What a year it was. 2007 started grimly. The conduits had catapulted and become a dominant force in the permanent lending market. Some in the industry were even questioning the relevancy of the GSEs. Cap rates and lending standards were pushed to levels not seen in recent years as the nation’s commercial real estate markets felt the impact of too much money chasing too few deals. And all this happening while ARCS was undergoing due diligence and contract negotiations, and scrutiny by a suitor looking to add a powerful Fannie Mae and Freddie Mac lending platform to their resources. Well, it finally happened. After a dozen years as an entrepreneurial company, ARCS was acquired. But a better marriage partner couldn’t be asked for. By us or by our borrowers. On July 2nd 2007, ARCS Commercial Mortgage became PNC ARCS, a PNC Real Estate Finance Company. A word about the folks. PNC Financial Services Inc. is one of America’s largest diversified financial services institutions. With assets of more than $130 billion. Technically a super-regional bank, but national as a lender in commercial real estate. Not long after becoming part of PNC, the world changed and the sub-prime meltdown colored the second half of ’07 with an unpleasant hue. Except for multifamily lenders. The conduits went stealth but the GSEs stayed the course. Our borrowers found the funds needed at rates they could hardly have expected. From Fannie and Freddie both. In fact it was our second biggest year ever, topped only by 2001. Despite the challenge of a merger in the first half, and unprecedented credit disruption in the second half, we provided 207 borrowers quality loan products with more than $2.4 billion. Sheer wizardry. •

What’s in a name?
Periodically someone would ask us, “What does ARCS stand for?” and after a respectable hesitation we would answer, “Always Reliable Courteous Service.” Despite the occasional arched eyebrow, or wisp of a smile, the questioner would nod, especially if they’d already experienced our extraordinary customer service. That same service earned us “Favorite Fannie Mae DUS lender” two years in a row from the savvy readers of Apartment Finance Today. Well…last year, Monday July 2nd, ARCS joined a larger family, becoming a PNC Real Estate Finance Company. And suddenly the shoe was on the other foot. We were asking, “What does PNC stand for?” And there were some lengthy historical explanations with antecedents going back 150 years. But the best answer was the simplest. One senior exec smiled and said, “Pretty Neat Company.” And that’s absolutely true…even if it’s oversimplified. The meshing of a small entrepreneurial company with a super-regional, diversified financial institution, the East Coast meets West Coast, all was made immeasurably smoother by the folks at the “Pretty Neat Company.” So now we’re PNC ARCS. We’ll leave you to judge just how “Neat” and how “Reliable and Courteous” the service really is. But if you’ve never done business with us before, now’s the perfect time. We can do so much more now. Need customized real estate financing? Just name it. All this is leaving America’s workforce with housing costs that approach 50% or more of their income. And since business moves where workers can afford to live, the problem is starting to get more attention from city officials concerned about attracting jobs and workers to their towns. But investors are taking notice too. For-profit developers (motivated by the promise of public sector funds to capitalize a deal) and non-profits (motivated by more philanthropic concerns) are both moving towards this specialized segment of multifamily housing. • ARCS can provide Fannie, Freddie, and FHA financing specifically geared for affordable housing. But even more importantly, ARCS has the experience and know-how to help simplify the complexities of affordable housing financing so that loans close and convert on time. As a long term leader in the area, we can help. And now that our population exceeds 300 million, it’s an opportunity you can’t afford to miss. For more information, call Keeley Kirkendall at 800-ASK-ARCS x3292.•

What about Pittsburgh?
Home of the Pirates, the Steelers, Carnegie Mellon, 330,000 Pittsburghers, and headquarters for PNC ARCS’ parent company whose predecessor companies date back to before the Civil War. Quietly going about the business of providing financial help in the mid-Atlantic and beyond. Quietly, yes, but definitely and consistently acknowledged for excellence. In 2007 PNC’s Jim Rohr was praised by both American

Seen here against the Pittsburgh skyline, Jim Rohr, PNC’s CEO has altered the financial map of America with his prudent leadership and community concerns.

Banker magazine and Institutional Investor as one of the most admired CEOs. Recently Fortune ranked PNC in their list of most admired companies. Which certainly dovetails nicely with our rating by the readers of Apartment Finance Today as their favorite Fannie Mae lender, two years in a row. Welcome news for us. But what about you? Well…now we can do more. A lot more. As a PNC Real Estate Finance Company, we can do what few others can. Provide access to debt and equity financing, construction loans, permanent financing, forward commitments, tax credit equity, direct bond purchase programs, mezz, bridge and everything in between. Think of us as your nationwide commercial real estate finance connection to one of America’s largest diversified financial institutions. •

The customer is always right

Off-the-rack” lending just won’t fit every deal. Call it financial engineering or custom tailoring,now that we’re PNC ARCS, we’ll fit your needs precisely.

Even with conduits less visible than last year at this time, the borrower is still in the catbird seat. True to their equally appealing but decidedly different cultures, Fannie Mae and Freddie Mac have approached the question of how best to help their customers in characteristically distinctive ways. We’ve noted in another article that Fannie Mae had streamlined the process by chopping their procedural manual, the DUS Guide, down to a third of its former size, and in the process had expanded the decision-making authority of their DUS lenders. Freddie has taken a different approach, custom tailoring products to meet and even anticipate growing needs. For borrowers buying a property and planning to invest substantial dollars for an upgrade, this loan can deliver up to 90% loan to cost. Freddie has also implemented a number of changes that make the process of getting a loan to rate lock even faster and easier. Need something to fit you exactly? Talk to us. •

The not-so-dismal science
If you regularly flip on NPR driving to work. If you’ve seen Maria B. talking money with a guest on CNN. If you’ve watched interview videos on bloomberg.com, you’ve probably seen or heard Stuart Hoffman. If you read WSJ, Barrons, Business Week, you’ve probably seen his commentaries. He’s one of those economist guys who explains things without resorting to arcane language.

Not just another pretty face, Stuart Hoffman is our man to bring clarity to the often murky world of economics...especially gratifying nowadays.

Stuart is Senior Vice President and Chief Economist for PNC Financial Services and principal spokesman on all economic issues. He’s been at PNC almost 30 years after a seven year stint at the Federal Reserve in Atlanta. In 2004, Business Week named him the most accurate economic and interest rate forecaster. He’s served as President of the National Associ-ation for Business Economics. And it was an NABE conference that had him right next to the Twin Towers on 9/11. So the turmoil in today’s market is unlikely to ruffle Stu’s feathers. Watch for him. He’s got something worthwhile to contribute. For insights from Stuart Hoffman and PNC economists, log onto www.pnc.com, click “About PNC,” then “Media Room” and finally “Economic Reports.”•

Size counts

Bigger may be better in some things, but fewer rules and more autonomy make for better decisions and easier, faster loan closings.

During the past two decades, Fannie Mae distinguished itself as a very reliable source of cost effective and innovative financing products. A large group of loyal borrowers grew in number each year, and to keep pace with the changing marketplace, so did Fannie Mae’s Guidebook, which governs the dos and don’ts for all the DUS lenders. Despite their best intentions, it inevitably added a measure of complexity to financing even the most “vanilla” transactions. Thank goodness for Newton’s Third Law. The bulk of the DUS Guide met with the resistance of lenders and borrowers alike, so Fannie Mae, with input from DUS lenders including PNC ARCS, took a fresh look at the DUS Guide and decided to shorten it substantially. Fannie Mae chopped and chopped and chopped, and what’s left is a lot shorter, much more manageable, and delegates even more authority to the DUS lenders…so everything’s a lot easier and much faster too. •

Heard along the way
These are far from quotes, just our observations and understandings of what they said.

NAHB Economist
Bernard Markstein:
The turmoil will continue. Capital will remain tight through 2009 and the situation should begin to normalize in early to mid 2010.

Marcus & Millichap
Linwood Thompson:
The best renters became the worst owners. But the multifamily fundamentals are still sound. CMBS Multifamily defaults less than half a percent. Industry NOT in recession, but in period of “re-calibration” with a return to common sense.

The Brookings Institution
Tony Downs:
Subprime is not the only cause for the housing downturn. And government fixes won’t be quick. There’s a disconnect between buyers and sellers. No one’s blinking. Velocity continues to drop. Caution is the watchword. Operational efficiency is critical.

Witten Advisers
Ron Witten:
Conditions vary market by market though none are especially bright. The condo crash created a temporary oversupply to be absorbed relatively soon. The picture brightens before 2010. Possibly mid-2009.

Vornado Realty Trust • $260,000,000
Washington DC area • 1,670 units

Vintage Court Senior Apartments • $7,200,000
Union City, CA • 125 units

Lemle Portfolio • $22,000,000
New York, NY • 130 units

Forest Hills • $11,000,000
Shoreline, WA • 108 units

Arboleda Luxury Apartment Homes • $17,651,000
Cedar Park, TX • 312 units

Kings Road Apartments • $17,169,000 Supplemental
Hollywood, CA • 196 units