03/23/2012

Loan Sales Experiencing Springtime Revival

After a sluggish start to the year, the market for distressed commercial mortgages is roaring to life, with portfolios totaling $1.6 billion poised to hit the block in the coming weeks.

The offerings, by Capmark Financial and special servicer LNR Partners, will join about $1.3 billion of listings that have rolled out this month from Eurohypo, Bank of America and other lenders.

While the final makeup of the upcoming listings remains fluid, rough outlines have begun to emerge. The Capmark portfolio is expected to encompass between $900 million and $1 billion of non- and subperforming loans. The roughly 60 mortgages are backed by a mix of retail properties, office buildings, hotels and golf courses. Eastdil Secured has the marketing assignment.

Capmark, formerly known as GMAC, filed for bankruptcy in 2009, after many of its loans defaulted and the market for originations went cold. When it emerged from bankruptcy in September, the Horsham, Pa., lender reported having $4.4 billion of loans “held for sale,” mostly collateralized by properties in Chicago, Southern California and the New York area.

LNR is preparing to bring out two portfolios of distressed assets next month, totaling $650 million. The Miami Beach servicer plans to sell about 100 loans, with a total balance of roughly $400 million, through its online affiliate, Auction.com. The second package, totaling $250 million, encompasses five assets, including both loans and foreclosed properties. That offering will be marketed by Eastdil, but investors will apparently place bids via Auction.com.

Typically, Auction.com has specialized in moving smaller assets. But LNR is looking to use the platform to sell large ones as well. Earlier this month, LNR used Auction.com to sell a $375 million portfolio of distressed multi-family loans and foreclosed properties for an average of 73 cents on the dollar. That offering included Empirian Chesapeake, a 374-unit apartment complex in Chesapeake, Va. It sold for over $55 million, or 87% of the outstanding loan balance.

While investors expected the loan-sale market to boom this year, many of the offerings in the first two months were modest. Only a smattering of portfolios exceeded $100 million, and most of the offerings consisted of small-balance loans. That has left many high-yield investors hungry for more.

The first large deal of the year hit earlier this month, when Eurohypo offered 12 mortgages totaling $740 million. The portfolio, being marketed by Jones Lang LaSalle, contains both high-quality and slightly distressed loans. It is drawing attention from both conservative and high-yield investors.

BofA, meanwhile, recently launched a series of loan offerings totaling more than $370 million. The largest chunk, 250 distressed assets totaling $285 million, is being sold via DebtX. Jones Lang is marketing several of the BofA offerings, including a $27.7 million performing loan on a 211-unit apartment complex in Turlock, Calif., and a $50 million portfolio containing nine loans backed by retail properties in California and Arizona.

Other lenders that have recently put distressed loans on the block include Bank of the West, which is marketing $224 million in notes via Mission Capital and Debt X (see article on Page 9), and Sun Life Financial, which is selling $88 million of sour loans via HFF and is expected to introduce another portfolio through Eastdil.

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