NEWS

• Investors Snap Up High-Quality Multifamily Properties as Rents, Occupancy Improve
   
  By Randyl Drummer
  June 30, 2010
  
   
  With apartment vacancies appearing to have peaked, and U.S. rents even starting to edge up slightly, offerings of quality multifamily assets have attracted multiple bidders and secured premium prices in the first half of 2010, with investors having an especially keen appetite for institutional-grade assets in attractive coastal markets.
  
  However, as with most asset classes in the current commercial real estate market, multifamily sales are largely divided between the asset haves and have-nots. With few high-quality performing apartment assets for sale and an abundance of pent-up capital seeking to invest, some properties have drawn multiple, even dozens, of bids.
  
  Recovery and transaction activity in the broader investment market for apartments and condominiums has not been nearly as swift or as strong as some experts predicted at the beginning of the year, despite modestly improving occupancies and rents, according to CoStar Group Real Estate Economist Mark Hickey.
  
  Through the first six months of 2010, $11.6 billion in multifamily property traded hands, up from $7.7 billion in the first half of last year, according to preliminary 2010 CoStar first-half sales statistics. The first half total is expected to increase as CoStar continues to tabulate market transactions that closed in the second quarter. Despite a flurry that brought $19.9 billion in activity at the end of last year, the prorated dollar volume for all of 2010 still pencils out to $23.3 billion, or a 17% increase over 2009, Hickey said. Although this year’s projected volume would still be a 44% drop from the bubble-driven sales level in 2008 and a 74% drop from 2007, he said.
  
  CoStar real estate economist Katie Pelczar memorably likened the scramble for the highest grade Class A assets seen on both coasts to old wartime photos where "hundreds of people are pushing and shoving to get their hands on a single loaf of pumpernickel." Deals for those coveted morsels, in this case well-occupied and higher priced properties in core markets like Washington, D.C. or New York, have thus far accounted for much of the sales activity this year.
  
  Buyers in general are assuming they’re going to see hefty rent increases and continued demand recovery due to the shutdown of the supply pipeline and the improving economy, said CoStar Global Strategist Michael B. Cohen.
  
  “The flip side to that is people are looking at the velocity of transactions and beginning to feel like the market is getting a little frothy,” Cohen said. “We’re generally seeing cap rate compression in those high-quality assets in coastal markets that people are paying high prices for. The returns are not the type of opportunistic returns investors thought they would see a year ago. Instead of a heavy distress play, we’ve seen a heavy core play.”
  
  Meanwhile, supply is tightening, home ownership remains soft and vacancies appear to have topped out, even declining in some markets. While asking rents are trending flat, the market is seeing some positive growth in effective rents as concessions burn off in such markets as Phoenix. Landlords are starting to feel the balance of power shift in their favor, Cohen said.
  
  The appetite of investors for the prime markets, however, has largely driven the increase in dollar volume, while the number of trades has flattened. The weighted average price per unit, which was about $28,000 in the first half of 2009, is an estimated $40,400 in first-half 2010, according to available data.
  
  REITs and other investors flush with equity are the most active players in the apartment sales arena, with financing challenges still playing out across the market.
  
  "Gap financing continues to be an issue for buyers that need some amount of leverage before an asset stabilizes," noted a participant in the second-quarter PricewaterhouseCoopers Korpacz Real Estate Investor Survey. The bid-ask gap has narrowed, mostly because sellers have acknowledged current market conditions. Betraying continued uncertainty, Korpacz survey participants offered mixed views on asset values, with some foreseeing increases of as much as 15% and others expecting continued declines of as much as 25%.
  
  Investor interest isn’t relegated solely to Class A properties, and pockets of strength have turned up in some interesting markets, notably Phoenix, hard hit by the single-family housing crisis and shadow supply of homes and condominiums.
  
  "There’s more of an investor appetite for Class A properties, but at the same time, you’ve seen more price declines and fundamentals declines on the lower properties. There’s a large number of groups that want distressed assets, B-minus and under," said Jack Hannum, vice president with Transwestern. Hannum and Vice President Bret Zinn are co-leaders of Transwestern’s multifamily team in Phoenix. "There’s just a tremendous appetite for all multifamily product here. If a deal goes to market, there’s high demand for it."
  
  On the financing side, government-sponsored entities Fannie Mae and Freddie Mac have long been the dominant providers of debt capital in multifamily, a trend expected to continue despite the political and market challenges the agencies face. However, one increasing trend since the beginning of the year is the growing participation of life insurance companies, noted Jeff Majewski, executive managing director, capital markets, for Grubb & Ellis. For most of 2008 and 2009, the insurers were out of that market and effectively ceded that business to the GSE agencies, but they’re back strongly this year.
  
  "The life companies have come into the space and they are aggressively competing with the agencies -- and in many instances winning many of the top-tier Class A projects -- primarily because they’re willing to take on a little bit more lease-up risk," Majewski said. "We think that’s going to continue through 2010. We don’t see any slowdown in their appetite for multifamily."
  
  Hannum and Zinn recently represented Weidner Investment Services, based in Kirkland, WA, in a $16.65 million off-market acquisition of the 258-unit Monterra apartment community in Phoenix from Aslan Realty Group, a deal which closed in under two months. Weidner said it plans to hold onto the property long term to take advantage of increasing net rental income and falling vacancies as the Phoenix market continues its expected recovery over the next 18 months.
  
  Weidner "just flat-out told Jack and I they wanted to buy 3,000 units and wanted to be in Phoenix," Zinn said.
  
  With so much demand and lack of high-end product on the market, apartment buyers are willing to pay the so-called ‘scarcity premium’ for quality assets, Zinn said. At the same time, many investors who raised funds two or three years ago but were forced to wait on the sidelines for the market to stabilize may now face deadlines to deploy that capital.
  
  "We get calls daily from new groups that want to be in Phoenix and are ready to buy. We just don’t have enough product to show them," Zinn said. "A year ago, no one in the market was convinced we were at the bottom. Over the last three to six months, there’s a lot more investor comfort in Phoenix that the market is at bottom and now is the time to buy."
  
  "Prices are where they were 10 years ago. In the C market, prices are where they were 15 to 20 years ago," Hannum added. "Net effective rents aren’t going any lower. You’ve still got good sources of financing with Freddie and Fannie. A lot of these buyer groups aren’t concerned with timing the bottom perfectly; they’re going to cost-in their acquisitions and average in the bottom."
  
  Also in the Phoenix market, Colliers International recently negotiated the sale of two Class B apartment assets in Mesa, AZ, to San Mateo, CA based Acacia Capital for $33.35 million. The 304-unit Verona Park property sold for $15.2 million, or $50,000 per unit. Argenta, 395 units, sold for $18.15 million, or $45,949 per unit.
  
  "We had a very strong response with multiple offers at, or over, list price," said Brad Cooke, vice president with Colliers’ Phoenix office, who along with vice president Cindy Cooke, represented the undisclosed seller. "It came down to who had the funds to close all-cash on both properties, could move fast, and had an in depth knowledge of the two submarkets."
  
  REITs and institutions targeted large properties in major markets this year, but private equity players were also in the mix. A sampling of other significant multifamily transactions tracked by CoStar in the first two quarters includes the following:
  
  

  • Equity Residential (NYSE: EQR), the largest apartment REIT, in the first quarter acquired three luxury apartment complexes in Manhattan from Macklowe Properties, River Tower, 777 Sixth Street, and the Longacre House, for more than 900 units in deals totaling $475 million.
     
  • A private equity firm identified only as Standard Austin acquired multifamily portfolios totaling 5,000 units across 16 properties in Maryland and Texas from Irvine, CA-based Bethany Group out of Chapter 11 bankruptcy for a reported $327.7 million.
     
  • Select Investment Realty Advisors, LLC on June 7 closed on the sale of the Fairhaven Multifamily Garden apartment portfolio in Long Island, NY, seven assets totaling 1,666 units located in Nassau and Suffolk counties. Eagle Rock Management, LLC acquired the portfolio for $229.75 million.
     
  • Equity Residential acquired 425 Mass, a 559-unit condo/apartment property in Washington, D.C. for $167 million, in a bankruptcy deal.
     
  • Watermarke Properties bought the Gardens at Wilshire Center mixed-use apartment project, a Class-A asset with 159 units between Beverly Hills and downtown Los Angeles, for $48 million. Watermarke was among 30 bidders for the asset.

• Strategy of Last Resort: To Default or Not To Default?
   

   

  Although It May Get a Lender's Attention, Defaulting Is Considered a Risky Debt Strategy
  By Mark Heschmeyer
  June 2, 2010

   

  As the volume and number of underperforming commercial real estate loans mounts, so has the number of owners who have or have considered turning to loan defaults as a strategy for forcing a refinancing or to get out from a loan that is underwater altogether. However, experts say this is a high-risk strategy for managing troubled debt at a time when access to money has become tight and as regulators pressure lender away from workouts.
  
  John B. Levy & Co. drew attention to the issue this past week in a podcast called "To Default or Not Default? That Is the Question."
  
  "What we're seeing is that some borrowers are being advised to stop paying on their loans if they want to get a discount . . . to default," said Andrew Little, principal at John B. Levy & Co. "And that is really bad advice. Borrowers who are experiencing problems with their debt need to take a more measured approach when working with lenders."
  
  Even as some borrowers are facing the prospect of default, lenders are holding onto a substantial amount of capital. In fact, Little suggested that there is more capital available these days than there are good deals to fund. The total disarray of the global market over the past couple weeks has resulted in a run on hard assets, and investors are vigorously pursuing real estate in the U.S.
  
  "What we're seeing is a 'Tale of Two Cities' scenario," Little said. "There's a lot of capital available in gateway cities, and then there's everyone else - the secondary and tertiary markets. And as for the lending world, investors are ready to make loans on the premium properties, but they're turning away from properties that aren't at the top of the A-list."
  
  CoStar Group put the question of whether a loan default should be considered a viable strategy to a number of other industry professionals. Their answers, for the most part, suggest the strategy can be viable, but only after other options have been exhausted and all that is left is bankruptcy, a short sale or a deed-in-lieu.
  
  "I would not advise clients to walk away. I don't think it's worth ruining a professional lending relationship that may have taken years to develop," said Charles G. Argianas, president of Argianas & Associates in Downers Grove, IL. "Unless the borrower absolutely cannot make debt service, I would not advise clients to walk away from their responsibilities, I just wouldn't."
  
  "We have seen CMBS borrowers defaulting on loans prematurely as a tool in order to get more attention from their lenders and special servicers," said David Goldfisher, principal of The Henley Group Inc. in Natick, MA. "Typically, well thought out and detailed plans for resolving a troubled loan in advance of a default is a much more effective way of communicating with your lender and will provide them the right incentive to negotiate in good faith."
  
  "Default is always an option for owners and always has been, but it should be the last strategy after previous attempts to contact the lender or special servicer," said Mark J. Chapman, senior vice president of PM Realty Group in Hudson, MA. "It may be an effective strategy if the lender/special servicer is too busy to focus on a particular owner's issue. However, it is only effective if a borrower/owner has several viable options to put in front of the lender that address both property issues and the lender's regulatory constraints."
  
  But while the consensus recommendation may be to avoid defaults, the reality is: it is happening, and happening successfully in some cases.
  
  "We recently sold a multifamily asset in Mesquite, TX, in which the owner defaulted and was 60-days delinquent," said William C. Jarnagin, an associate with Marcus & Millichap in Dallas. "During the process of closing, we stepped in to assist the borrower with negotiations with the lender and the lender actually reduced the interest payments on the loan by half for one year and gave a conditional agreement to extend for another year. We are working several assets where the borrower has considered this currently."
  
  "This is only an effective strategy for distressed debt that will undoubtedly need a significant write down to clear the market if the lender does end up owning the asset," Jarnagin added. "There has to be a significant level of distress. Physical deficiencies and code issues are likely to weaken the lenders desire to take possession of the asset. Properties that are nearly covering debt service and do not need significant capital injections are not likely candidates."
  
  Todd A. Carlson, a senior associate with Marcus & Millichap in Houston said the strategy has been used more successfully with CMBS-type debt because of the ability for special servicers to modify loans that are in default or non-payment status.
  
  "I think it is used in situations where the debt is non-recourse so the lender/special servicer must just rely on the asset to recoup any losses," Carlson said. "If a borrower can prove that they weren't the reason for the default, and they are a quality owner/operator, the lender might consider them the best option with the fewest costs and liabilities."
  
  Dan Colton, principal of Colton Commercial in Tempe, AZ, said the strategy of pursuing a loan default is also sometimes used in cases in which there are multiple loans on the property.
  
  "The borrower defaults on loans in second and third position while keeping the first current. Drawing the secondary lender(s) to the table appears to be a viable option that is starting to occur in the market place," Colton said. "Other conditions to obtaining potential discounts are strengths associated with loan guarantees, if the lender can absorb the discount or if the notes have been sold."
  
  Marty Busekrus, an investment sales associate with NAI Rauch Weaver Norfleet Kurtz & Co. in Fort Lauderdale, FL, sees this used as a strategy more commonly on the CMBS side where the special servicers are not inclined to deal with the sponsor until the borrower has defaulted.
  
  "Once the loan goes in to the 30 days past due case, the bankers are all over it and that's when the special asset managers and attorneys get involved," Busekrus said. "That could go either way for a borrower. It's true, you will get the attention of the bank, but probably not the good kind of attention. Depending on who the special assets manager is, they may be very experienced and been around the block a few times, in which case the strategic default may not work out in the borrowers favor."
   

• CoStar Power Broker Awards Recognize Top Dealmakers in Commercial Real Estate
   
  Annual Selection of the 'Best of the Best' in Commercial Real Estate Brokerage Presented by Industry's Leading Research Organization
   

   
  By Tim Trainor
   
   
  April 28, 2010
   
   
  Successfully closing any commercial property transaction was enormously challenging in 2009, given the extreme economic conditions investors, tenants and property owners faced last year.
  
  The brokers who excelled under those conditions and achieved the highest transaction volume in commercial property sales and leases last year in their respective markets are especially deserving of industry-wide recognition. Which is why CoStar is especially pleased to present the 2009 CoStar Power Broker Awards, singling out those who persevered and earned the right to be called one of the 'best of the best' in commercial real estate brokerage.
  
  "CoStar Group is very proud to recognize the commercial real estate brokerage firms and brokers who performed at the industry’s highest level under what can only be described as the most challenging circumstances in decades," said CoStar Group CEO Andrew C. Florance. "Top performers deserve to be recognized for their innovation, prowess and deal-making abilities to achieve remarkable sales and leasing success in 2009, despite the challenging economic climate. We congratulate all the award winners on their impressive professional accomplishments."
  
  As the largest professional research organization serving the commercial real estate industry, CoStar is uniquely positioned to identify the top firms and brokers in each market. Every year, CoStar tallies the commercial real estate sales and lease transactions that closed during the previous year and presents CoStar Power Broker Awards to the brokerage firms and individual brokers who closed the highest transaction volume in commercial property sales and leases in each market.
  
  Reflecting its comprehensive coverage of U.S. commercial real estate, CoStar has expanded its Power Broker Awards program over the past eight years, and now presents more awards to more real estate brokers and firms in more markets than ever before.
  
  Follow this link to access the complete list of 2009 CoStar Power Broker Award winners listed by market.
  
  All awards are based on transaction data in CoStar's commercial real estate database, the largest independently researched database of commercial real estate property information available online.
  
  Information in CoStar's database is verified and continuously updated by approximately 900 CoStar researchers, comprising the largest commercial real estate research operation of its kind. CoStar's U.S. database contains more than 3 million commercial properties, and the total U.S. square footage or gross building area tracked and maintained by CoStar exceeds 70 billion square feet.
  
  In addition to receiving individually customized CoStar Power Broker Award plaques, winners will be featured in the CoStar Power Broker section of CoStar's website for an entire year, and will be entitled to display the CoStar Power Broker icon on their website and in their emails and marketing materials.
   

• Medical Office Investors Mobilize as Health Reform Becomes Law

  Mar 31, 2010 5:25 PM, By Denise Kalette, NREI senior associate editor

   

  With health care reform now law, developers and commercial real estate investors are responding to the new demand for medical office space, which could reach 60 million sq. ft., by some estimates. At the same time, many private equity real estate funds are flush with cash and under pressure to invest as deadlines approach.
   

  The funds, which include some of the nation’s biggest investors, such as insurance companies and pensions, typically have a four- or five-year window to spend stockpiled capital, according to their bylaws, and time is running out.
   

  “They are under quite a lot of pressure to invest that money,” says Tim Friedman, head of communications at London-based data provider Preqin. The current “dry powder” — or committed but still unspent capital available to real estate fund managers — totals $195 billion worldwide, according to Preqin.
   

  Vintage 2006 and earlier funds possess $23 billion, or 12% of the industry total, says Friedman. “They have four-year investment periods and they’re getting toward that four-year period right now and they still haven’t called up all the capital.”
   

  In general, fund managers held off buying as they waited for asset prices to drop to the lowest possible levels. But because they also rely heavily on financing, fund managers were hindered by a lack of liquidity in the marketplace. “These guys need to be buying at the bottom on the way up,” says Friedman.
   

  Some funds are committed to specific property types, such as retail, but opportunistic funds can target assets across sectors, including medical office.
   

  Medical office spree
   

  The 32 million additional Americans who will be covered by health insurance as the Patient Protection and Affordable Care Act takes effect over the next few years, will create a demand for a substantial amount of new medical office space, analysts agree.
   

  An Atlanta-based investor, National Standard Finance, a public-private investment company, plans to spend $3 billion in 2010. About $750,000 of that is earmarked for health care-related real estate projects, says John McCulloch, senior vice president for the health properties group.
   

  “We’re out very aggressively looking for assets,” he says. Health care reform is definitely one of the drivers for the search, adds McCulloch. “We’re looking at the development of hospitals and medical office buildings all over the country.”
   

  Next year, National Standard hopes to ramp up its spending for health care assets from $750,000 to about $1 billion. “When you have this amount of people — a tenth of the population being thrown into the medical system of our country — that’s a lot of people. And today [the industry is] not prepared to handle that influx,” says McCulloch.
   

  National Standard is homing in on potential construction and acquisitions in Southern California, specifically Orange County, as well as assets in Palm Springs and San Diego.
   

  Over the next five years, the company plans to continue its aggressive pace, examining opportunities in Arizona, Texas and Florida, as well as potential deals in the Midwest, including Iowa and Oklahoma.
   

  Other investors and developers across the country are conducting similar searches after hanging back to await the fate of the health reform bill over the long months of Congressional debate.
   

  “You’re going to see a lot of construction permits being issued in the next six to 12 months,” says McCulloch. Despite the intense public debate and some backlash, including a political effort to have it repealed, McCulloch is unfazed. “I don’t see it being reversed,” he says.
   

  Primary care offices will be needed for physicians who will act as gatekeepers to specialized care such as referring patients to cancer or heart specialists, says McCulloch. He foresees a need for more centers to house patients released from hospitals under pressure to keep patient stays short. “I really think the big growth is going to be in skilled nursing,” he says.
   

  In any case, the nation’s nearly 80 million aging baby boomers also will require more health care over the next decade, bolstering the need for new facilities.
   

  Concerns over cost
   

  Reaction among commercial real estate companies and trade groups has been mixed, as they fret over the cost of the measure. The National Retail Federation (NRF) expressed “extreme disappointment” at the passage of the legislation. Many retail workers will lose their jobs because of it, the federation said.
   

  "We are particularly concerned about mid-sized companies that are large enough for the mandates to apply but too small to have the ability to absorb these added costs," said Steve Pfister, NRF senior vice president for government relations, in a statement. "They could be among the hardest hit.”
   

  But others welcomed the law. “Uncertainty about the health care plan — whether it would pass, when it might pass, what it might contain and what it would cost — was the primary obstacle to deals in the medical office space,” says attorney Neil Shapiro, head of the health care practice at New York-based Herrick, Feinstein.
   

  “It was the removal of that uncertainty, far more than anything that the legislation contains, that will spur investment sales and leasing activity in medical offices.”
  
   

• Risky or Not, Lenders Slowly Opening Vaults to CRE Lending Again 
  Loan Renewals, New CRE Lending Jump in December
   

   
  By Mark Heschmeyer
   
  Even as banking regulators and politicians deal with the fallout from the collapse of commercial real estate values and the subsequent impact on the banking systems, it appears that an increasing number of lenders are more inclined to jump back into the sector.
  
  Total renewals of existing commercial real estate accounts increased 57% from November to December of last year, according to numbers released this week by the U.S. Department of Treasury. Treasury completes a monthly tally of lending activity of the nation's 20 largest bank, which control 57% of all U.S. banking assets.
  
  While seasonality contributed to the increase -- as year-end is an active time for renewals -- new lending also more doubled in December from the previous month. Total new commercial real estate commitments increased 157%. That was the first increase in four months.
  
  Citigroup's new CRE lending increased eightfold in December to $294.4 million. Loan renewals more than doubled to $282.3 million, reflecting an increase in capital?raising activities by real estate investment trusts, Citigroup said.
  
  Even with new and renewals increasing, the big banks also increased their disposal of CRE assets on their books. Citigroup noted, for example, that its average total CRE loan and lease balances totaled $22.8 billion at the end of December, 3% lower than it was in November. The outstanding balance of CRE loans of all respondents fell 1% in December, and the median change in outstanding balances was a decrease of 1%.
  
  Fifth Third Bancorp's average CRE balances decreased by approximately 1.3% in December compared to November. New CRE commitments originated in December 2009 were $196 million, which was up almost 50% from $132 million in November 2009. Renewal levels for existing accounts increased significantly in December 2009 to $1.2 billion versus November 2009 at $471 million due to normal year-end seasonal trends.
  
  Even though Fifth Third's combined originations and renewals were higher in December than November, payments and dispositions of troubled CRE outpaced the higher levels of activity causing the overall balances to continue to decline. As commercial vacancy rates continue to rise, Fifth Third said it continues to monitor the CRE portfolios and continues to suspend lending on new non?owner occupied properties and on new homebuilder and developer projects in order to manage existing portfolio positions.
  
  "We feel this is prudent given that we do not believe added exposure in those sectors is warranted given our expectations for continued elevated loss trends in the performance of those portfolios," Fifth Third reported.
  
  Other Banks Follow Lead
  
  What is happening among the majors also seems to be the route other banks say they will be more willing to take this year. According to findings from Jones Lang LaSalle's annual 2010 Lenders' Production Expectations Survey, bankers are predicting that loan production will increase this year.
  
  The number of respondents that said they expect their loan production to range from $2 billion to $4 billion in 2010 doubled from last year to 43%. Showing even more future optimism, nearly 70% of respondents said their loan production will ramp up to $2 billion to 4 billion in 2011. In another encouraging metric, the number of lenders that expect to lend more than $4 billion jumped up 6% from 9.3% in 2009 to 15.2% in 2010.
  
  "Lenders we spoke with say they'll be giving borrowers 24+ month extensions in order to avoid foreclosure on high quality, well-located assets," said Bart Steinfeld, Jones Lang LaSalle's managing director of the real estate investment banking practice. "With more than $1 trillion worth of commercial real estate loans expected to mature between now and 2013, it's no surprise that a majority of borrowers are placing significant importance on restructuring those loans. However, many financial institutions don't want to hold on to assets and now are coming to terms with the fact that they can no longer 'extend and pretend.' They're now realizing it makes good sense to move these assets off their balance sheets to create greater ability to originate loans this year."
  
  The number of lenders willing to lend greater sums toward single-asset acquisitions is also shifting. In 2009, the majority of respondents indicated they would lend only $10 to 25 million on a single asset acquisition. In 2010, the greatest percentage of respondents was split evenly at 28% each among those willing to lend $50 million to $100 million and $100+ million (hence 56% will lend $50 million and more for single-asset purchases). In 2011, the number of lenders willing to lend $50 to $100+ million rises by 8% to 64% of respondents.
  
  "A few life companies and investment banks we spoke with indicated that they're willing to lend $150 [million] to $500 million on large, single-asset acquisitions in 2010," said David Hendrickson, managing director of Jones Lang LaSalle's real estate investment banking practice.
  
  Approaching maturities will continue to share the stage in 2010, with more than 67% of life company respondents acknowledging 40% to 60% of their portfolios will be allocated to the refinancing of maturing loans.
  
  While liquidity within the capital markets is expected to turn from a trickle to a slow-but-steady flow in 2010, borrowers can expect the same tightened underwriting standards they experienced from life company lenders in 2009.
  
  Loan to value ratios in 2010 will fall predominantly in the 50% to 70% range, according to more than 74% of life company respondents, and that number is expected to remain steady in 2011.
  
  As for new conventional commercial real estate loans in 2010, 59% say most loan terms will range five years or greater, with an additional 28% indicating a preference for three to five year terms.
  
  As for the sectors that lenders would most prefer to lend, a majority of respondents (27%) said they would single out multifamily for their loan dollars, while another 21% said they would focus on the office sector in 2010. The hotel sector stood out as the sector to which lenders are least likely to lend.
  
  There was a significant increase in the number of lenders who said they are selling performing and non-performing loans. In addition, these lenders said they are prepared to accept significant discounts in 2010 to create liquidity and to rid themselves of these non-core or problem assets. For performing loans, 29% of respondents indicated they are selling performing notes at 90 cents on the dollar and another 24% are selling performing loans between 70 cents and 80 cents on the dollar.
  
  "There is also increased interest in selling sub-performing, or "scratch and dent" loans," said Noble Carpenter, managing director of Jones Lang LaSalle's real estate investment banking practice. "Depending on the remaining term, interest rate, property type and market, over 45% of survey respondents indicated a willingness to sell these loans below 0.60 cents on the dollar.
  
  Many lenders also said they have started or are considering asset, REO and loan sales.
  
  "We're definitely seeing the bid-ask spread between buyer and seller narrow, and in many cases reach equilibrium. That alignment should be the impetus many lenders need to bring large and small balance loans and REO to market," added Wes Boatwright, managing director of Jones Lang LaSalle's real estate investment banking team.