Lending Is Back Many groups raised funds to buy distressed loans or REO, but found there was almost nothing to buy. Having raised the funds they needed to do something with the money so they have now almost all become lenders/preferred equity providers. There is now a rush of money to loan and the race is on to put it out. Spreads have already started to come in and leverage levels are rising already. We already have competition between lending sources. On transactions I am personally doing, and others I am familiar with, there is funding for deals none of us would have imagined just 60 days ago. For example I am arranging funds for a brand new condo project at 75% of DPO cost. Another is a cash flowing portfolio of select service hotels some of which are still in the ramp up phase being brand new. Again a 75% LTV is apparently achievable through an A/B structure. Another transaction I am advising on is to raise a fund for hotel debt at similar LTV with a similar structure. These are all non-recourse, but underwritten on today values and today existing cash flows. The banks are getting back in slowly and it depends on what condition the bank is in as to capital. The major banks are lending, although more conservatively than the funds. Insurance companies are lending to core properties. Spreads on the top quality loans with low LTV and top rated borrowers can be as low as 300-350 over with 30 year amortization. Some insurers are now lamenting that they did not act more aggressively late last year and early this year, as they are now having strong competition to put out dollars. One foreign bank is considering a construction loan in New York at fairly low spreads. Several bankers I recently had dinner with this week were discussing how they are still working the old book of bad loans while the push is starting for new originations. They commented that originations are much more interesting and a lot more fun than modifications, which leads on to believe modifications are going to be accelerated to get them over with so the lending officers can get back to enjoying their work by making new loans. A number of the grown ups in the business are already worried, including me. We can see where this is headed. We are astounded that any lending is happening at all this fast compared to the early nineties when it took until mid to late 1993 to restart having stopped in 1989-4 years. Now we see it stopped in late 2007 and here we are in spring 2010-2