Palisades Financial, a leading commercial real estate direct lender and advisory firm, announced that its Palisades Regional Investment Fund II (PRIF II) earned an 6.4 percent (8.5 percent annualized) return during the first six months of 2008. While many other investment vehicles, such as the five NAREIT indexes, had negative growth for the full year 2007 and the Dow Jones Industrial Average is down more than 10 percent year-to-date, Palisades has been able to outperform the marketplace based on its contrarian investment model.

“We were well positioned to capitalize on opportunities in the marketplace during the first half of 2008 and remain optimistic that we are in a strong position to seize on this historic imbalance in the credit markets,” said Palisades Financial Principal Ira Bergstein. “With most capital providers being forced to the sidelines, we are seeing a substantial increase in lending activity with new business opportunities presented virtually every day.”

The current credit crisis, which began with the subprime mortgage meltdown, has been far deeper and more impactful than most expected. Accordingly, the balance sheets of some of the largest banks and investment banks have been decimated and the credit spigot has been all but turned off.

In fact, the Commercial Mortgage Backed Securitization (CMBS) market is down 91 percent from 2007 to 2008. For the six months ending June 30, 2007, the U.S. CMBS market was $137 billion. The six months ending June 30, 2008 saw only $12 billion in CMBS transactions. Furthermore, the terms for borrowers have been completely altered in this climate.

“The days of 80 percent first mortgages coupled with 15 percent mezzanine loans and only 5 percent equity are long gone,” said Palisades Financial Principal Mark Zurlini. “Today the maximum a majority of the balance sheet lenders are willing to advance is 60 percent, which does not make economic sense for many borrowers.”

For Palisades, the market turmoil has created an enormous window of opportunity.

“Because of our tremendous liquidity as a fund, we have more flexibility than traditional lenders and can be much more creative in our deal structures as well,” Palisades Principal Jack Chimento said. “Additionally, the quality of the product and collateral we are seeing is far greater than it has been in the past and we expect this trend to continue for the foreseeable future.”

Palisades has also recently announced that it has entered its first joint venture agreement with an experienced operator to purchase defaulted single-family mortgages from regional banks. The mortgages being purchased are low loan-to-value loans, not subprime mortgages. The portfolio currently consists of 37 mortgages with a combined unpaid principal balance of $9 million.

During the first six months of 2008, Palisades also strengthened its management structure with the addition of two senior financial executives. Mark Bhasin and Pierre Bonan have joined Palisades as senior directors of originations. Bhasin and Bonan will be originating first mortgages, subordinate debt and equity investments in real estate and real estate-related instruments across a variety of asset classes..

Bhasin began his career as a financial analyst for PaineWebber in New York and is now an adjunct professor real estate development at Columbia University where he lectures on real estate capital, credit and property markets. Bonan began his career as a financial analyst and acquisitions associate for Newmark & Co. Real Estate Inc. in New York before moving on to Credit Suisse First Boston. He also served as a vice president of Overture Asset Managers, LLC, a parent company for boutique investment advisors.

Palisades Financial
Palisades Financial, LLC is a commercial real estate lender and advisory firm providing bridge, mezzanine and equity financing through its Palisades Regional Investment Funds. Palisades Financial specializes in commercial real estate and secured corporate lending and has successfully completed over $2 billion in transactions.

In 2002, Palisades Financial launched its first real estate private equity fund, Palisades Regional Investment Fund I, which invested in transactions valued at over $500 million. The company subsequently launched its second fund, Palisades Regional Investment Fund II, and is raising $200 million to invest in transactions ranging from $2 million to more than $50 million.

Palisades Financial originates bridge and mezzanine financings secured by a variety of property types, including land, retail, multi-family, office, light industrial and specialty use properties. Borrowers have utilized Palisades Financial proceeds for acquisitions, development, construction and recapitalizations. Palisades Financial also invests directly in real property and acquires non-performing mortgages. Both Palisades Financial and the Palisades Regional Investment Funds are based in Fort Lee, New Jersey. For more information, call 201-894-5000.