent of the area median income and 115 units of housing for a project in Norwood, Bronx, with half of the units for residents who are mentally disabled. Bank of America also served as the co-lead on financing for 619 units of affordable work force housing

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Affordable Housing / February 2014

at Hunters Point South in Long Island City, Queens.

“As historically has been the case, the financing is going to be a combination of capital that comes in as subsidy, tax-credit equity, tax-exempt financing and private credit from lenders like Bank of America,” Mr. Gomez said. “I don’t think the stack is going to change, but the amount of each component within the stack may change.”

The other top affordable housing lenders in New York’s banking arena—Citigroup, Wells Fargo and J.P. Morgan—declined to comment for this story, citing the uncertainties of Mr. de Blasio’s plan and sensitivities between the industry and the mayor’s office. Mr. Gomez, who called affordable housing development an “obligation to serve those who need it, who work in the city and who are an important part of our overall economy,” also noted the potential challenges, referring to New York City as an area with little low-hanging fruit.

“We’re in a different place than we were when Ed Koch started his plan or Michael Bloomberg started his plan,” he said. “Fortunately, for our economy here in the city, there aren’t a lot of empty buildings and tax lots left over. There’s a lot of competition for land in this market, which can make it more challenging and expensive to develop affordable housing.”

Designating more land and resources for affordable housing could in turn push up costs for luxury tenants and luxury developers, Mr. Lazio said. “The consequence of all this is that it will likely become more expensive to build luxury rentals in Manhattan and developers will be under more pressure to help finance affordable housing throughout the boroughs,” he said. “If there are fewer upmarket deals because of the additional costs imposed on developers, then the lenders who service them will also be affected by that. Lenders will write less lucrative business.”

Whether an uptick in affordable housing means a potential decrease in new luxury rental and condominium developments remains to be seen.

Luxury condo developer Steve Witkoff, for one, told Mortgage Observer that he was in favor of Mayor de Blasio’s plan and not at all phased by more city land and resources being committed to affordable housing development.

“I don’t think it’s necessarily a binary decision— that one unit of affordable is somehow going to leave a unit of luxury out of the marketplace,” said Bank of America’s Mr. Gomez. “There are going to be opportunities to develop luxury residences to keep up with the demand for that here in the city.”

New York-based Greystone’s managing director and head of its affordable housing group, Jeff Englund, noted that one of the most effective means

Willoughby Court Apartments at 721 Willoughby Avenue in Bedford-Stuyvesant, Brooklyn.

of affordable housing creation is the development of 80/20 properties. “That’s a direct result of the cost of land, construction costs and rents,” Mr. Englund said.

In December 2013, Greystone partnered with Bank of America to provide a $78 million HFA loan for a planned 80/20 residential building at 149 Kent Avenue in Williamsburg, Brooklyn. The borrower, L+M Development Partners, acquired the 40,000-square-foot warehouse property in July 2012 for just under $20 million and entered into a joint venture with the landowner to develop the sevenstory building. Construction on the new property, which will contain 164 residential units and groundlevel retail space, is set to begin in the spring of 2014 and end in the beginning of 2016.

While 80/20 developments in New York have grown in popularity in recent years, Mayor de Blasio’s pledge to make inclusionary zoning mandatory for developers has raised eyebrows among the city’s real estate community. Under the Bloomberg administration, nearly 40 percent of the city’s land mass was rezoned to allow for large-scale projects in all of the boroughs. That plan largely focused on neighborhoods with dense industrial pockets such as Williamsburg, neighboring Bushwick and Long Island City. The amount of land that can be rezoned for greater density going forward is unclear, while developers are unsure of how an effective trade-off would occur.

“The only thing we know right now is that, if you want upzoning for your project, which means you have to go to the City Council, you would be expected to have to make a trade to create some affordable housing units,” Mr. Rosenthal, of Phoenix Realty Group, said. “I don’t think anyone knows what that trade is. Do you have to do it off-site? Do you have to do it on the same site?”

One other potential hurdle the de Blasio administration faces is red tape, Mr. Rosenthal noted

as he cited federal and state concerns over subsidy layering review to make sure a developer doesn’t take in too much money. “The new administration will need to figure out a system to expedite the processing in order to get to 90,000 new units,” he said, adding that successfully implementing such a plan will involve a combination of profit and velocity.

Deputy Mayor Glen said the administration is “working to implement a comprehensive housing plan,” which includes “rezonings, changes in tax policy, making better deals with developers and exploring options for pension investment.”

In order to complete that process, the city’s new government will need to finish assigning its key administrators, Messrs. Lazio, Gomez and Rosenthal said. Three weeks into his term, as of Jan. 23, the mayor has yet to designate a Department of City Planning director to replace Amanda Burden, while the New York City Housing Authority is also short a permanent leader. John Rhea, NYCHA’s former chairman, announced his resignation on Dec. 30.

“Mayor de Blasio has a good housing background from his days at HUD, and I think he generally understands the issues,” Mr. Gomez said. “The industry is waiting to see who will lead HPD, HDC and NYCHA, but I think most feel very encouraged that there is a plan and that, so far, administrators with strong affordable housing experience have been selected to lead that plan.”

The de Blasio administration, which inherited a balanced budget of $72.7 billion for fiscal year 2015, has not yet indicated the extent of city resources, state and federal funding and private debt and equity sources needed to meet the mayor’s goal.

“They’ve got tools in the toolbox,” Mr. Lazio said. “The big question will be: Can the de Blasio administration get to scale? His goal is a very bold, ambitious number, and he’s going to have do this with singles and doubles, not with triples and home runs.”

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Q&A / February 2014

Debbie Riley

Senior Managing Director, GE Capital At last month’s Commercial Real Estate Finance Council January conference, Mortgage Observer met with Ms. Riley, who runs capital markets for North America for GE. She filled us in on her current responsibilities and the evolution of her career and shared valuable pieces of advice for women early in their own.

Mortgage Observer: What are your current responsibilities?

Debbie Riley: I cover capital markets for our North American commercial real estate platform, including operations in Canada, Mexico and the U.S.—this includes our CMBS and balance sheet products.

Last year, my team enabled over 50 percent of the $6.5 billion of financing closed in North America.

This is a great convention, because you have a wide range of participants, including the issuers for CMBS, mezz investors, bond buyers, portfolio lenders and servicers, so over the course of a few days, you can cover a broad spectrum of the industry.

Can you talk about your background and how you got involved in the industry?

My father was a developer of apartments in the Midwest. He started in Florida as a general contractor. We moved to Ohio in the early ’70s where he then went into partnership with my mother owning and managing apartment complexes, so it was pretty much a family operation.

During college at the University of Michigan, I had no intention of going into commercial real estate. I was in accounting—I got my C.P.A.—and then I spent four years in public accounting with PricewaterhouseCoopers. I did auditing for four years, which is a fabulous background, because it just takes an incredible amount of discipline.

After four years, I decided that I no longer wanted to be an auditor and targeted a finance company that would suit my background. I landed at Heller Financial, which was bought by GE in 2001. After a year in their corporate accounting department, I joined their real estate group.

What precipitated the move to the real estate group?

I had done a lot of real estate in public accounting, but there was also a man who was leading the real estate group, Michael Blum. If you were to ask me about my mentors, I would mention Mike, just because he really encouraged women. He gave women a lot of visibility within the organization, and he liked to work with really bright women. And at the time, his second in command was a woman named Lauralee Martin.

She’s now the C.E.O. of HCP. Before that, she was the C.E.O. of Jones Lang LaSalle for the Americas and before that C.O.O. and C.F.O. of Jones Lang LaSalle.

I saw her as a role model. Both Lauralee and Mike encouraged me to broaden my skill set and to learn more about the credit and sales side of commercial real estate.

If I’ve learned anything in my career, [it’s that] sometimes you have to take what may appear like a lateral move, but if you’re continuing to expand your knowledge of the business, then it’s really just a stepping stone to something bigger.

How has the experience of working at GE been?

GE has been very good for me. I was really open regarding the GE acquisition, because GE is such a powerful name, compared to coming from a small company where you didn’t have that brand name at all. I thought it would be pretty powerful to go out to market with that brand name and be able to do large transactions. GE is great a company for women. They have a women’s network and really foster mentoring and sponsorship of women. Not all companies give women the flexibility they need, and I am thankful to have the ability to commute between my family in Chicago and my job in New York.

Has someone at GE mentored you?

For the most part, my mentors have been largely

Debbie Riley outside of GE. Lauralee is still a mentor and sounding board. The relationships with people who have known me and watched my career over the past 15 to 20 years are generally the people I look to when a career decision or opportunity comes up.

Is there any piece of advice you would give to young women who are starting out their careers?

Being flexible. I think when you come out of college, whether women or men, they have this idea regarding how their career is going to be, and it doesn’t always happen that way. You have to be flexible and see if it’s right for you and if you’re interested in it. The other advice is that, if you’re interested in something and engaged, you will do very well. To succeed, you have to become comfortable with taking more personal risks.

You were instrumental in reestablishing the securitization program at GE, right?

Yes. The securitization market after the financial crisis had a couple of years when it was shut down.

Similar to a lot of other people, we exited it. We relooked at it in 2010, and we got back into the business, and I am very excited about what we’ve accomplished. We’ve been very successful in that we did a half-billion of volume in 2013 and are looking to do a billion or more throughout the course of 2014.

Are there any trends that you’re seeing?

One of my observations over the last few days at the convention is that there is a perception of less risk, which ultimately leads to compressed pricing.

Additionally, with increasing rates, you can expect that spreads will get compressed.

Stephen + Anne Truppe

by Carl Gaines

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The Stoler Report-New York’s Business Report Building New York-New York Life Stories

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The Sked / February 2014

The Sked: February The Mortgage Bankers Association is hosting its CREF/Multifamily Housing Convention & Expo at the Hyatt Regency Orlando early this month. The event is billed as being where market-makers meet.

The four-day program includes many opportunities to network with the 2,500 professionals that will be in attendance.

Mortgage Bankers Association: Where Market Makers Meet, Hyatt Regency Orlando, 9801 International Drive, Orlando, Fla., go to events. mortgagebankers.org/CREF2014 for more information

4

The Real Estate Lenders Association’s Chicago chapter is hosting its New Year’s networking event in Chicago at the American Junkie, a self-described “destination for sports addicts.” However, you need not be intimidated. The new American restaurant boasts an impressive cocktail menu and revolutionary spins on hors d’oeuvres. Here’s hoping the salmon deviled eggs are served. M.O. columnist Dr. Sam Chandan is the featured speaker.

RELA: Chicago New Year’s Networking Event, American Junkie, 15 West Illinois Street, Chicago, 5:30-7:30 p.m., go to rela. org for more information

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Hailing from one of New York’s prominent real estate family dynasties, Will Zeckendorf will speak at a meeting with the Real Estate Lenders Association. Please note that the event is limited to lenders and equity investors only.

RELA: New York City Meeting with Will Zeckendorf, Yale Club, Grand Ballroom, 50 Vanderbilt Avenue, New York City,. 5- 8 p.m., go to rela.org for more information

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Catch our other M.O. columnist, Joshua Stein of Joshua Stein PLLC, as he chairs this two-day Practicing Law Institute program for his 18th consecutive year. Attorneys, accountants and commercial real estate managers are encouraged to attend.

Commercial Real Estate Financing 2014, Practicing Law Institute, 1177 Avenue of the Americas, New York City, 9 a.m.-5 p.m. both days, go to pli.edu or call 800-2604PLI for more information Information Management Network nails it again with a perfectly located executive conference on the coast of Fort Lauderdale at the Ritz-Carlton. The program focuses on special assets and real estate workouts, but the real workout is a walk—or run,

for the physically fit finance set—along the white sand beaches.

IMN: The Fourth Annual Bank & Financial Institutions Special Asset Executive Conference on Real Estate Workouts, Ritz Carlton, 1 N. Fort Lauderdale Beach Blvd., Fort Lauderdale, Fla., contact Andy Melvin at 212-901-0542 or amelvin@imn.org for more information

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All photographs courtesy creative commons

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Apparently, mortgage bankers are taking over the Hyatt Regency Orlando hotel in Florida. The Mortgage Bankers Association returns to host its national mortgage servicing conference and expo.

The opening general session will feature a speech from Captain Mark Kelly, the commander of space shuttle Endeavour’s final mission.

Mortgage Bankers Association: Emerge, Evolve, Excel, Hyatt Regency Orlando, 9801 International Drive, Orlando, Fla., go to events.mortgagebankers. org/servicing2014 for more information

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The Insider’s Guide to the Commercial Real Estate Financial Industry

Mortgage Observer is a monthly glossy magazine dedicated to in-depth coverage of the commercial real estate finance industry, delving into the trends driving commercial real estate finance and the lending philosophies of those in control of the purse strings.

Companion to The Mortgage Observer, providing industry updates and news to 12,000 real estate insiders. Mortgage Observer Weekly is a weekly PDF newsletter emailed directly to industry players every Friday morning.

To receive Mortgage Observer Weekly, please visit commercialobserver. com/mortgage-observer-weekly-signup

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Year in Review / Opportunities in Europe

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2nd Annual Women’s Issue / CREFC January Conference Wrap-Up

JULY/AUGUST

Opportunities in Mezzanine Financing Europe

MARCH

The 50 Most Important People in Commercial Real Estate Finance

SEPTEMBER

Lawyer’s Issue / Mortgage REITs

APRIL

Financing the Multifamily Market

OCTOBER

Hotel Lending

MAY

Developers and Construction Lending

NOVEMBER

Twenty on the Rise: Top 20 Brokers Under 35

DECEMBER

Life Companies

For advertising information please contact Barbara Ginsburg Shapiro, Associate Publisher, at 212-407-9383, bshapiro@observer.com.

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Culture / February 2014

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2

Your Intro to Office

Artwork

3

by Suzanne Weinstock Klein

4 Shelley Kaminer

Statistics show that, during your working years, you’ll spend roughly a third of your waking hours at work. If you’ve worked your way up to a corner office, you deserve for that to be a curated space that reflects your taste and makes a statement. Whether you’re ready to invest in a serious collection or just want to surround yourself with pieces you enjoy, art is the key to an office with impact. Need a place to start? Turn to one of these five resources.

1 Artsicle Artsicle is a New York start-up that has taken the commitment out of buying art. Rent original art for under $100 per month, and then change it out when you get bored, or buy it if you love it. For corporate clients, a member of the Artsicle team will come to the office, chat with you about your taste, select artwork on your behalf, then come install it. artsicle.com

2 LUMAS Lumas’ mission is to make high-grade, museumquality photographs available to the masses at reasonable prices. Photography is unique in the art world, because even in multiples, each work is

4

JENS HAUSMANN; AARON WEXLER; PACE EDITIONS

AARON WEXLER

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“original.” However, by making the prints signed and limited edition, each one retains value. Bring images of your office to the Soho store (362 West Broadway), and a Lumas staffer will use digital wizardry to show how the space will look. lumas.com

3 Pace Prints If you have a taste for famous artists but not the astronomical prices they garner at auction, then Pace Prints is a great compromise. Pace Prints sells numbered editions from contemporary artists and masters produced in its New York printmaking workshops with methods ranging from woodcuts to etching to lithography. paceprints.com

Ready to take the leap into building a personal collection of fine art? Then New York has a wide world of art consultants ready to guide you. The trick is to find one whose expertise aligns with your goals. Shelley Kaminer, for example, specializes in guiding her clients toward investment-grade emerging artists whose work she feels strongly will appreciate in value. shelleykaminerfineart.com

5 Vick Art Advisors For those who want their firm to get serious about art, Vick Art Advisors, the company responsible for adorning the walls of powerhouse companies, including the New York Times Company, Time Inc. and Comcast, is a great pick. Vick specializes in putting together complete art programs that reflect its client’s image and enhances the work environment, as well as suiting personal tastes. vickartadvisors.com

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