The transactions through the $313-million Savanna Real Estate FundI, continue to advance the firm's opportunistic privateequity investment strategy designed to take advantage of the creditcrisis dislocation by acquiring subordinate bank notes. "Whilethere are literally hundreds of potential debt deals to pursue inthis climate, we have carefully picked a handful of notes securedby the kind of real estate we typically buy, own and operate," saysNick Bienstock, a managing partner with Savanna. "Our objectivewith these types of investments is to generate equity-like returnwith substantially less risk. Our experience as a developmentcompany gives us the security of recognizing the true value ofthese assets."

The Savanna source tells GlobeSt.com that the firm believes thatcredit for commercial real estate transactions will becomeincreasingly scarce in the near-term, which will lead to additionaldebt buying opportunities for two reasons. "One main reason has todo with the 'legacy/pre-crunch' loans that banks are stillholding," the source says. "In particular, there are a few largeinvestment banks who have not sold a lot of debt since last Augustwhereas other banks were pushing hard to move debt off of theirbooks by year-end 2007. One of the reasons that some banks heldonto debt while others sold is that different banks are regulateddifferently, and the commercial banks were forced to recognizeproblems sooner than some of the investment banks. Another reasonsome banks held onto their debt is that they simply thought thingswould get better and that they had the staying power to wait untilthe credit markets improved, which has turned out not to be true."The source continues that "our sense is that the banks that heldonto loans with the hope that things would get better--i.e. creditwould become more readily available--are now realizing that this isnot the case, and are now looking to sell because they are gettingcapital calls from their line providers."

The source notes that a second main reason they believe creditscarcity will lead to additional debt buying opportunities has todo with refinancing/maturity default. "As loans that wereoriginated over the past couple years mature over the next 12 to 18months, borrowers are going to be faced with the prospect ofinvesting additional equity or facing default simply becauselenders have reduced advance rates," the source says. "Inevitably,there will be borrowers who will not be able to refinance theirproperties with the same amount of debt and who do not have theequity necessary to make up the shortfall. Since banks are not setup to own real estate, our sense is that banks will look to sellthese types of troubled loans." The source point to Harry Mackloweas just "one example of a borrower caught in this situation, butthere are many others across all asset classes, markets andinvestment size."