Citi Marketing Big Batch of Performing Loans

Citibank is shopping $460.8 million of high-quality seasoned mortgages, one of the largest performing-loan portfolios to hit the market this year.

The 41 loans have a mix of fixed and floating rates, with a current weighted average coupon of almost 4%. They are backed by office, retail and other commercial properties in multiple states.

The notes are nearly six years old on average and have a weighted average maturity date of 2015. Most are recourse loans guaranteed by the borrowers, many of whom are wealthy individuals or institutions. The weighted average loan-to-value ratio is below 55%, and the average debt-service-coverage ratio is greater than 2 to 1.

The offering is expected to draw interest from life insurers, mortgage REITs and other conservative investors looking to hold the loans. Bids are expected to come in at 94-97 cents on the dollar. The offering appears to be part of an effort by Citi to reduce its exposure to commercial real estate.

The bank’s advisor, CBRE, has divided the portfolio into four pools based on geography and property type. Bids on the entire package, individual pools or combinations of pools are due Nov. 17.

The largest pool has $221 million of loans on office, mixed-use, retail and other properties on the East Coast. It includes a $57.5 million loan on 79 Fifth Avenue in Manhattan, a roughly 300,000-square-foot building at East 16th Street. The property’s major tenants include Foundation Center and the New School university.

A West Coast pool contains 15 notes totaling $125 million, also on office, mixed-use, retail and other properties. Among the largest is a $48 million loan on Plaza 555 in Sacramento. The 376,000-sf office building is at 555 Capitol Mall, four blocks west of the state capitol. Major tenants include Bank of America, CBRE and multiple law and accounting firms.

A $63.7 million pool has five loans on multi-family properties.

The fourth pool has $51 million of loans on office, retail and mixed-use properties in the Southwest.

The Citi portfolio is the latest in a string of performing-loan offerings that have hit the market this year — with mixed success. This summer, insurers John Hancock and Nationwide marketed several seasoned-loan portfolios ranging in size from $170 million to $238 million. Market players said most of those notes didn’t sell. This year’s largest performing-loan deal came in August, when Wells Fargo agreed to pay close to par value for a $1.4 billion offering from Bank of Ireland.

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