From left: William Mack, chairman of Area Property Partners, Neil Rubler, CEO of Vantage Properties, 43-09 47th Avenue in Sunnyside and 102-43 Corona Avenue in Corona

Clockwise from left: Neil Rubler, head of Vantage Properties, William Mack, founder of Area Property Partners, Jordan Slone, CEO of Harbor Group International, 3489 Broadway, 610 West 163rd Street, 548 West 164th Street and 519 West 143rd Street

Ailing Anglo Irish Bank underwrote hundreds of millions of dollars in real estate debt in New York during
the boom and is now unloading a $51.5 million mortgage secured by a package of apartment buildings
in Upper Manhattan, owned by Vantage Properties.

Anglo Irish, based in Dublin, is in financial distress after billions of dollars in global real estate loans went
bad. Ireland’s central bank reported last month that the bank, which provided financing for projects
such as the Apthorp and 225 Rector Street, is winding down operations. A
representative of the New York office said the bank declined to comment.

The Vantage Properties loan is being marketed by investment sales firm Massey Knakal Realty Services.
Company CEO Robert Knakal declined to comment on the offering, but said in this week’s edition of
Insights from The Real Deal that currently demand for note sales is higher than for actual properties (see
video above).

The Vantage loan was being offered for the face value of the unpaid balance of the loan. Marketing
materials distributed earlier this month by Massey Knakal, and obtained by The Real Deal, said the note
was performing as of November.

The sale of the note highlights the wide variety of loans that are on the market and the complexity of
selling them. Loan sales now make up an ever growing proportion of commercial transactions, yet the
market remains shrouded in secrecy because note sales are rarely recorded in government records and
both the lenders and borrowers often don’t want the offering made public because acknowledging a
property is in distress can further reduce values.

The 474-unit Vantage Properties note, secured by buildings such as 90 Ellwood Street in Fort George and
248 Sherman Avenue in Inwood, has 414 rent-stabilized units and estimated annual gross revenue of
$5.5 million, the marketing materials say.

Neil Rubler, president and CEO of Vantage Properties, declined to comment via e-mail, but added
that, “I also can’t comment on our interest in buying the note, as it’s our policy not to discuss acquisition
efforts.”

Massey Knakal is active in the Bronx as well, marketing two purchase options on notes for major
properties there. The firm is offering an option to buy the $36.5 million note secured by two buildings
with 490 units — Robert Fulton Terrace at 530-540 East 169th Street in Morrisania and Fordham
Towers at 480 East 188th Street in Belmont. Those properties, purchased by a group of investors led by
Mark Karasick in 2007, are
being foreclosed on by special servicer LNR Partners.

The other Bronx asset is a $35 million loan in foreclosure controlled by LNR, that is secured by 10
buildings owned by Milbank Real Estate.

The Milbank portfolio has attracted particular scrutiny from the city and housing advocates who believe
the loan is too high for the 531-unit property, which has estimated gross revenues of $5.9 million for
2010, the marketing materials say. The properties are plagued by housing code violations, with a total of
4,372 in the 10 properties, city officials said.

In fact, today Department of Housing Preservation and Development Commissioner Raphael Cestero
announced subpoenas to order executives of Milbank and LNR Partners to appear at HPD’s offices in
January to discuss the Bronx properties.

Knakal, in his interview with Insights from The Real Deal conducted before the subpoena was
announced, said owners were not deterred by housing advocates.

“Buyers have to have a lot of intestinal fortitude to deal with properties that have rent-regulated
tenants in them from the beginning, so a little bit of pressure from housing advocates doesn’t really
dissuade investors,” he said.

Knakal said activity on note sales was high.

“I would say on the notes we have sold this year, where the collateral has been Manhattan-based
properties, we have gotten a minimum of 50 offers,” he said.

Harold Shultz, senior fellow at the non-profit research center Citizens Housing and Planning Council, said
lenders and special servicers in many cases have been reluctant to sell notes, because they have to mark
down their value.

“But presumably they can’t hold on to them forever. Perhaps this is the beginning of the big sell off,” he
said.

During the real estate boom, buyers such as Vantage Properties and Urban American snapped up large multi-family portfolios, and real estate moguls like Harry Macklowe made eye-popping office building acquisitions.

With the downturn, that activity largely stopped as overall sales declined and financing large deals became even more difficult.

Yet in recent weeks, two significant portfolios have been brought to market, signaling a shift in expectations, brokers said, but bringing risks as well.

“There is a real belief that pricing has returned in many instances,” David Schechtman, senior director at Eastern Consolidated, said in the latest edition of Insights from The Real Deal (see video above).

The larger portfolio, asking $276 million, is a package of 26 mostly residential properties owned by landlord Steven Croman, which is being marketed by Massey Knakal Realty Services. The other is a smaller collection of six mixed-use properties and a parking lot on the Upper East Side owned by the estate of Arthur Brown, listed by Schechtman for $26 million. The six walk-up buildings have 45 apartments and seven retail locations along First and Second avenues.

The 26-building Croman portfolio is being offered as a single package or in 16 smaller groupings. As a package, it is believed to be the most expensive portfolio put on the market since the downturn began in 2008, several brokers said.
“These are mature assets that are turnkey and probably have, give or take, 20 to 25 percent more upside,” Croman said. “We have done a lot of work on these, we have done the heavy lifting.” He said he would use proceeds from individual sales or a bulk sale to buy new properties, in what is referred to as a 1031 exchange.

Croman, who said he owns approximately 100 buildings in New York City, is considered by brokers to be an aggressive landlord who maximizes the value of his properties before returning them to the market, meaning it was unlikely a buyer could expect to improve rental income substantially from what he has achieved.

The Croman portfolio is concentrated on the East Side in neighborhoods such as Kips Bay, Gramercy Park and the East Village.

Schechtman said there were risks with bringing such a large portfolio to market today, as real estate sales activity remains soft.

“I think the two greatest risks are one, finding financing and two, the amount of equity you are going to put up,” he said.

Others were skeptical Croman would be able to achieve the $276 million asked.

Timour Shafran, an investment sales broker at Capin & Associates, speculated that European investors anticipating a decline in the euro might pay such a relatively high amount, as an investment strategy. But he did not think local investors would pay anywhere near that much.

“Short of that, I don’t see anyone stepping up to the plate to pay this number,” he said.