11/11/2011

Eurohypo Shops $358 Million of Mortgages

Eurohypo is marketing $358 million of mixed-quality loans that it wrote during the real estate boom on hotel, office and retail properties in the U.S.

The German lender is shopping $297 million of the loans via Eastdil Secured. Separately, Eurohypo and another German bank, Deutsche Hypothekenbank, have tapped Jones Lang LaSalle to find a buyer for a $61 million loan they jointly originated on a suburban Seattle office complex.

The offerings have evidently been in the planning stages for a while, but they gained momentum last week when Eurohypo’s parent, Commerzbank, announced it would unload assets and curb lending to comply with demands from the European Banking Authority. The loans being shopped make up about 6% of Eurohypo’s $5.5 billion portfolio of U.S. commercial real estate loans. Last year, Eurohypo wrote about $703 million of U.S. commercial-property loans, some of which were syndicated.

Eurohypo prefers to sell the $297 million portfolio, backed primarily by hotels, to a single buyer. It has set a Nov. 17 bidding deadline, with an eye toward closing a sale by Dec. 15.

The portfolio contains nine assets — a senior mortgage, a participation interest, an A-note, three B-notes, two mezzanine loans and a repurchase facility. The collateral types, by balance, are hotel (31%), condo-hotel (30%), retail (21%), mixed-use (12%) and office (7%) properties. Seven of the loans, or 81% of the total balance, are performing. But the underlying properties struggled during the downturn, and the cashflow and debt yields of some have yet to bounce fully back.

One loan (3% of the total balance) matured a year ago and wasn’t refinanced. Four (44%) mature next year. The other four mature between 2013 and 2017.

The largest loan is a $64.6 million repurchase facility on four Sofitel hotels. A Whitehall Street Real Estate fund partnership tapped Eurohypo to refinance the properties in 2007. Eurohypo securitized the senior debt and retained subordinate positions — two B-notes and two mezzanine loans. In May 2008, Eurohypo sold those notes to the Whitehall team and provided the repo facility to fund the acquisition. The facility, which is performing, matures next November. The hotels, which have 1,399 total rooms, are in Chicago, San Francisco, Miami and Minneapolis.

The portfolio also includes:

A $59.5 million senior mortgage and a $28 million mezzanine loan, both performing, on the 335-room Mondrian South Beach in Miami.

A $28 million performing B-note on the 421-room Sofitel San Francisco.

A $35 million nonperforming mezzanine loan on the 2.1 million-sf Solana, a mixed-use complex in Westlake, Texas.

A defaulted $20.5 million B-note on three office buildings, encompassing 330,000 sf, in Melville, N.Y.

The $61 million loan in the other offering is backed by the 324,000-sf Redstone Corporate Center 1&2, in Lynnwood, Wash. Eurohypo and Deutsche Hypo originated the loan in 2006 to finance the $64.2 million acquisition of the complex by Chicago-based Pearlmark Real Estate (then known as Transwestern Investment). The loan is structured as an A-note and B-note, which are being offered jointly. Eurohypo and Deutsche Hypo each funded half of the A-note, and Eurohypo funded the B-note. The loan, which matures in June, is performing, but the complex is only 54% leased, and its value has slipped.

Jones Lang will take bids on Nov. 22. A sale is expected to close by yearend.

Eurohypo, Eastdil and Jones Lang declined to comment.

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