12/05/2008

LoanCore Seeks Equity for Origination Fund

LoanCore Capital, which raised $500 million of equity from Singapore's sovereign wealth fund this summer to buy distressed debt, is now seeking to line up more than $3 billion for a commingled fund that will originate loans.

The Government of Singapore Investment Corp. has committed to kick in another $1.5 billion for the new fund, on the condition that it not be the majority investor. That means LoanCore still needs to solicit more than $1.5 billion from other investors.

The company, formed several months ago by Mark Finerman and two other former RBS Greenwich executives, has tapped Eastdil Secured as its placement agent. Logical capital sources include other sovereign wealth funds and pension funds that will have fresh investment allocations in the first quarter.

LoanCore's first vehicle is backed solely by the Singapore sovereign fund. It is focusing on the acquisition of distressed debt. Including leverage, the vehicle has $1.5 billion of buying power, most of which has not yet been deployed.

The origination strategy for the second fund is unclear. But when Finerman left RBS in May, there was talk he believed that, in the wake of the market meltdown, lenders would have to retain a portion of loans if they wanted to sell participation interests to investors. For example, a lender seeking to securitize a loan portfolio might sell the triple-A and double-A securities and retain the rest to show investors that it is willing to stand behind its loans.

While LoanCore currently plans to set up a separate fund, the company is evidently leaving open the option of merging the new capital into the initial vehicle.

LoanCore, of Greenwich, Conn., was set up by Finerman, Perry Gershon and Chris McCormack. Finerman, one of the best-known lenders in commercial real estate, held the top commercial MBS post at RBS. Gershon was his top lieutenant, and McCormack was the chief CMBS trader. They all left in April or May as the firm pulled back from the CMBS market because of the sector's sharp downturn.

LoanCore subsequently hired three staffers. Gary Berkman joined last month as chief credit officer. He formerly managed real estate credit risk at UBS and reported to Finerman. Over the summer, LoanCore also hired veteran large-loan originator Brett Kaplan as a managing director and Richard Small as an associate. Kaplan had previous stints at Eurohypo, Bank of America, RBS and US Realty Advisors. Small previously worked as an associate in real estate finance at RBS.

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