W Financial goes Institutional: Fund II launch slated for Fall 2007

W Financial provides first mortgages, second mortgages and on a very selective basis, mezzanine loans to real estate developers and owners. The Fund’s primary geographic focus is on the New York Metro area with a secondary focus on the other major markets across the U.S.

Gregg Winter, Founder and Principal, plans to launch a second fund for institutional investors in September 2007. Fund II will managed by Gregg Winter and David Heiden, a highly respected industry veteran with a decade of private lending experience. Winter is also the president and CEO of Winter & Company Commercial Real Estate Finance (www.winter1.com), a commercial mortgage brokerage firm that helps to source many of the loan opportunities for W Financial.

W Financial has delivered a compound annual return net of all fees since inception of 10.95% on a GAAP basis. For the same period, the annualized return on the S+P 500 index is 10.31%. The typical term of a W Financial bridge or mezzanine loan is one or two years, although it has done several loans with terms as long as five years.

The high-yield bridge loan market is rapidly evolving. Experienced bridge lenders who used to syndicate individual loans among a group of high net worth investors have matured and grown their businesses. Some, like W Financial, have found that a fund structure where investors share a diverse portfolio of bridge loans is far more efficient both for the manager and for the investors. At the same time, institutional investors have started to sort out the “wheat” from the “chaff” and have begun to identify those managers who can pick the right deals, maintain tight controls and conduct both rigorous underwriting and effective loan servicing. As a result, private mortgage funds are beginning to make their way into the portfolios of more and more mainstream institutional investors.

The keys to achieving the consistent yields and low volatility that are characteristic of a portfolio of real estate-backed bridge loans are: a) a seasoned and highly disciplined management team, and, b) a robust source of loan opportunities. The object is to earn mid to high teens gross annual returns on loan opportunities with a low risk of default, and plenty of equity/value/opportunity in the event of a default. The seasoned manager knows how to value the properties correctly, vet the Sponsors, and evaluate all land use, zoning and municipal issues.

On the other side of the equation, owners and developers of commercial real estate are increasingly choosing to use the appropriate tool at a given moment (i.e., bank or private financing) to accomplish the task at hand, depending, of course, upon the borrower’s time frame and where a given property is in the investment or development cycle (vacant or fully cash-flowing).

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