GlobeSt.com

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GlobeSt.com: Tell me a bit about why and how ARA formedthe Distressed Asset Services Group.

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Corson: Obviously the economy and the tight creditmarkets have taken a toll on people's ability to get financing.We're seeing a lot more distressed assets, not just in the marketsthat have had a lot of employment loss, but across the country.Many of us at ARA have been through this type of market in the pastand have a lot of experience in dealing with distressed assets, sowe felt the timing was right to set up a group to help the lendersand servicers with working through their assets.

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GlobeSt.com: Have you closed any deals so far?

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Corson: Yes, we have. Especially in some of the moredistressed markets, we have gotten listings and sold assets forlenders. For us, it's not just a process of getting and selling thelisting, but acting as consultants. We want to help the customer asmuch as we can. Sometimes that means holding onto the property fora number of years. We know the deals that are going on in themarket, what the rents are, where the distressed assets are. A lotof times, we're helping these clients through the process offiguring out what the best avenue for the asset is. We expect to doa lot more of this business in the future, because you're going tosee a lot more of these deals in the future.

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GlobeSt.com: Take me through a typical deal, from themoment it lands on your table to closing.

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Corson: Typically, we first would find out a property inthe market is distressed. Either the lender calls us, or we findout it's in distress and then we call the lender or servicer. Wemay be in a position, right off the bat, where they might want usto find a management company for the property because they need tohave a receiver appointed. We may need to go out and walk units tosee the condition of a property. We may go and scope out theneighborhood and check the comps. A lot of times, these guys willcall us and they won't have had an opportunity to see the asset, sowe can be their eyes and ears. In a lot of cases, we'll turn arounda report to them within 24 or 48 hours.

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GlobeSt.com: Are your clients typically banks or otherlending institutions?

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Corson: Yes, they're typically banks, lenders or specialservicers. Sometimes they're people who bought the notes on theproperties. We have had owners who are in distress who have used usto market their properties, but in terms of this particular group,we expect the majority of the deals to be with lenders andservicers.

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GlobeSt.com: Banks and other capital providers aretypically not in the business of owning real estate. Is there asense of urgency on the part of your clients to get theseproperties off their books, or are they apt to wait itout?

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Corson: It depends on who you're talking to, and theasset. You may have an asset where the conditions are such thatyour best option is to get rid of it now. There are willing andable buyers out there who can turn it around faster and at lessexpense, so it's in your best interest to move it out the doorright now.

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That's not always the case. What we've been finding is thespecial servicers, for the most part, are trying to be responsiblefor the clients and they don't want to just dump the asset nomatter what the cost. They're looking for ways to recoup some oftheir losses, and they want to have people who can walk through thebest strategy for the asset. And depending on what area it is, andwhere the market is at the time and how bad the asset it, it couldbe any number of strategies.

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GlobeSt.com: When do you think you'll see this businessreally pick up?

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Corson: We're just starting to see it pick up. Certainly,the credit market seized up in July or August 2007, so slowly, moreof this started coming to a head. It's really starting to gathersteam and we're going to see more of this in the next year.

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GlobeSt.com: What's the demand like on the buyer side? Whoare the groups bidding for these assets?

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Corson: There's lots of demand for these assets. It'sreally interesting to talk about who the buyers are because a lotof the groups who were traditional buyers of real estate have nowentered the distressed asset game. You just have a lot of peoplewho view this as an opportunity. Any time you have a lot ofuncertainty and someone's in distress, there are people who areready and willing to take over, because they're looking foropportunities. One of the things at ARA is we're really good atfinding those people because of the structure of our database. Wehave over 1,800 names in our system, and we survey them every yearto find out what they're looking for. So you could come into theARA database and say, "I want to look at distressed assets in theseareas, in this price range, and in this type or property." We cansort through that database and come up with a huge number of peoplethat meet those criteria immediately.

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GlobeSt.com: What's the standard size of the deals youwork on?

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Corson: We have private client groups who will, dependingon the market, go down to 20 units all the way up to 1,000 units.You could have distressed deals that are still over $100,000 perunit, and you could have deals that need improvement that trade foras low as $5,000 a unit. The price range varies by market and bywhat's happening with the asset.

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GlobeSt.com: You said you expect to see more of theseopportunities next year. Yet the uncertainty over the economy andthe market has many players waiting on the sidelines. Do you thinkthere will be more buyers come in the market next year?

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Corson: We hope so. It depends on people's perception ofwhere the bottom is. You have a number of people sitting on thesidelines because they're waiting to see where the bottom is, butin my experience, those who are waiting to see where the bottom isgenerally miss it. There are certainly a lot of people who havecash now and who will look at these distressed assets and make adeal for them, almost more so than the market-rate buyers.

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