Control of Capmark Fund Up for Grabs Again

The management rights to a struggling $1.1 billion debt fund operated by bankrupt Capmark Investments are back on the market.

Capmark's advisor, Lazard Freres, contacted investment managers in the past two weeks to gauge their interest.

Last spring, Lazard shopped the management rights and Capmark's limited-partner interest in the fund, Capmark Structured Real Estate Partners. At the time, investors estimated that the management rights might command $5 million and that the limited-partner stake would sell at a deep discount. Lazard narrowed down the bidders to a few finalists, including AREA Property of New York and Invesco Real Estate of Dallas. But no deal was struck.

This time around, the offering doesn't include the limited-partner interest, which Capmark acquired for $120 million.

It's unclear if AREA and Invesco are interested in taking another look. Other

potential suitors for the management rights include fund shops Normandy Real Estate of Morristown, N.J., Square Mile Capital of New York and PCCP of El Segundo, Calif.

The fund's sub-advisor, Urdang Capital Management of Plymouth Meeting, Pa., has the right to match any winning bid. Urdang is a unit of Bank of New York.

A sale would have to be approved by the court overseeing Capmark's bankruptcy.

The fund, which was launched in 2006 and finished investing in 2009, had suffered a nearly 50% decline in net asset value through June, according to the latest return figures available.

The fund's woes stemmed in part from two investments. One was $100 million of mezzanine debt that helped finance Blackstone's $26.2 billion takeover of Hilton Hotels in 2007. The other was a $182 million portion of a $600 million loan package on Xanadu, a long-stalled retail/entertainment development at the Meadowlands sports complex in East Rutherford, N.J. Both investments may have regained some value in the past year.

The fund's limited partners include Singapore's sovereign wealth fund ($250 million), California State Teachers ($100 million), Calpers ($100 million), Texas Teachers ($100 million) and Ohio State Teachers ($80 million).

Capmark, of Horsham, Pa., has been liquidating its operations since filing for bankruptcy in October 2009. It has already sold its commercial-mortgage servicing and origination arm, as well as its property-fund operation. ?

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