Fried tells GlobeSt.com that the reasoning behind launching thisprogram is that AFC views the current market as a "deleveragingcycle." In other words, "in this cycle, the capital markets arelooking to provide less capital--less 'leverage'--as a primarymeans of lending 'defensively,' more conservatively and moresafely." He notes that references to "capital crunch" and "creditcrunch" for example, are "just a prominent part of the deleveragingof US real estate assets. In light of concerns of a slowingeconomy, this is understandable." Fried continues that "if aslowing economy means that real estate assets will experiencedeclining cash flows--or at least not the growth that was projectedduring the prior 'aggressive' growth cycle--one way to providecapital but defend against declining cash flows is to provide lesscapital, whether in the form of debt or equity."

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He explains that in light of this trend among capital providers,AFC's clients and transaction partners are faced with having toprovide more capital--sponsor capital--for its transactions. "AFChas typically provided capital in such situations to get itsclients' and partners' transactions closed."

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Fried tells GlobeSt.com that AFC's co-sponsor investment inthese transactions is usually the difference between thetransaction happening or dying. "In a recent transaction, aninstitutional group which was providing the joint venture equityfor AFC's client decided to provide less capital--the sponsor wasable to provide some of the balance, but was not going to be ableto provide the entire sponsor requirement in time to close thetransaction. AFC provided the balance to close the deal ontime."

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Sonnabend says that "this program simply formalizes AFC'shistoric activity of co-investing with its clients when additionalcapital was needed to close transactions. Over the last 20 years,AFC has stepped up to fill a need for its clients during marketcycles when capital has pulled back, and where the most compellingvalue-add transactions are threatened. We find ourselves in thatenvironment again, and are well capitalized to make a difference inthe success of many of our clients' deals."

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Fried says that most of the capital providers that AFC talks toare concerned about providing funding to "typical" and "standard"transactions. "It's as if current market conditions have causedthem to wonder if they know how to recognize a good transaction anddetermine whether it has the attributes to succeed regardless ofthe overall economy; others are anticipating 'distressed'transactions that will be more profitable than standardtransactions." He continues that he hopes AFC's investments will bepart of an effort by many parties to continue to do good standardtransactions. "Continuing to do good solid transactions is animportant counter balance to the general concern that there aren'tgood transactions, or that the only transactions to be done have tobe distressed."

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AFC Co-Sponsor Investment Program is just part of the firm'soverall business capabilities. Fried says that he expects theoutcome of the program to be that AFC's clients and transactionpartners will "continue to get their transactions done--the termswill reflect current market conditions--and the transactions willhave to stand up to the diligence required in an unpredictableenvironment. But these transactions will close." In recent years,AFC has co-invested with clients on new development andredevelopment transactions involving multifamily, hotel,industrial, office, retail and self-storage properties around thecountry.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.