|
SLOW CLIMB OUT OF A DEEP HOLE
CRE deals start to trickle through the pipeline as owners struggle with maturing loans and banks try to get troubled assets and debt off their books. Westbrook Partners, Southwest Value Partners and Mosaic Properties and Development make big ticket acquisitions above $20M, with Westbrook’s $100M acquisition of three luxury hotels leading the way. Numerous other buyers such as Highland Park Enterprises LLC, Fairfax Countyin Virginia, the University of New Mexico and Regent Properties take advantage of distressed owners, bankruptcies and foreclosures to pick up properties at discounts that top 40%. Iberiabank and Northwest Capital Group buy back foreclosed properties that didn’t’ bring any buyers to the table.
The majority of deals getting done are still under $5M, but bigger deals are starting to pop up. Everyone anxiously awaits the entry of all sidelined capital, but for the most part, the special deals they are looking for are few and far between. Mosaic spent more than a year and a half before finding its first trophy in a retail center in South Elgin, Ill.
The volume of property sales picked up the pace late in 2009, with the year-end number hitting $50B, according to the Mortgage Bankers Association, but that was still 63% lower than 2008. Property prices appeared to stabilize in the second half of 2009, with the CPPI rising 3.6% in Q4, according to Moody’s. With Goldman Sachs estimating that 7% of banks’ commercial mortgages will eventually go bad, it’s likely transactions will pick up later this year and in 2011, as banks begin to feel the heat to foreclose on properties or trade troubled loans at reduced values.
Northwest Capital Group takes back the Exchange Building in Memphis, Tenn., for $1.9M after its affiliate, Northwest Savings Bank, foreclosed on the property in February. The 19-story apartment building was appraised for $4.2M in 2009. The Exchange Building LP defaulted on a $2.9M construction loan through First Tennessee Bank from January 1995. After numerous loan modifications and reassignments, Northwest got the loan. Thomas R. Dyer and Douglas M. Alrutz of the law firm Wyatt, Tarrant & Combs LLP were the successor trustees. The 202-unit building was built in 1910 and is listed on the National Register of Historic Places.
Highland Park Enterprises LLC buys the 70-unit Highland Park complex in Phoenix for $1.6M ($23.2K/s.f.) and a pro forma cap rate of 8.65%. The 52,350-s.f. property was built in 1974 and consists of 36 one-bedroom, one-bath units and 34 two-bedroom, two-bath units. The former owners, Antonio and Analuisa Banda, bought the property for $3.5M in 2007. The county assessor valued the property at $2.7M in 2009, $2.5M in 2010 and $1.4M in 2011.
The University of New Mexico(UNM) contracts to buy University Tower for a 44% discount from the asking price of $8.25M. The empty 99,003-s.f. Class-B building was part of the 2009 DBSI bankruptcy that the forced tenant-in-common investors to unload buildings nationally. Lender Wells Fargo foreclosed on the property. UNM still needs approval from the regents. The five-story building previously housed back office and administrative functions for UNM Hospital. Those operations were relocated in September 2008. CBRE was marketing the property for DBSI last year, but the loss of the major tenant made the property’s value decline even more. DBSI purchased the building in late 2004.
Continued on Next Page
Slow Climb Out Of A Deep Hole…
Regent Properties snaps up three nearly vacant buildings in the Glendale Corporate Center in Glendale, Ariz. The $9.2M ($63/s.f.) REO sale was all cash. Bank of the West and California Bank & Trust were the syndicate selling the deal after developer Opus West filed Chapter 11. The two banks provided land acquisition and construction loans. The property consists of 145,745 s.f. of Class-A office space with about 97% vacancy. The deal also included a 7-acre parcel of semi-approved land. The shell and core buildings were fully entitled at the time of purchase with an additional 104,737 s.f. of entitled office space to be built in the future. CB Richard Ellis marketed the property for more than a year before striking gold with Regent on a cold call. Two other buildings in the center were bought in November for $5.1M by Western Maricopa Education Center.
Mosaic Properties & Development buys the 260,000-s.f. South Elgin Crossings retail center in South Elgin, Ill., for a 65% discount from KeyBank for $24M. KeyBank took control of the 95%-leased property through a deed-in-lieu foreclosure late last year when its $33.5M senior loan matured and V-Land couldn’t make the payment. The deal also included a $3.5M second mortgage. Mosaic funded the purchase with an $18M loan from Wells Fargothat was 75% LTV based on cash flow. The center, anchored by Home Depot, Best Buy and Staples, was developed by V-Land Corp., which is facing foreclosures on several developments. The property also includes a parcel that can hold another 25,000-s.f. store.
Fairfax County buys a vacant Circuit City in Springfield, Va., for $4.5M from Monument Realty. Monument bought the property for $7.6M in July 2007. The company had plans to develop a mixed-use project with the Circuit City, but Lehman Brothers, Monument’s partner in the deal went bankrupt, followed quickly by Circuit City. Funding for the property’s acquisition came from Fairfax County Commercial and Industrial revenue funds. The property has spans 118,000 s.f. and the county looks to develop a commuter parking facility there.
Iberiabank acquires a 20,000-s.f retail center in Bartlett, Tenn., for $739K from Morton & Germany PLLC, substitute trustee appointed in June 2009. Lincoln Square Group LLC,which filed bankruptcy in 2009,defaulted on a $1.8M deed of trust through Pulaski Bank and Trust Co. from April 2006. Iberiabank purchased Pulaski Investment Corp. in 2007. Lincoln Square Group bought the Class-A center at 6496 U.S. 70 for about $1.9M in 2006. The Shelby County Assessor valued the center at $1.6M in 2009. The property was being marketed by Marcus & Millichap for $1.9M last year.
Westbrook Partners spends about $100M and garners 66% interest in three top-notch luxury hotels. Millennium Partners gets special servicer LNR Partners off its back in San Francisco, as Westbrook paid $35M on the troubled Four Seasons’ $90M securitized mortgage. Realpoint LLC estimated the
loan was worth only about $55M. While the 277-room San Francisco hotel was the only property of the three overwhelmed with debt, Westbrook also eliminates about $40M in bank debt from the
Millennium Tower in Miami and $25M for the Boston Ritz-Carlton. The San Francisco hotel ran at about 50% occupancy in 2009 and took about a $5M loss in net operating income. Millennium stopped making mortgage payments last summer, hoping to get a modification, which never happened. In Q1 of 2010, the hotel is operating at more than 80% occupancy and Millennium anticipates a $2M gain in
NOI by year’s end. Look for Westbrook and Millennium to partner and buy other distressed hotels in
the near future.
Master-Planned Communities
Southwest Value Partners (SWVP) and GoldenTree InSite Partners (GTIS) team up for the first time to buy a 4,500-acre MPC in Phoenix’s Merrill Ranch for more than $27M. The property was taken back by a group of 62 banks after Merrill Ranch Investments LLC defaulted on a $100M loan. Seventy percent of the equity came from a fund managed by GTIS, with private real estate investment company, SWVP, contributing 30%. The parcel is entitled for up to 18,000 residential lots and an additional 900 acres are fully entitled for commercial use. The JV plans to hold the lots and sell it in pieces once public homebuilders start seeking out entitled land.
NOT SO GOLDEN TIMES FOR SOME COMMUNITY BANKS
The next round of insolvent banks could hit the Golden State as many troubled commercial loans clog
their books. Only two banks in California have failed this year — La Jolla Bank FSB in San Diego and First Regional Bank in Los Angeles. But those with low capital or high exposure to risk might be on the chopping block. The Congressional Oversight Panel projects that a wave of CRE loan losses over the next four years could jeopardize the stability of many banks, particularly community banks. CRE loans originated over the past decade total $1.4T and will require refinancing between 2011 and 2014. Almost half are currently underwater because of depreciated values.
The gray area is almost gone for banks with doors still open. Michael Natzic, SVP of the Stone & Youngberg Community Bank Group, believes there are basically two classes of banks today — those with problems and those without. Many began taking a proactive approach more than a year ago and wiped bad debt off their books in the fourth quarter, but Natzic thinks first quarter 2010 will be critical. Expect many bank workout specialists to be in a closed-door meeting at the upcoming IMN Bankers Forum on Distressed Properties and Real Estate Loan Workouts in New York this month to discuss their key issues and how to solve them. Those that delayed addressing their issues have two options: raise capital or reduce exposure in the CRE market.
Regulators closely watch banks whose CRE loans to risk-based capital is 300% or more, and 10 banks considered volatile fall between 700% and 1400%, according to S&Y Community Bank Group. Banks located in California’s Inland Empire suffered greatly last year, and don’t be surprised if some banks in the Central Valley don’t make it through 2010. Keep an eye on almost 60 California banks that received low marks based on their recent numbers. Bank research firm Bauer Financial Inc. analyzes 2009 financial data for 339 FDIC insured banks operating in California and rates them on a five-star system, with five considered superior and zero to one categorized as troubled. At year-end, 19 banks received zero stars,
17 had one star and 34 had two stars, ranking them as problematic. Nine banks with zero stars had
non-performing assets in the double-digit percentile range, which include loans past due over 90 days, REO and non-accrual loans. Not surprisingly, Bauer and S&Y narrow their sights on many of the same banks.
Those with zero stars include 1st Pacific Bank of California, Banco Popular North America, Chinatrust Bank (U.S.A.), Community Banks of Northern California, First Vietnamese American Bank, Golden Coast Bank, Granite Community Bank N.A., Home Savings of America, Innovative Bank, Mission Oaks National Bank, Mother Lode Bank, Nevada Security Bank, Pacific State Bank, Palm Desert National Bank, Professional Business Bank, Saigon National Bank, Sterling Savings Bank, Tamalpais Bank and Ventura County Business Bank.
Red flags surround Tamalpais Bank in San Rafael, Calif. CRE loans to risk-based capital skyrocketed to 1401% in 2009 from 598% in 2008, according to S&Y. Regulatory orders spurred the bank to sell $28.3M in non-performing and sub-performing loans to an undisclosed third party for $15.4M, or a 45.6% discount. The loans included multifamily and CRE secured by properties located in Northern California that sold in a nationwide bidding process, an SEC filing shows. Non-performing assets totaled $46.6M, with $43M in loans and nearly $3.6M in REO as of December. The FDIC and the California Department of Financial Institutions issued a cease and desist order last September. Tamalpais operated as a single branch from 1991 to 2002 before expanding to seven branches in Marin County by 2009. Company assets were nearly $630M at year’s end.
CRE loans to risk-based capital hit 904% for 1st Pacific Bank of California in San Diego. Year-end tangible assets of $377.7M include 4.7% non-performing, according to Bauer. Residential and CRE loan originations increased approximately $2.8M, with total non-performing loans rising $2.2M to $14.5M. Any gains or losses are projected to be immaterial when the bank sells its $2.6M REO portfolio. C&I charge-offs were $594K in 2009. The bank entered into regulatory agreements with the Department of Financial Institutions and the Federal Reserve Bank of San Francisco to improve asset quality and overall capital last December. President and CEO John McGrath and EVP and Chief Credit Officer Paula Berggren have been brought on board to lead that charge because of their experience with financially challenged institutions. 1st Pacific operates six branches and opened in 2000; it consolidated its Tri Cities and Solana Beach offices this month.
Continued on Next Page
Not So Golden Times For Some Community Banks…
Ventura County Business Bank watched its CRE loans to risk-based capital nearly triple to 1199% year over year. The Oxnard bank’s charge-offs totaled $3.9M for C&D loans and $379K for C&I loans.
Loan-loss provisions tallied $5.8M. The bank, which opened two branches in 2003, had tangible assets of $101M with 8.8% non-performing.
Community Banks of Northern California sees non-performing assets soar to 15.7% in 2009 and
CRE loans to risk-based capital nearly double to 902%. The bank had tangible assets of $147.2M, with
charge-offs of $8.8M for C&D loans and $1.5M for C&I loans. Loan-loss provisions posted $10.3M. Community Banks of Northern California merged with Community Banks of Colorado in March. Both are subsidiaries of Community Bankshares Inc., which operates four branches in NoCal. Community Banks of Northern California was established in 1981 as Tracy Savings and Loan Association.
CRE loans to risk-based capital of 736% ranks Granite Community Bank N.A. in S&Y’s top 10 troubled institutions, a position it also maintains on Bauer’s list. The bank had tangible assets of nearly $118M with 17.4% non-performing. Charge-offs were $2.4M for C&D loans and $393K for C&I loans, while loan-loss provisions were $3.1M. Established in 2002, Granite runs three branches in Placer County and one loan production office.
Chinatrust Bank (U.S.A.)in Torrancemight be cleaning up its act even with zero stars. Tangible assets of nearly $2.2T include 7.9% non-performing, but the bank’s CRE loans to risk-based capital decreased from 473% in 2008 to 269% in 2009. Charge-offs totaled $101M for C&D loans and $30M for C&I loans, with $229M of loan-loss provisions at year’s end. China Trust Bank of New York was established in
1965 and renamed in 1997 after internal mergers. The bank serves the Asian American population, with
13 branches in California, two in New Jersey and four in New York. There is also a loan production office in Washington.
Low capital and a few bad loans impact Long Beach-based Golden Coast Bank. The small, local bank posted tangible assets of $37.3M, with 2.4% non-performing in 2009. However, it’s CRE loans to risk-based capital doubled to 600%. Charge-offs jumped half a million dollars to $1.5M, including $1.3M of C&D loans and $178K of C&I loans. Loan-loss provisions increased from about $1.4M in 2008 to almost $2M in 2009. In February 2010, the FDIC issued a C&D order to Golden Coast, which opened in May 2007 to primarily serve the Cambodian American population.
Two New York-based real estate companies strike a deal in the CMBS market. Centerline Capital Group, a real estate asset management and financial services firm, completes comprehensive restructuring transactions with Island Capital Group LLC in March, eliminating $1.6B of liabilities and risk. As part of the deal, Island Capital’s newly formed affiliate, C-111 Capital Partners LLC, buys Centerline’s CMBS debt fund management and commercial mortgage loan special servicing business for $110M ¾ $50M in cash and $60M in assumed senior debt — or 40% ownership. The transactions help Centerline, a subsidiary of Centerline Holding Company, reduce its debt from about $208M to $137.5M and focus on its core business of low-income housing tax credit (LIHTC) origination, asset management and multifamily lending. It also provides $100M in new equity to Centerline, which retained the services of Rothschild Inc. to source and analyze recapitalization options. Centerline was the special servicer on 81 CMBS transactions totaling almost $110B, and oversaw the workout or resolution of 419 troubled assets totaling $5.5B as of Sept. 30, 2009, according to Fitch Ratings. In December, Fitch downgraded Centerline’s servicer rating due to significant financial challenges facing the parent company.
The relationship between the two companies goes back, as Island Capital’s Chairman and CEO Andrew Farkas previously served on the board of trustees for CharterMac. Farkas founded Island Capital in 2003 after his previous company, Insignia Financial Group Inc., merged with CB Richard Ellis. Marc Schnitzer is president and CEO of Centerline Capital, which operated as CharterMac from 1997 to 2007 until going public. But the company was established in 1972 under a different name and began tax-credit syndication in 1986, when The Tax Reform Act was implemented. In 2006, its business evolved into the CMBS market when it acquired ARCap, a move that seems to bring the company full circle having sold that platform to Island Capital.
CONTACTS
1st Pacific Capital Bank of California: 9333 Genesee Ave., Suite 300, San Diego, CA 92121. John McGrath, President/CEO; James Burgess, CFO/EVP; Paula Berggren, Chief Credit Officer/EVP; (858) 875-2000.
Bank of the West: 180 Montgomery St., San Francisco, CA 94104. John Wojcik, CFO, (925) 942-8300. john.wojcik@bankofthewest.com
BauerFinancial Inc.: 2655 Le Jeune Road, Penthouse One, Coral Gables, FL 33134. Karen Dorway, President, (800) 388-6686, fax (800) 230-9569. kdorway@bauerfinancial.com
California Bank & Trust: 11622 El Camino Real, Suite 200, San Diego, CA 92130. David Blackford, President/CEO/Chairman, (858) 793-7400, fax (858) 793-7438.
California Bankers Association: 1303 J St., Suite 600, Sacramento, CA 95814. Rod Brown, President, (916) 438-4400.
Chinatrust Bank (U.S.A.): 22939 Hawthorne Blvd., Torrance, CA 90505. Geoffrey Liu, President, (310) 791-2828.
Centerline Capital Group: 625 Madison Ave., New York, NY 10022. Marc Schnitzer, President/CEO, (212) 317-5700.
Community Bankshares Inc.: 5570 DTC Parkway, Greenwood Village, CO 80111. Kathy Sisneros, EVP, (720) 529-3336. ksisneros@cobnks.com (Community Banks of Northern California Headquarters): 2140 W. Grant Line Road,
Tracy, CA 95377. Janice Mattos, SVP Operations Administration, (209) 820-6417. jmattos@cobnks.com
Connolly Properties: 128 E. Seventh St., Plainfield, NJ 07060. David Connelly, CEO, (908) 322-6755.
Cushman & Wakefield of San Diego: 4435 Eastgate Mall, Suite 200, San Diego, CA 92121. Eric Johnson,
Senior Manager of Distressed Assets and Receivership Services Group, (858) 558-5655.
eric.johnson@cushwake.com
Fairfax County Planning Commission : 12000 Government Center Parkway, Suite 330, Fairfax, VA 22035. James Hart, Committee Member, (703) 324-2865, fax (703) 324-3948.
Golden Coast Bank: 850 Long Beach Blvd., Long Beach, CA 90813. George Hwang, Interim President/CEO President,
(562) 216-6300. Josefina Guevara, SVP/CFO, (562) 216-6398. jguevara@goldencoastbank.com
Granite Community Bank N.A.: 4100 Douglas Blvd., Granite Bay, CA 95746. David Kaiser, President/CEO, (916) 788-2000. davidk@granitecb.com
HFF L.P.: 200 W. Madison St., Suite 3650, Chicago, IL 60606. William Mitchell, Managing Director, (312) 980-3607.
Stuart Salins, Senior Managing Director, (312) 528-3678. wmitchell@hfflp.com ssalins@hfflp.com
Highland Park Enterprises: 6301 N. 64th Drive, Suite 45, Glendale, AZ 85301. Andrew Chiang, Member.
Iberiabank: 200 W. Congress St., 12th Floor, Lafayette, LA 70501. Michael J. Brown, Vice Chairman/COO,
(337) 521-4012. investor@iberiabank.com
Island Capital Group: 717 Fifth Ave., 18th Floor, New York, NY 10022. Andrew Farkas, Chairman/CEO, (212) 715-5000,
fax (212) 715-5001.
KeyBank: 127 Public Square, Cleveland, OH 44114. Thomas C. Stevens, Vice Chairman/Chief Administrative Officer,
(800) 539-2968.
Millennium Partners: 1995 Broadway, New York, NY 10023. Christopher Jeffries, Founding Partner, (212) 875-4900. info@millenniumptrs.com
Monument Realty: 2900 S. Quincy St., Suite 350, Arlington, VA 22206. Michael Darby, Owner, (703) 933-9400.
CONTACTS
Morton & Germany PLLC: 45 N. Third St., Second Floor, Memphis, TN 38103. Kelly McCarthy, Attorney, (901) 522-0050, fax (901) 522-0053.
Mosaic Properties & Development LLC: 555 Skokie Blvd., Suite 204, Northbrook, IL 60062. Sherwood Blitstein, Principal, (847) 498-3977.
New York Community Bancorp: 615 Merrick Ave., Westbury, NY 11590. Ilene A. Angarola, EVP/Director Investor Relations, (516) 683-4420. ir@mynycb.com
Northwest Bancshares: 100 Liberty St., P.O. Box 128, Warren, PA 16365. William J. Wagner, President/CEO,
(814) 728-7263.
Opus West: (Corporate Headquarters) 10350 Bren Road W., Minnetonka, MN 55343. Jeff Roberts, VP Phoenix,
(602) 468-7000. jeff.roberts@opuswest.com
Regent Properties: 11990 San Vicente Blvd., Suite 200, Los Angeles, CA 90049. Scott Curtis,
Division President Southwestern U.S., (310) 806-9800, fax (310) 806-9801. info@regentproperties.com
Roma Financial Corp.: 2300 Route 33, Robbinsville, NJ 08691. Peter Inverso, President/CEO; Sharon Lamont, CFO,
(609) 223-8310.
Sheldon Good & Co.: (Midwest Region) 333 W. Wacker Drive, Suite 400, Chicago, IL 60606. (312) 346-1500;
(Eastern Region) 635 Madison Ave., Suite 1203, New York, NY 10022; (Mountain Region) 600 Grant St., Suite 425, Denver, CO 80203; (Southern Region) 7150 E. Camelback Road, Suite 200, Scottsdale, AZ 85251;
(Western Region) 101 California St., Suite 2450, San Francisco, CA 94111. John Cuticelli, CEO, (212) 672-0020. jcuticelli@racebrook.com
Spencer Savings Bank: River Drive Center 3, 611 River Drive, Elmwood Park, NJ 07407. Charles P. Woehrle Jr.,
VP/Director of Commercial Real Estate Lending, (800) 363-8115.
Sterling Banks Inc.: 3100 Route 38, Mount Laurel, NJ 08054. (856) 273-5900. Robert King, President; R. Scott Horner,
EVP. rking@sterlingnj.com; shorner@sterlingnj.com
Stone & Youngberg Community Bank Group: P.O. Box 1688, Big Bear Lake, CA 92315. Michael Natzic, SVP,
(909) 584-4500, fax (909) 585-7220. mnatzic@syllc.com
Tamalpais Bancorp: 630 Las Gallinas Ave., Second Floor, San Rafael, CA 94903. Mark Garwood, President/CEO,
(415) 454-1212.
Valeo Fund: 4835 LBJ Freeway, Suite 167, Dallas, TX 75244. Steve Lipscomb, Co-founder/Managing Director,
(972) 490-5390, fax (972) 490-3443.
Ventura County Business Bank: 366 W. Esplanade, Oxnard, CA 93036. Gerald J. Lukiewski, President/CEO and Director, (805) 604-7600, fax (805) 604-4447.
Wells Fargo Bank, N.A. Commercial REO Department: P.O. Box 63359, San Francisco, CA 94163. (415) 371-3229. www.wellsfargo.com/com/cgi/properties
Westbrook Partners: 645 Madison Ave., 18th Floor, New York, NY 10022. (212) 849-8800, fax (212) 849-8801. info@westbrookpartners.com
Wyatt, Tarrant & Combs LLP: The Renaissance Center 1715, Aaron Brenner Drive, Suite 800, Memphis, TN 38120.
Thomas R. Dyer, Attorney, (901) 537-1000, fax (901) 537-1010. tdyer@wyattfirm.com
FOREIGN INVESTORS TAKE TO U.S. SOIL
Private equity firm Valeo Fund nabs foreign investors for its $150M fund targeting discounted U.S. CRE deals. With debt up to 60%, the fund hopes to have $350M in buying power. Valeo is in the middle of fundraising and about halfway to its first closing, with approximately $22M so far. Investors are coming Latin America and Europe, with Japanese investors putting up the working capital to start Valeo. The fund recently started targeting U.S. investors as well. The game plan is 18 months to raise capital, three years to invest and five years to hold with three one-year extensions. Valeo boasts minimized fees, charging only a 1.75% asset management fee, with investors getting preferred equity back plus 80% of the profits. The partners know that their payoff won’t come until the fund runs its entire course. Valeo looks to buy between 14 and 18 properties. The fund’s sweet spot is medical office and retail, the partners’ expertise. Areas of interest include Texas, San Diego, Long Beach and other healthy coastal California markets, Denver, Atlanta, South Florida, and Washington, D.C. The firm prides itself on looking at the real estate behind the loan, and then uses the loan to get to the property. The fund will buy the asset or the loan that’s in trouble.
The backbone of the firm is four University of Texas alums, who have been friends since college and come together from various firms. Co-founder and Managing Director Fred Hamm, a former executive officer of private wealth management company Keystone Group, started his career fixing messes for the Japanese in the late 80s and built up a stable of relationships by handling their overseas assets. Co-founder and Managing Director Stephen Lipscomb was the national director of Archon Retail, a Goldman Sachs Company, where he was responsible for the company’s acquisition, development, leasing, asset management and underwriting of retail properties. Under his direction, Archon Retail grew to include five regional offices across the U.S. and a team of more 20 real estate professionals. Co-founder and Managing Director Michael Lewis left Crescent Real Estate Equities after 15 years to help start Valeo. In less than three years in his post as managing director, Lewis led his team in securing lease transactions exceeding $750M. Managing Director James Yoder served as managing director of Jones Lang LaSalle’s investor services group, serving both institutional and private clients. The team, under his guidance, leased and managed a portfolio of more than 12 million square feet.
BUYERS EYE COMMERCIAL LOAN PORTFOLIOS
CRE loans attract eager investors looking to get a piece of multifamily and mobile home park portfolios. Midland Loan Services’ $13.2M portfolio sold to nine investors that bought 12 of the 13 non-performing and REO pools. LaSalle Bank, acquired by Bank of America, was the originator on both deals. HFF LP arranged the sale, with Managing Director William Mitchell and Senior Managing Director Stuart Salins marketing the loans individually to net nearly 25% more in returns. A $90M portfolio for a money-center bank sold in 13 sub-pools, unloading 78 of the 81 loans — half of those were non-performing loans snagged by strategic buyers and the rest were performing and purchased mostly by banks. Strategic buyers are playing a bigger role as special servicers become active sellers and dispose of smaller balances, while banks are being more selective in dispositions as they evaluate their portfolios. Eighteen local and regional buyers picked up more than 95% of the portfolios’ assets that were spread across 25 states, including California, Texas, Florida, Ohio, Michigan, North Carolina and New Jersey. Midland’s portfolio took several months to close because it had recently acquired the loans and didn’t know what exactly was on the books. Mitchell notes potential buyers encountered zoning or title issues with the loans that didn’t trade.
RECEIVERS BECOME ACTIVE PLAYERS
Cushman & Wakefield looks to take advantage of the distressed asset market with two groups that help owners with troubled assets. The real estate firm formed a distressed assets and receivership services group last year, after starting a resolution group early in 2008. The receivership group, which has about 19 qualified employees who can act as court-appointed receivers throughout the U.S., primarily assists special servicers and banks, with a focus on rents and profits receivership for commercial assets. Senior Manager Eric Johnson, a 30-year industry vet who oversees transactions in California, notes that most activity has been in tertiary markets across all product types. He sees more distressed assets in retail, followed by office and industrial. Asset sales will increase over time as the bid/ask gap closes and sits around 30 basis points right now, according to Johnson. Expect receivers to remain on the scene for a while in an effort to stabilize distressed assets and rebuild value.
CRE LOANS FORCE MORE BANK MERGERS
Roma Bank agrees to spend $14.7M to acquire Sterling Bank, which fell victim to an overwhelming number of bad construction loans. The two New Jersey-based banks plan to merge by Q3, following regulatory and stockholder approvals and other contingencies. In the meantime, the banks will address any troubled assets on their books. You can lay odds on many more mergers and acquisitions to occur this year and next, as banks headed toward insolvency or with low capital assess their bottom line.
Sterling Banks Inc. is the holding company of Sterling Bank, whose non-performing assets at year’s end totaled $23.9M, including troubled debt restructurings. Sterling has been troubled recently by defaults on loans and reported losses of $14.3M in 2009. Last November, the Federal Reserve Bank of Philadelphia advised the bank to boost its reserves for bad loans by $5M. The bank is implementing an intensive loan portfolio-managing program that provides early warning and intervention of stressed borrowers. Headquartered in Mount Laurel, Sterling Bank will become a subsidiary of Roma Financial. The bank opened in 1990 and today has 10 offices in Burlington and Camden counties.
Even though Roma struggled last year, the bank still generated a $2.6M profit. Roma’s non-performing multifamily and commercial real estate loans represent $13M of the $172M portfolio. Commercial loans represent almost 88% of the 37 outstanding loans to 25 borrowers, while the rest are consumer and residential mortgage loans. The bank’s total non-performing commercial loans increased from $10.3M in 2008 to $14.8M in 2009, or almost 2.5% of total loans, 1.13% of assets and 6.85% of capital. The recession hampered Roma Bank’s efforts to quickly resolve and dispose of non-performing commercial loans, according to President and CEO Peter Inverso. Loan-loss provisions totaled $3.3M, rising from $787K the prior year. In Q4, Roma took back two commercial properties valued at $1.9M that had been in the foreclosure process for two years and plans to sell both properties — one which could generate income the spring/summer seasons if not sold before then. Roma Financial Corp. is the holding company of RomAsia Bank and Roma Bank, which operates 13 branches in Mercer, Burlington and Ocean counties and was founded in 1920.
The Distressed Real Estate Team
Email: distressedrealestate@crittendennews.com
Customer Service Newsroom (949) 900-3740
E-mail: market@crittendenonline.com
Distressed Real Estate™ is published by Crittenden Research, Inc., 45 Leveroni Court, Suite 204, Novato, CA 94949. Send address changes to Crittenden Distressed Real Estate™, P.O. Box 1150, Novato, CA 94948-1150. Contents copyright © 2010 Crittenden Research Inc. Sample newsletters may be viewed online at http://www.crittendenonline.com..
Crittenden publishes The Crittenden Report on Real Estate Financing™, Real Estate Buyers™, Retail Space News™, Restaurant Insider™, Hotel/Lodging News™, The Apartment Report™, BuildersReport™, Real Estate Developers™, Resort Report™, and Distressed Real Estate™. For more information on our publications go to http://www.crittendenonline.com.
Distressed Real Estate™ is protected by copyright. It is illegal under federal law to make and distribute copies of this newsletter in any form without permission, including without limitation, photocopies, faxes, e-mails, digital scans and postings on an intranet site. Violators risk criminal penalties and $100,000 in damages per offense. Please contact our customer service department at (800) 421-3483 for information regarding site licenses, to request reprints of articles, or to inquire about permission to make copies.
Crittenden makes every effort to ensure the accuracy of the information published in Distressed Real Estate™. Crittenden uses only those sources it determines are accurate and reliable, but no guarantee or warranty with regard to the information is made or implied. Information in Distressed Real Estate™ is subject to change. Crittenden Research Inc. does not accept fees nor is it a business partner with any companies or firms mentioned in this publication.
|
