04/15/2011

Allied Irish Shops $950 Million US Portfolio

Allied Irish Bank took a second round of bids on Wednesday for a $950 million portfolio of performing U.S. commercial mortgages that it wrote during the economic boom.

The portfolio contains roughly 45 loans, many of which are syndicated portions of first mortgages, B-notes and mezzanine loans.

Because the beleaguered Dublin bank has minority interests in many of the loans, the assets are viewed as passive investments suitable for portfolio lenders or investors that would hold them to maturity.

The bidders include CIBC and Wells Fargo, according to market players. Bank of America and Deutsche Bank also kicked the tires, although it's unknown if they made offers.

The loans are divided into two pools based on leverage, leading market players to speculate that Allied Irish hopes one or two buyers would take down the entire portfolio.

The offering includes a $30 million senior portion of a $450 million debt package on the 1.2 million-square-foot KPMG Tower at 355 South Grand Avenue in Los Angeles, a $25 million slice of a debt package on the 398-room Sofitel Hotel in Midtown Manhattan and a $15 million slice of mezzanine debt on the 2.8 million-sf MetLife Building at 200 Park Avenue, also in Midtown.

The offering is being overseen by Varadero Capital, a New York investment firm headed by Fernando Guerrero. Loan-sale advisors were surprised by the selection of Varadero, which operates a hedge fund that invests in distressed residential and commercial MBS, but apparently hadn't previously handled any large loan-sale assignments.

There was speculation that Varadero landed the plum assignment through a relationship Guerrero has with Allied Irish executives. Guerrero has an extensive background in structured finance. After stints in the CDO groups of TD Securities, ABN Amro and Merrill Lynch, he joined the Dutch merchant bank NIBC in 2007 as a managing director and as chief executive of NIBC Credit Management, a New York unit overseeing the bank's investment-management activities in North America. It's unclear if Varadero, which was formed last year, is affiliated with NIBC.

Allied Irish, once Ireland's largest lender, was among three of that nation's banks that vied for U.S. commercial mortgages during the real estate boom. It and the other two Anglo Irish Bank and Bank of Ireland were nationalized after suffering crushing losses when the market crashed.

This week, Allied Irish announced a loss of $14.7 billion for 2010 and said that it would cut 2,000 jobs. The Irish government has already pumped $10.4 billion into the bank, giving it a 93% ownership stake. The bank needs an estimated $18.8 billion more aid to remain afloat.

Allied Irish wrote many of its U.S. loans from 2004 to 2007 on properties in New York, Boston, Chicago and Los Angeles. The bank's portfolio includes three high-profile financings that aren't in the current offering:

Its share of a $700 million debt package provided with BNY Mellon in 1970 on two 60-story towers with 1,359 luxury apartments developed by Larry Silverstein at West 42nd Street and 11th Avenue in Manhattan.

A $122.5 million floating-rate loan on the 207,000-sf office building at 2099 Pennsylvania Avenue NW in Washington.

A $50 million mezzanine piece of the ill-fated $4.4 billion debt package on the Peter Cooper Village and Stuyvesant Town apartment complexes in Manhattan.

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