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March 13, 2020  

Waterfall Wins Bridge-Loan Portfolio Auction

Waterfall Asset Management has agreed to pay a slight premium for a large portfolio of performing bridge loans that Bancorp Bank started shopping late last year.

The New York investment manager had yet to close on its purchase as of this week, after submitting the winning bid of around 100.79 cents on the dollar last month. The portfolio encompasses more than $800 million of floating-rate debt backed mostly by multi-family properties across the U.S.

The auction was managed by Cushman & Wakefield, which began marketing $740 million of the loans on Bancorp’s behalf in November. Prospective buyers said in December that the pool had grown to $879 million, including some loans that were expected to close by yearend. The final tally was unavailable this week, and it was unclear if Waterfall was buying all of the offered notes.

Bancorp typically securitizes its bridge-loan originations by floating commercial real estate CLOs. After doubling its annual volume of CLO issuance via two deals totaling $1.3 billion last year, the Wilmington, Del., bank decided to use bulk loan sales as an additional avenue for replenishing its origination capital.

As previously reported, chief executive Damian Kozlowski said during a fourth-quarter earnings call on Jan. 31 that Bancorp expects to issue three CLOs this year, but that loan sales could replace one or more of those.

It’s too early to say whether its plans might be affected by the current turmoil in global markets, but industry pros said Bancorp is in a relatively good position because it focuses heavily on multi-family loans, which are generally thought to be safer than debt tied to other property types.

On the loans it’s selling to Waterfall, Bancorp will retain control of asset management, including oversight of future-funding commitments and drawdowns from loan reserves.

Formed in 2005 by managing partners Tom Capasse and Jack Ross, Waterfall targets investments in securitized products and loans. It had $8.7 billion of assets under management as of Nov. 1.

CORRECTION (3/20/20): This article has been revised. The original version understated the price that Waterfall Asset Management agreed to pay Bancorp Bank for $879 million of performing bridge loans. Waterfall’s winning bid for the entire pool of offered notes was 100.75 cents on the dollar.