The loans are performing at present "due to the application offunds from an interest reserve that is being rapidly depleted,after which point there is a strong likelihood that the loans willbecome non-performing," Verona says in a prepared statementregarding the portfolio. It says the portfolio consists of multiplecross-collateralized, cross-defaulted loans made to a singleborrower and secured primarily by the residential land.The bankintends to sell the loans as a portfolio, and not on an individualbasis, and wants to complete the disposition by the end of thesecond quarter.

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Chad Buelow, co-founder and managing principal of Verona, pointsout that the portfolio is hitting the market at a time whenSouthern California land prices are rebounding, with builders andother buyers now willing to come back into the market. Buelow'sobservation is borne out by a report on Southern California landprices that was issued in February by the Irvine-based Hoffman Co.,a land brokerage firm that tracks land values in the region.

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The Hoffman report said that land values in many areas ofSouthern California doubled or tripled in 2009 compared to 2008,when they hit bottom. The report pointed out that the most activeland buyers today are home builders, both public and private, asopposed to the opportunity funds that were the buyers when themarket was at bottom.

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Verona principal Dan points out that prices can varyconsiderably from one geographic submarket to another and says thatthe $135 million Southern California loan portfolio is secured byland that is in "top markets that are supply-constrained."

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Century City-based Verona, formed in 2009, is a commercial realestate capital markets, mortgage brokerage and advisory firmserving institutional, middle market and individual clients.

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