In view of the current economic conditions regarding distressed asset valuations and consequential “Investor” and “Lender” asset management issues I enclose information outlining the personal fee-based services historically provided. Further specific information about previous endeavors as an advisor and as a principal is available. Much of these activities took place during similar, albeit milder, market fluctuations that have occurred in the past four years, fostering present and impending financial disasters. I anticipate a marked increase of this over the next 12 – 24 months, as Banks start to succumb to write-down on commercial real estate and related portfolios.

The present climate needs: experienced and professional asset management leadership; the opportunity for proven ability to structure acquisitions; and an instinct for creating and implementing “value – added” programs to optimize returns over the near term. This is my reason to re-introduce ANFANG RESOURCES INCORPORATED, now based in southeast Florida, to a new universe of clients.

I look forward to your thoughts on how we may be able to work together in this cycle – the most opportunistic in 30, possibly 75 years!

January, 2010

This decade will generate another rare opportunity for wealth creation in property and related asset investments.  From timely disposition or re-structuring of existing distress/underperforming investments; redeployment of capital to funding opportunities via direct ownership, and the creation of structured equity/debt participation positions.   
Real estate IS a Professional Business! There are periodic cyclical absurdities, fueled by easy money, captivating even the experienced investor. Many “under qualified” people were promoting or financing investments. Many were only guilty of ignorant exploitation of the cycle – creation of “get – rich - quick” schemes for short term profits. The velocity of this deal making exacerbated otherwise normal increases in value, supported by cyclical supply/demand imbalances.  “Exuberance” (a k a “greed”) fed upon itself, distorted underlying fundamentals causing the bubble eventually to pop!!! Real estate never was, and will never be, a vehicle for sho rt term profit. “Yes, Mary”, it is capital intensive and “illiquid” by comparison to alternative investments. These characteristics are the reasons for great long-term returns to the experienced professional real estate investor. Notice that the well known real estate family businesses being long term investors have experienced limited or controllable overall distress in this cycle. Most didn’t participate when the craziness started. In fact, they are awaiting acquisition opportunities.
This recent real estate bubble is not much different from those in the 80’s and 90’s except the current one will prove to be more widespread and severe. The stories and fables are legion of schemes, scams, ponzies, and illogical juvenile type financial transactions using real property as the lure. Well worn basics of the property investment business as proven through modern economic history haven’t changed; what does periodically change is the illogical packaging of capital for a product that is inherently damaged goods. Real estate presents an ideal product for abuses in a cyclical easy money period – like gold it has a magic allure, but often forgotten is that it also is a highly complex illiquid business.
Property IS a capital intensive business – despite periodic failed attempts to degenerate this principal under various guises- ”spreading risk” “layering” “derivative protection”, etc. The various mechanisms were meant to add investment incentives for attracting easy money.  This further enhanced valuations in pro-forma business plans. Traditional leverage is a sound fundamental property ingredient - - - when abused excessive leverage can be disastrous, destroying wealth, and consequential extreme capital dislocations. Sound leverage is a friend, excessive leverage is an enemy.

In 1979, STEPHEN ANFANG founded ANFANG RESOURCES, INCORPORATED. Upon leaving Lehman Brothers, Real Estate Consultancy, he has been materially immersed in a broad spectrum of:  direct investment/ownership/management/leasing etc. in direct and derivative participations in property and debt transactions, AND, continuing to successfully represent clients in challenging asset management engagements as a fee-based advisor. The philosophy of the latter business, originally based in Manhattan (presently in Southeast Florida), continues to follow an “old fashioned” merchant banker platform - take time to listen to the client, understand their goals, and  then assist in the task at hand - issue resolution, and implementing a range of tasks including work-outs, turn-around value added transitions, acquisitions, dispositions, asset analysis, leverage creation, financial restructures, property management, leasing supervision, portfolio creation, etc.
Time has tested the astuteness of this personal service/ limited clientele platform. The “brochure” recently re-printed was originally written and disseminated in 1979 coincident with Stephen Anfang opening his doors at 654 Madison Avenue, N.Y.C.. Nineteen eighty bears a remarkable similarity to the 2010 market and may very well commence a wealth accumulation period with profit taking available 2015 - 2018!
The clarion of this fee-based service business has been to optimize the application of traditional commercial property investment principles, real world experiences - adding a dose of God given gift of “gut instinct” and creativity.   
It is believed that this decade will generate another rare opportunity for wealth creation in property and related asset investments.  From timely disposition or restructuring of existing distress/underperforming investments; redeployment of capital to funding opportunities via direct ownership, and the creation of structured equity/debt participation positions.   
The universe of financial transactions in general, and the property business in particular, is entering a “back – to- basic” cycle of traditionally capitalized and realistically levered property transactions. Astute well prepared capital will seek restructuring of existing commitments that are in distress or underperforming; and prospect in the growing distress market to optimize new capital commitments. Corporate America has been in this mode since middle of 2008.
The magnitude in gross dollars and categorical breadth of property distress is the largest in modern history. Commercial property transactions are by definition complex and unwinding distress will not be simple nor enjoyable. There is no known method for simplification, although cosmetic surgical procedures have been attempted – and failed.
Empiric estimates of the breadth of distressed commercial property is overwhelming: as of August ’09, $17.5 billion of office properties are “under water”; as of November ’09, 4.5% of all CMBS loans are delinquent (six times the year earlier of 0.75%); bank loan defaults on commercial real estate are predicted to rise to 8% in 2010; the FDIC has now (November ’09) $30 billion in debt held by failed banks; market prices of construction and land development properties are down 44% from the peak in October 2007, and 1.5 trillion of commercial mortgages will mature between 2010 – 2014! The residential market may be stabilizing, but commercial property, as is usual lags in this cycle – 2 years is an educated estimate.
In Florida, 25% of all construction and land development mortgages are “non- current”, 15% off all multi-family as of September ’09 are similarly “non-current”; at least $200 million has already been repossessed (REO’s).
Massive loan re-classifications by lenders should ensue in earnest in 2010/2011. Hundreds of billions of dollars of write-offs to market by foreclosure sales, voluntary sales and massive bank write-downs of debt are being instigated by bank regulators. It is assumed that we will avoid duplicating Japan’s zombie bank policies of the 1980’s with longer term negative economic consequences. At least there will be policies pronounced to avert the latter. Expectations are for regulations to halt the current unrealistic regulatory leniency sanctioning “kicking the can down the road” a k a debt deferral. Loan maturities incapable of being refinanced or restructured in a newly conservative regulatory environment create investment acquisition opportunities of property and debt.
A sophisticated vehicle is the creation of secured participation in re-capitalization of deals by carving out a new “preferred equity” position. This latter opportunity will be very profitable if the evidence of current debt rates is any indication, as follows: Some proof of rewards for this risk/reward opportunity reported by Cushman Wakefield Sonnenblick Goldman in November 2009; high grade commercial property senior mortgage bank rates @ 6.25% to 6.75% with 50 to 70% LTV and 11.5. – 14% debt yields; 20% - 25% yields with blended 80% LTV from private lenders;  private “mezzanine” blended rates of 800 to 1,700 basis points above Libor (@ November ’09 Libor was 0.23%) with a 60% to 85% LTV!!!
Treasury Department policies, as in the early 1980’s, could also profoundly boot strap favorable investment “after-tax” benefits in the forthcoming restructuring and acquisition cycle. The theory is that fiscal tax incentives will add value (by increasing demand) for commercial property. Increased pricing benefit banks to off-load distress debt and property in a more orderly marketplace, possibly not exceeding the reserves already created on their balance sheets. Tax incentives could include: the extension and expansion of 15 (otherwise 37) year accelerated depreciation schedules for qualified leasehold improvements (current expiration date is 12-31-09); expensing of brown-fields remediation costs extension; expansion of the allowance for deductions of net operating losses (NOL) from income earned over previous 5 years from present ceiling of  $15 million annual receipts; selective accelerated depreciation/expensing schedules that were eliminated in 1986; etc. etc. The Federal Reserve will increase pressure on lenders to liquefy balance sheets, but will be wary of resulting magnitude of “right-offs”. Pricing of distressed properties and debt can be assisted through various fiscal incentives.  Paradoxically this possibly spreads “losses” to all taxpayers spanning a long time horizon rather than penalizing lenders to absorb a onetime major hit now. In the end, who knows what the correct policies should be –a Japan-like lost decade(s) or endangering bank solvency or ???? - --time will tell.                     
All indicia points to opportunity knocking:  commercial real estate recovery lags recovery of the general economy; personnel at FDIC, CMBS, and bank foreclosure departments have been overwhelmed by the residential debt market collapse to date but are expected to increase activities reviewing commercial debt reserves; overall Federal Reserve pressures on banks to “clean-up” balance sheets; various fiscal incentives to put distress property in strong experienced hands; low returns on alternative investments (the stock market, commodities, can’t maintain its ROI’s of the past 18 months!).
It is clear to this writer that the best real estate investment environment in 30 years, maybe 75, is upon us. Stephen Anfang and A.R.I. will utilize its actual experiences, creativity, principal oriented mentality, instinct, market knowledge and contacts to successfully assist clients to professionally deploy capital into sophisticated opportunistic commercial property investments. And it will be accomplished by still adhering to a fee-based “merchant banker” philosophy.
Taking an active role to get the job done, fees are not based on the weight and height of a written report, but on all encompassing preparation, market intelligence analysis and most important- the ability to fully IMPLEMENT a course of action.   
“BE PREPARED TO ACT QUICKLY AND NIMBLY”.

Stephen F. Anfang (d/b/a Anfang Resources, inc. founded in 1979) represents a family owned investment company(s), with particular regard to:

• Owner Representative for Major commercial portfolio in Newark, NJ.
• Create and implement development concepts, manage entitlements team of professionals, prepare development programming, and all other owner/developer tasks for eventual    development of a strategically significant regional commercial mixed-use master planned 300 +acre Class “A” park  in South Ft. Myers, FL on I-75.
• Asset management, dispute resolution, litigation management, and market implementation for repositioning/renovation of a Historic hotel property at a prime Boardwalk location in Atlantic City, NJ.
• Review, analyze and opine on status of portfolio assets.
• Ongoing new opportunistic investment prospecting. Locate, analyze, preliminary due-diligence, and negotiate new investment opportunities through to documentation and acquisitions.