Geographically, Figueroa is looking all around the country,although it tends to gravitate toward Southern Californiaproperties in its debt placements, Conn says. In placing equity,"We will concentrate on the Southern California area because wefeel that there are some very good opportunities here, but we'vealso been looking at a lot of other markets," he says. The companyis working on a deal in Idaho and has also been looking in placeslike Charlotte, NC; Texas, Arizona and Las Vegas.

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Figueroa represents a change of direction for its founders, allof whom formerly were with Pathfinder Mortgage Corp. in DowntownL.A., working primarily in the CMBS and life company arena. Connexplains that over the past year, as conditions changed in thecapital markets, Figueroa's partners found themselves pursuingother sources of debt, including local commercial banks.

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The company's founders achieved "a pretty strong success ratewith closings" on debt and were also successful in assemblingequity from private sources, "so it made a lot of sense for us toget much more focused on how to close quality deals in this newenvironment," Conn says. "One reason that we started our own firmwas that we have been successful on the equity side in assemblingprivate capital for a number of transactions over the past year,"he adds. He says that Figueroa's partners wanted to continue thatequity placement "in a little bit larger way," so they arepreparing to go to market with an opportunity fund of probably $25million in discretionary equity for joint ventures and other equityinvestments.

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One of the factors that drove the formation of Figueroa is that"Borrowers' past banking relationships have become unreliable" withthe demise of CMBS lending as a major source of commercial realestate finance, according to Conn. Local commercial banks serve asone of the primary sources of debt for Figueroa, which also relieson some Asian-based banks and has relationships with other brokerswho have their own network of lenders.

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"We have introduced commercial lending to a lot of banks thateither didn't do commercial lending or—if they did it—didn't dothat much of it and weren't that excited about it," Conn pointsout. He says that many of the local banks have capital, are stableand are willing to lend to strong borrowers with qualityproperties—but at lower leverage than was typical in the heyday ofCMBS lending. "For the most part, our refinancings and debt are atleverage of about 60% to 65%, some up to 70%," versus the 80% to90% leverage that was commonplace with CMBS deals, Connexplains.

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The Figueroa CEO says that one reason the firm focuses on localcommercial banks is that they "have a much more thoroughunderstanding of the local property markets, have an interest inseeing their local communities thrive and want to see theirborrowers be able to continue operating their properties." For themost part, these are portfolio lenders who do not sell theloans.

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Figueroa's approach involves "cherry-picking deals just as abank would," Conn says. "We pick good, strong borrowers with good,strong properties that we're pretty confident that we can getfinancing for, and then we work hard to get the deals closed."

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When Figueroa launches its equity fund, it will be lookingprimarily for value-add deals. Conn says that debt for value-adddeals is still available, including financing from Asian-basedbanks that "really understand and are comfortable with value-addplays, mini-perms and bridges and even some constructionfinancing." On the other hand, he points out, those banks "shy awayfrom speculative sale opportunities."

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Despite the contraction in the credit markets and the slowing ofdeal flow, "There is still a lot of capital out there," Connobserves. He notes that local commercial banks are funding quite abit of construction financing for performing projects and thatdemand remains steady for refinancings.

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In addition, "There is a lot of quality property that is goingto change hands because there were some issues with the financingstructure or for other reasons," he says. In light of the changingconditions in the capital markets, those property sales willrepresent "a lot of opportunities" for companies like Figueroa, hesays.

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