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NEW YORK CITY-Last month the Treasury Department’s Public Private Investment Program ramped up after months of administrative prep work: several of the nine asset managers chosen to participate in the program announced they had fully funded their commitments. They set out armed with more than $12 billion in debt and equity purchasing power.

Since then, it’s been relative silence from the five that have received funding – leaving the market to stew in the questions that still linger about the program – questions that range from what it will mean for pricing to which institutions might be suitable for the investment to whether the program will ultimately even be successful. Taking a stab at some of these issues is Kenneth Spears, SVP of Savills.

GlobeSt.com: What is the biggest impact PPIP will have on distressed assets in your opinion?

Spears: Price discovery, which right now is a chicken and egg issue. We still don’t know at what point sellers are willing to let go of assets and what buyers are willing to pay. PPIP, I hope, will establish that. It could have a dramatic impact. If asset owners have marked down their assets appropriately and if the proposed purchase price is within striking distance of where these guys are willing to sell, then it could open the flood gates in terms of deals. If, on other hand, through the price discovery process it turns out that the equity yield requirements of PPIP investors are still significantly far away from where sellers are – we will be stuck on the same page we are right now.

GlobeSt.com: There hasn’t been anything officially announced since the asset managers announced they had raised the necessary funds. What happens next?

Spears: I think the next few months deal or working towards deals under PPIP will happen very discretely. I haven’t heard of anything moving yet but we’ve talked to some of the groups that have won the assignments to be in PPIP and they are definitely gearing up to go fishing.

GlobeSt.com: What type of deals do you think these asset managers will try to close? Do you have a sense of what they might be interested in?

Spears: Given the amount of money they have to put out they will not spend time on smaller deals. So they will try to unearth $100 million to $200 million pools of assets – the more troubled loans from institutions. FDIC is obviously one place where some of this bidding will take place. The managers will also go to institutions that have these loans on their books, that have a large exposure to commercial real estate that they want to clear off, as well as try to buy them from the owners themselves.

Corus Bank is a good example – the buyers may decide to spin off a portfolio of assets, say half a billion of construction loans, and let the PPIP guys go after it. Then there are the assets from Wachovia, Lehman Bros., Washington Mutual – the institutions that took over those portfolios want to find a solution to unwind the toxic transactions. Basically, there are a lot of assets around that in the right format might get sold in bulk to PPIP.

GlobeSt.com: When do you think we’ll know something? Or put it another way, at what point can the market deem PPIP a failure, or the price discovery process a failure, if no deals have obviously transacted.

Spears: I think the end of the year is a bit aggressive of a timetable because of the due diligence that is required. By the end of Q1 2010 we should hear of some movement; if an institution is holding a bidding process the market usually finds out about it through a leak. I’ll say May – if we haven’t heard of anything or if there have been no announcements by May then I’ll call PPIP a failure.

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