.crazylegs..

'SuperREIT' CapitalSource Swoops Up Fremont's Branches

Wait a second, you've missed the point - I think your analysis stinks. They had been looking for a deposit based funding strategy PRIOR to the credit issues. Remember Tier One? I give them tons of credit NOT doing that deal as they would have ended up with a portfolio of construction loans.

Now they get to the same endpoint BUT they end up with:

1. An A participation of the loan pool that was originally sold from Fremont to iStar Financial where iStar kept a B participation. iStar is one of the best commercial RE loan operators. The CEO was recently quoted as saying he expects to earn a positive return on the investment. And Jay Sugarman is a top notch exec with an excellent reputation.

2. $3 billion cash

The A participation has an accelerated paydown as CSE gets 70% or principal payments. This is a great deal for CSE.

I would also not characterize CSE as a mortgage REIT. That would signify that they are borrowing money to purchase mortgage securities to earn a spread. They have a large direct origination platform that has a very large health care component and THEY do the underwriting. This has to be noted as a huge difference from an entity that buys other folks' underwritten products. The CSE guys are very, very good. The large investment from Farallon partners is another reason to look at this company as it does its homework very diligently before investing.