$100 million of committedcapital.

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GlobeSt.com: What led you to conclude that theseroutes are the optimal strategy for North River at this point inthe market?

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Kaye: We started closed on the fund in April andopened our doors in May. Since then we have taken quick survey ofwhat is on offer from financial institutions for purchase andconcluded that, for a fund like us, a lot of notes and mortgagesare still expensive relative to the underlying economic value ofthe debt on the property.

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GlobeSt.com: A lot of banks are offering discounts– even when they say they won't initially, they agree to one afterthe bidding doesn't result in a hard sale.

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Kaye: From what we have seen, the discounts thatare being offered do not make sense to us on a total return basis –at least not yet. If you do an analysis on the underlying loanrelative to the value on property and then overlay that on howpeople will lend on that asset today, on a long-term sustainablebasis the offering price just don't make a lot of sense.

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GlobeSt.com: So instead you are investing in Anotes and whole loans. Can you explain the investment case?

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Kaye: Generally speaking, we are seeing thesedeals price in high 80s to low 90s in dollar prices. Some sellersare offering leverage and seller financing, and, of course, someare not. But when you do the math on some of the offerings we cancome out on leveraged basis in the mid-teen area.

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As for the new loan mezzanine origination market, theopportunities are much stronger there compared to a year ago. Lastyear lenders were lending at 80% LTV based on aggressive cap ratesand aggressive cash flow assumptions. Today lenders -- the few thatare active -- are lending at very conservative levels. We see anopportunity to provide gap funding by taking the senior loan up to80% to 85%.

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GlobeSt.com: There is some competition in themarket now for that strategy.

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Kaye: True, but more players have left than areentering now. Also there is the opportunity to make greatreturns.

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GlobeSt.com: How great?

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Kaye: Current coupons on mezz paper can be in thelow to high teens, depending on the transaction's story, itsleverage levels and so on.

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GlobeSt.com: Which strategy will you favor thisyear?

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Kaye: We set up the fund to be flexible – we didnot want to be restricted to one investment style. Right now,originating loans is where our focus will be. In Q4, when banksstart pushing paper out of the door and discounting it, then wewill shift focus.

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