08/05/2011

BofA to Put $1.3 Billion Portfolio Up for Sale

Bank of America is poised to put $1.3 billion of mixed-quality loans on the block next week — adding a third massive portfolio to the secondary market.

With the timing of the move, BofA appears to be seeking to tap into investor interest generated by the two other offerings: a $9.7 billion portfolio owned by Anglo Irish Bank and $1.4 billion of loans being shopped by Bank of Ireland.

Many of the major high-yield investors have been amassing capital and teaming up to bid on the two portfolios, especially the Anglo Irish mortgages, which are backed by trophy commercial properties in New York, Boston and Washington. But market players expect a single bidder to land the entire Anglo Irish portfolio. Should that happen, the rest of the investors will be looking to deploy their capital elsewhere.

The 41 loans in BofA’s portfolio have an average size of roughly $31 million. Most have floating rates and terms of 3-5 years. On average, they have about 12 months remaining until maturity.

By and large, the mortgages are up-to-date on their payments. But many of the underlying properties have declined in value, which will make it challenging for the borrowers to refinance at maturity. The loans are backed by office, retail, hotel, industrial and apartment properties, many of which are in California.

BofA’s advisor, Jones Lang LaSalle, has divided the portfolio into 6-8 pools, based on property type. Investors can bid on individual pools, combinations of pools or the entire portfolio. Offers will not be accepted on individual loans. Jones Lang is scheduled to take bids in late August.

Eastdil Secured will take bids Tuesday on the Anglo Irish portfolio, which it began marketing in June. HFF is gathering second-round bids this week on the Bank of Ireland loans.

Banks and special servicers, including BofA, CWCapital, LNR Partners, M&I Bank and Wells Fargo, have put billions of dollars of largely distressed loans on the market in recent months, with most portfolios ranging in size from $10 million to $300 million. Meanwhile, insurance companies, including John Hancock and Nationwide Insurance, have recently marketed more than $1 billion in performing loans. Investors and brokers said investor appetite for both ailing and healthy mortgages remains strong.

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