04/30/2010

MetLife Shops Large Performing Portfolio

MetLife is offering 22 performing commercial mortgages with a combined balance of $196.5 million.

The fixed-rate loans, which have a weighted average remaining term of less than two years, are being pitched to lenders seeking the inside track on refinancing opportunities. The loans' 6.6% weighted average coupon also offers a relatively attractive spread. The mortgages are expected to trade for close to par value or, in some cases, above par.

The bidders are likely to include mortgage REITs, mortgage funds, banks and securitization shops. Bids are due by May 14. CB Richard Ellis is handling the marketing campaign.

MetLife is evidently offering the loans as part of its routine portfolio management. Many of the mortgages are smaller than the insurer's current target size. MetLife could also be seeking to take advantage of the strong secondary market for performing loans. Now that liquidity has returned after a long dry spell, the secondary market is once again an option for portfolio lenders seeking to fine-tune the makeup of their portfolios. The loans being offered by MetLife represent well less than 1% of its $33 billion commercial mortgage portfolio.

The portfolio has been divided into four pools by property type. There are eight office loans with an unpaid balance of $97.2 million, three industrial/warehouse loans totaling $37.6 million, four multi-family mortgages totaling $34.8 million, and seven retail loans totaling $27 million. Investors can bid on individual pools or the entire portfolio.

The portfolio's weighted average seasoning is 74 months and the remaining term is 20 months. The debt-service-coverage ratio is more than 1.5 to 1, and the debt yield is 9.7%.

The largest loan is backed by the 412,000-square-foot Centura Tower One, an almost fully occupied office building in Dallas. The original $50 million balance has been paid down to $45.7 million. The 7.5% loan, originated in 2004, matures in August. The borrower is a local development group.

The portfolio also includes a $26.2 million loan on the 213,000-sf office building at 10000 Ming Avenue in Bakersfield, Calif. The fully leased property is owned by Castle & Cooke, a Los Angeles real estate firm. The five-year loan, with a 5.5% coupon, matures next February. The original balance was $28.6 million.

The offering could draw heated bidding because few large portfolios of performing mortgages have hit the market in recent months. In the last big trade, TIAA-CREF sold a $505 million portfolio in February to Starwood Property, a REIT formed last summer by Starwood Capital. The REIT paid slightly more than 101% of the face amount, just north of the 100.5% price initially sought by TIAA. The REIT overcame bids for all or part of the portfolio from such suitors as Blackstone Group, Goldman Sachs and J.P. Morgan. That portfolio had a weighted average remaining term of 23 months.

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