Commercial Mortgage Advisory Partners has several financing programs for distressed commercial property owners. One is the Distressed Owner Recapitalization (DOR) Program. For owners unable to refinance loans, CMA Partners can tie together our expert capital advisory services with access to hundreds of active private funding sources ready, willing, and able to recapitalize troubled commercial real estate assets across the capital stack. While much of the commentary in the commercial real estate industry today focuses on investor opportunities to acquire distressed debt, the Distressed Owner Recapitalization (DOR) Program by CMA Partners focuses on helping troubled owners and developers. The Capital Markets and Structured Finance groups at CMA Partners are offering solutions every day to the ongoing liquidity crisis by providing access to more active funding sources across the capital stack. When better access to active funding sources is combined with expert advisory services, the DOR Program will positively impact owner recapitalization.
For experienced owners of existing income-producing properties looking to refinance, the program by CMA Partners offers access to investors that will purchase the note from the bank at a discount. Owners will continue to make new payments to the new investor and participate in the up side when values increase.
In those instances where the bank won’t discount the note for the income-producing property, CMA Partners has access to investors that will recapitalize it. They will provide the equity and/or mezzanine financing required to secure new senior debt of 50-65% LTV. Owners will participate in the upside once the market improves.
For experienced developers of partially completed projects that need capital to finish and operate the property, CMA Partners has access to investors that will purchase the note from the bank at a discount, allowing the developer to complete the project and operate the property. The developer will continue to make the original payments to the new investor and participate in the upside when property values increase.
For more information or to speak with a consultant, please call - 866-496-9897
Wednesday, February 24, 2010
Tuesday, January 26, 2010
Owners: $5.4B NY housing complexes go to creditors
By Samantha Gross, Associated Press Writer , On Monday January 25, 2010, 5:52 pm EST
NEW YORK (AP) -- Like many homeowners who owe more than their properties are worth, the heavy hitters behind the most expensive real estate deal in U.S. history are giving up the two massive apartment complexes they bought during the nation's housing boom.
The 110 buildings and 11,000 apartments that make up Manhattan's Stuyvesant Town and Peter Cooper Village will be turned over to creditors who financed the $5.4 billion deal in 2006, the ownership team said Monday. Fitch Ratings estimates the property now is worth $1.8 billion.
The team, led by Tishman Speyer Properties and BlackRock Realty, was hurt by the real estate market collapse and couldn't make a $16 million loan payment due earlier this month. Partnership spokesman Bud Perrone said the decision to transfer control to lenders was the only viable alternative to bankruptcy.
A number of large-scale defaults have been happening around the country as owners grapple with the aftermath of the housing-bubble collapse, a fragile economy and constrained credit markets. Many property owners have been unable to refinance burdensome debt, and in some cases, commercial property landlords facing mounting payments have had to file for bankruptcy protection or walk away from their holdings.
It has been a "perfect storm of lending and credit markets," said Steve Kuritz, a senior vice president at the credit ratings agency Realpoint LLC. "You had aggressive lending, aggressive underwriting and then you had property values plummet. It was a combination of all of that."
In April, mall operator General Growth Properties filed for Chapter 11 protection after racking up some $27 billion in debt. In June, hotel operators Extended Stay Hotels LLC and Red Roof Inn Inc. each followed suit.
And in August, Los Angeles-based Maguire Properties Inc. said it would stop making payments on more than $1 billion in loans for seven office buildings in Southern California and try to sell them or turn them over to lenders.
The bankruptcies and defaults were part of the commercial real estate market's worst year in decades, and analysts expect the woes to deepen before a turnaround takes hold. Vacancies have soared as unemployment worsened and businesses and consumers reined in spending.
Nearly $31 billion worth of commercial apartment properties were in default, foreclosure or bankruptcy as of last month, according to Real Capital Analytics. And things are expected to get worse before they get better.
Apartment vacancies rose to more than 8 percent last year and are projected to dip slightly by the end of this year, according to Marcus & Millichap Real Estate Investment Services.
In New York, the decision to turn Stuyvesant Town and Peter Cooper Village over to creditors brings an end to a deal that had been a topic of much consternation among residents and politicians who wanted to protect what had long been a bastion of affordable housing.
Monday's announcement renewed those concerns. City Public Advocate Bill de Blasio warned in a statement that "changes in Stuyvesant Town's ownership must not be used as an excuse to hike rents and skimp on apartment services."
At the time of the sale in 2006, many real estate analysts had also voiced doubts about the record purchase price, but the partnership believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar.
The tactic failed as the city's housing market cooled.
Apartment conversions happened much slower than expected, many of the roughly 25,000 tenants fought back and a state court ruled that about $200 million in the partnership's new rent increases was improper.
It hasn't been determined when the ownership transfer of the sister properties will take place and who specifically the new owners will be, said Perrone, the partnership spokesman. In a statement Monday, Fitch Ratings said it believes the transfer of control of the property could be a lengthy process.
Tishman Speyer, whose other properties include Rockefeller Center and the Chrysler Building, said it wouldn't consider a long-term management contract to continue operating the apartment complexes if it didn't involve ownership.
The housing complexes, which are so big they have their own newspaper, were built by Metropolitan Life in the 1940s for returning World War II veterans. MetLife Inc. decided to sell them in 2005, when real estate prices were soaring.
Tenants launched their own bid to take over the 11,227 units, three out of four of which were rent-stabilized and priced far below the market rate, before MetLife announced it had closed a deal.
Associated Press Real Estate Writer Alex Veiga contributed to this report from Los Angeles.
NEW YORK (AP) -- Like many homeowners who owe more than their properties are worth, the heavy hitters behind the most expensive real estate deal in U.S. history are giving up the two massive apartment complexes they bought during the nation's housing boom.
The 110 buildings and 11,000 apartments that make up Manhattan's Stuyvesant Town and Peter Cooper Village will be turned over to creditors who financed the $5.4 billion deal in 2006, the ownership team said Monday. Fitch Ratings estimates the property now is worth $1.8 billion.
The team, led by Tishman Speyer Properties and BlackRock Realty, was hurt by the real estate market collapse and couldn't make a $16 million loan payment due earlier this month. Partnership spokesman Bud Perrone said the decision to transfer control to lenders was the only viable alternative to bankruptcy.
A number of large-scale defaults have been happening around the country as owners grapple with the aftermath of the housing-bubble collapse, a fragile economy and constrained credit markets. Many property owners have been unable to refinance burdensome debt, and in some cases, commercial property landlords facing mounting payments have had to file for bankruptcy protection or walk away from their holdings.
It has been a "perfect storm of lending and credit markets," said Steve Kuritz, a senior vice president at the credit ratings agency Realpoint LLC. "You had aggressive lending, aggressive underwriting and then you had property values plummet. It was a combination of all of that."
In April, mall operator General Growth Properties filed for Chapter 11 protection after racking up some $27 billion in debt. In June, hotel operators Extended Stay Hotels LLC and Red Roof Inn Inc. each followed suit.
And in August, Los Angeles-based Maguire Properties Inc. said it would stop making payments on more than $1 billion in loans for seven office buildings in Southern California and try to sell them or turn them over to lenders.
The bankruptcies and defaults were part of the commercial real estate market's worst year in decades, and analysts expect the woes to deepen before a turnaround takes hold. Vacancies have soared as unemployment worsened and businesses and consumers reined in spending.
Nearly $31 billion worth of commercial apartment properties were in default, foreclosure or bankruptcy as of last month, according to Real Capital Analytics. And things are expected to get worse before they get better.
Apartment vacancies rose to more than 8 percent last year and are projected to dip slightly by the end of this year, according to Marcus & Millichap Real Estate Investment Services.
In New York, the decision to turn Stuyvesant Town and Peter Cooper Village over to creditors brings an end to a deal that had been a topic of much consternation among residents and politicians who wanted to protect what had long been a bastion of affordable housing.
Monday's announcement renewed those concerns. City Public Advocate Bill de Blasio warned in a statement that "changes in Stuyvesant Town's ownership must not be used as an excuse to hike rents and skimp on apartment services."
At the time of the sale in 2006, many real estate analysts had also voiced doubts about the record purchase price, but the partnership believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar.
The tactic failed as the city's housing market cooled.
Apartment conversions happened much slower than expected, many of the roughly 25,000 tenants fought back and a state court ruled that about $200 million in the partnership's new rent increases was improper.
It hasn't been determined when the ownership transfer of the sister properties will take place and who specifically the new owners will be, said Perrone, the partnership spokesman. In a statement Monday, Fitch Ratings said it believes the transfer of control of the property could be a lengthy process.
Tishman Speyer, whose other properties include Rockefeller Center and the Chrysler Building, said it wouldn't consider a long-term management contract to continue operating the apartment complexes if it didn't involve ownership.
The housing complexes, which are so big they have their own newspaper, were built by Metropolitan Life in the 1940s for returning World War II veterans. MetLife Inc. decided to sell them in 2005, when real estate prices were soaring.
Tenants launched their own bid to take over the 11,227 units, three out of four of which were rent-stabilized and priced far below the market rate, before MetLife announced it had closed a deal.
Associated Press Real Estate Writer Alex Veiga contributed to this report from Los Angeles.
Tuesday, December 22, 2009
Distressed Commercial Real Estate Soars to $180 Billion
Dec 14, 2009 12:12 PM, By Denise Kalette
The amount of distressed commercial real estate properties in the U.S. has reached a record $180 billion, according to a new report by New York-based research firm Real Capital Analytics. The distress reaches across all property types, with the greatest amount plaguing retail assets, the report shows.
By far, the market with the highest dollar value of troubled assets is Las Vegas, with $17.7 billion of properties that are delinquent, in default, bankrupt, foreclosed or otherwise owned by lenders.
Manhattan had the second-highest amount of troubled properties as of November, $12.3 billion, followed by Miami, with $7.6 billion and Los Angeles, $7.1 billion.
“The distress is formidable,” says Dan Fasulo, managing director of Real Capital Analytics. Most of the financial problems accumulated between September 2008, following the collapse of Lehman Brothers, and November 2009, he says. “Before 2008 there was no material distress in commercial real estate — period. It was just a normal market. This isn’t something you can compare with other periods. This is new for everybody.”
Unfortunately, the pace of the distress process is not slowing, says Fasulo. “I think we’ll continue to see more distress come to market well into 2010. I like to think we might hit the apex in the middle of 2010 and then start working our way down.”
As the flow of distressed properties continues unabated, resolution of the problem has been slow in taking effect. Just 10% or $18 billion of the distress has been resolved, according to the research firm.
Recent federal regulation is likely to restrict defaults among commercial properties with continuing cash flow by encouraging loan extensions and restructurings. But when it comes to properties without cash flow, such as failed developments or vacant buildings, lenders will have little alternative but to foreclose, according to the report.
“Those are assets that have no chance of recovering their full value in the short term. In those situations lenders just aren’t in a position to carry those assets for a long time. Many are [real estate owned by banks] already, but even more working are their way through the process,” says Fasulo.
Retail was the hardest-hit sector with $37.5 billion in troubled assets. Hotels were second with $32 billion, followed by office, $28.2 billion, and apartments, $27.9 billion. The industrial sector had just $5 billion in distressed assets.
Much of the distressed retail property lies in U.S. suburbs, where new residential developments were planned but never completed, because of the recession and credit crisis. “I’ll never forget driving around the loop in Vegas. There’s a brand new retail center on the desert next to the highway,” near an abandoned housing development. “It’s all plotted out for new houses. Obviously they’re not going to build the houses now,” says Fasulo.
Industrial properties fared better than other types, and are expected to remain strong into next year. “It’s not the sexiest sector. It never got over-levered the way some property classes did,” notes Fasulo. Another plus: the warehouse industry is upgrading the market with new, high-tech facilities, he says.
Investors voice frustration
Despite the high level of distressed properties, on the demand side many investors are aggravated. “I get upset calls from investors almost every day, frustrated that they can’t find anything to buy. It sounds so counterintuitive,” says Fasulo.
But a lot of the sale action is taking place on the debt side. In this difficult economic climate many properties don’t come to market in the usual way, with the help of brokers. “A lot of investors are trying to sneak in and buy the first mortgage or mezzanine debt to take control of the property that way instead of participating in a public auction,” notes Fasulo.
For the most part, investors who expected to see prime retail or office properties trotted to the market at huge discounts have been disappointed. Instead, the investors have had to become highly creative at ferreting out attractive distressed properties with bargain prices.
Because the deals have been hard to find and often have entailed “back door” access to lenders and other sources, requiring thorough knowledge of a market and connections, many investors have turned to their own local markets to find deals, says Fasulo.
For example, the recent auction of the trophy W Hotel in New York took place at an attorney’s office. There’s no way an investor sitting at a computer in Los Angeles could gain proper entrée to a deal like that, says Fasulo. That’s why so many investors now are taking a closer look at available deals in their own backyards.
The amount of distressed commercial real estate properties in the U.S. has reached a record $180 billion, according to a new report by New York-based research firm Real Capital Analytics. The distress reaches across all property types, with the greatest amount plaguing retail assets, the report shows.
By far, the market with the highest dollar value of troubled assets is Las Vegas, with $17.7 billion of properties that are delinquent, in default, bankrupt, foreclosed or otherwise owned by lenders.
Manhattan had the second-highest amount of troubled properties as of November, $12.3 billion, followed by Miami, with $7.6 billion and Los Angeles, $7.1 billion.
“The distress is formidable,” says Dan Fasulo, managing director of Real Capital Analytics. Most of the financial problems accumulated between September 2008, following the collapse of Lehman Brothers, and November 2009, he says. “Before 2008 there was no material distress in commercial real estate — period. It was just a normal market. This isn’t something you can compare with other periods. This is new for everybody.”
Unfortunately, the pace of the distress process is not slowing, says Fasulo. “I think we’ll continue to see more distress come to market well into 2010. I like to think we might hit the apex in the middle of 2010 and then start working our way down.”
As the flow of distressed properties continues unabated, resolution of the problem has been slow in taking effect. Just 10% or $18 billion of the distress has been resolved, according to the research firm.
Recent federal regulation is likely to restrict defaults among commercial properties with continuing cash flow by encouraging loan extensions and restructurings. But when it comes to properties without cash flow, such as failed developments or vacant buildings, lenders will have little alternative but to foreclose, according to the report.
“Those are assets that have no chance of recovering their full value in the short term. In those situations lenders just aren’t in a position to carry those assets for a long time. Many are [real estate owned by banks] already, but even more working are their way through the process,” says Fasulo.
Retail was the hardest-hit sector with $37.5 billion in troubled assets. Hotels were second with $32 billion, followed by office, $28.2 billion, and apartments, $27.9 billion. The industrial sector had just $5 billion in distressed assets.
Much of the distressed retail property lies in U.S. suburbs, where new residential developments were planned but never completed, because of the recession and credit crisis. “I’ll never forget driving around the loop in Vegas. There’s a brand new retail center on the desert next to the highway,” near an abandoned housing development. “It’s all plotted out for new houses. Obviously they’re not going to build the houses now,” says Fasulo.
Industrial properties fared better than other types, and are expected to remain strong into next year. “It’s not the sexiest sector. It never got over-levered the way some property classes did,” notes Fasulo. Another plus: the warehouse industry is upgrading the market with new, high-tech facilities, he says.
Investors voice frustration
Despite the high level of distressed properties, on the demand side many investors are aggravated. “I get upset calls from investors almost every day, frustrated that they can’t find anything to buy. It sounds so counterintuitive,” says Fasulo.
But a lot of the sale action is taking place on the debt side. In this difficult economic climate many properties don’t come to market in the usual way, with the help of brokers. “A lot of investors are trying to sneak in and buy the first mortgage or mezzanine debt to take control of the property that way instead of participating in a public auction,” notes Fasulo.
For the most part, investors who expected to see prime retail or office properties trotted to the market at huge discounts have been disappointed. Instead, the investors have had to become highly creative at ferreting out attractive distressed properties with bargain prices.
Because the deals have been hard to find and often have entailed “back door” access to lenders and other sources, requiring thorough knowledge of a market and connections, many investors have turned to their own local markets to find deals, says Fasulo.
For example, the recent auction of the trophy W Hotel in New York took place at an attorney’s office. There’s no way an investor sitting at a computer in Los Angeles could gain proper entrée to a deal like that, says Fasulo. That’s why so many investors now are taking a closer look at available deals in their own backyards.
Tuesday, November 10, 2009
New fed guide on commercial real estate loan mods
| The Associated Press |
(AP) — WASHINGTON - Banks must accurately identify their potential losses when modifying troubled commercial real estate loans under federal guidelines issued Friday.
Regulators have warned that rising losses on commercial real estate loans pose risks for U.S. banks, with small and mid-size banks especially vulnerable. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.
Agencies including the Federal Deposit Insurance Corp., Federal Reserve and Office of Thrift Supervision released the new guidelines for banks, which emphasize that modifying loans in a prudent fashion is often in the best interest of both the bank and the creditworthy commercial borrower.Under the guidelines, loans to creditworthy borrowers that have been restructured and are current won't be classified as high risk by regulators solely because the collateral backing them has declined to an amount less than the loan balance.
Banks that put prudent modifications into effect after making a full review of the borrower's financial condition "will not be subject to criticism (by regulators) for engaging in these efforts," even if the reworked loans end up being classified as high risk, the agencies said. They said their bank examiners will take "a balanced approach" in evaluating banks' risk management practices in this area.
Bank failures for the year hit 106 last week, the most since 1992 at the height of the savings-and-loan crisis, as institutions nationwide have succumbed under the weight of soured real estate loans and the recession.
The failures have cost the FDIC's fund that insures deposits an estimated $25 billion so far this year and are expected to cost around $100 billion through 2013. To replenish the fund, which has fallen into the red, the agency wants the roughly 8,100 insured banks and savings institutions to pay in advance $45 billion in premiums that would have been due over the next three years.
Depositors' money-insured up to $250,000 per account-is not at risk, with the independent FDIC backed by the government.
Wednesday, October 28, 2009
Capmark Files for Bankruptcy With $21 Billion in Debt
Bloomberg - By Dawn McCarty
Oct. 26 (Bloomberg) -- Capmark Financial Group Inc., the lender owned by companies including Goldman Sachs Group Inc. and KKR & Co., filed for bankruptcy protection after posting a second-quarter loss of about $1.6 billion.
The company listed consolidated debt of $21 billion and consolidated assets of $20.1 billion as of June 30, according to Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Forty-three affiliates also sought protection.
Capmark, based in Horsham, Pennsylvania, is one of the largest U.S. commercial real estate finance companies, with more than $10 billion in originations, according to Moody’s Investors Service. The company, formerly known as GMAC Commercial Holding Corp., services more than $360 billion of debt. It has struggled as the default rate on commercial mortgages held by U.S. banks more than doubled to the highest since 1994.
“The Capmark bankruptcy reinforces that, in the case of institutions with large concentrations in commercial real estate, current disruptions to the market have the potential to impact their viability,” said Sam Chandan, president and chief economist of Real Estate Econometrics LLC, a commercial real estate consulting firm in Manhattan.
Capmark asked a bankruptcy judge to approve the sale of its loan-servicing and mortgage business to Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp. for as much as $490 million. Higher bids would be sought at an auction. The deal was announced Sept. 2, the same day Capmark said it might file for bankruptcy.
‘Saved or Sold’
“All the businesses will be saved and continue with Capmark or will be sold as going concerns for full value,” attorney Martin Bienenstock, a partner at Dewey & LeBoeuf LLC in New York, which is handling the bankruptcy case, said in an e- mail.
Capmark provides mortgage financing and portfolio management services for investors in apartment buildings, offices, industrial property, shopping centers and malls. Unlike real estate investment trusts, Capmark’s core business isn’t holding property, according to its Web site.
Capmark and its units owe $7.1 billion to the 30 largest creditors without collateral backing their claims, according to court documents.
The three biggest are Citibank NA, as administrative agent under the $5.5 billion credit agreement, with a claim of $4.6 billion; Deutsche Bank Trust Co. Americas, as trustee for the 5.875 percent senior notes and the floating senior notes due 2010, with claims of $1.2 billion and $637.5 million, respectively; and Wilmington Trust FSB, as successor trustee for the 6.3 percent senior notes due 2017, with a claim of $500 million, according to court papers.
Late Payments
Capmark filed for bankruptcy following a drop in revenue from loan origination, servicing and its portfolio, said Chandan, who is also an adjunct professor at the Wharton School at the University of Pennsylvania in Philadelphia.
As of June 30, $4 billion in loans were late by 60 days or more, out of a total portfolio of $24.1 billion in securitized or owned mortgages, according to Capmark’s most recent quarterly report. That was up from late payments on $1.52 billion in loans out of a $26.9 billion portfolio as of Dec. 31.
Commercial property values in the U.S. have plunged since 2007 as employers cut jobs and the recession reduced demand for offices, retail space and rental apartments. The Moody’s/REAL Commercial Property Price Indices fell 3 percent in August from July, bringing the decline to almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.
Unleased Space
U.S. office vacancies are at a five-year high, apartment vacancies are at a 23-year record, and retail centers are showing the greatest share of empty store-fronts since 1992, according to real estate research firm Reis Inc. All that unleased space makes it harder for landlords to pay their mortgages to lenders such as Capmark.
Property investors including New York developer Harry Macklowe, whose trophies included Manhattan’s General Motors Building, and Tishman Speyer Properties LP, which controls the Chrysler Building and Rockefeller Center, are being affected by plunging values and a dearth of credit.
Losses from commercial real-estate lending pose the biggest threat to U.S. banks as the loans deteriorate, leaders of Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and Office of Thrift Supervision told the Senate Banking Committee earlier this month.
Capmark had its senior unsecured ratings lowered to C from Caa1 by Moody’s Investors Service Inc. after the announcement of the potential sale, release of the operating results and restructuring efforts, according to a Sept. 9 credit opinion published by Moody’s.
‘Substantial Losses’
“Unsecured lenders and bondholders, either in a default or restructuring scenario, would experience substantial losses,” Moody’s said.
KKR, the New York-based private-equity company run by Henry Kravis and George Roberts, wrote the investment in Capmark down to zero as of March 31 of this year, according to data provided by KKR’s publicly traded investment vehicle.
Andrea Raphael, a spokeswoman for Goldman Sachs, declined to comment on the status of her firm’s investment in Capmark.
The case is In re Capmark Financial Group Inc., 09-13684, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.
Oct. 26 (Bloomberg) -- Capmark Financial Group Inc., the lender owned by companies including Goldman Sachs Group Inc. and KKR & Co., filed for bankruptcy protection after posting a second-quarter loss of about $1.6 billion.
The company listed consolidated debt of $21 billion and consolidated assets of $20.1 billion as of June 30, according to Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Forty-three affiliates also sought protection.
Capmark, based in Horsham, Pennsylvania, is one of the largest U.S. commercial real estate finance companies, with more than $10 billion in originations, according to Moody’s Investors Service. The company, formerly known as GMAC Commercial Holding Corp., services more than $360 billion of debt. It has struggled as the default rate on commercial mortgages held by U.S. banks more than doubled to the highest since 1994.
“The Capmark bankruptcy reinforces that, in the case of institutions with large concentrations in commercial real estate, current disruptions to the market have the potential to impact their viability,” said Sam Chandan, president and chief economist of Real Estate Econometrics LLC, a commercial real estate consulting firm in Manhattan.
Capmark asked a bankruptcy judge to approve the sale of its loan-servicing and mortgage business to Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp. for as much as $490 million. Higher bids would be sought at an auction. The deal was announced Sept. 2, the same day Capmark said it might file for bankruptcy.
‘Saved or Sold’
“All the businesses will be saved and continue with Capmark or will be sold as going concerns for full value,” attorney Martin Bienenstock, a partner at Dewey & LeBoeuf LLC in New York, which is handling the bankruptcy case, said in an e- mail.
Capmark provides mortgage financing and portfolio management services for investors in apartment buildings, offices, industrial property, shopping centers and malls. Unlike real estate investment trusts, Capmark’s core business isn’t holding property, according to its Web site.
Capmark and its units owe $7.1 billion to the 30 largest creditors without collateral backing their claims, according to court documents.
The three biggest are Citibank NA, as administrative agent under the $5.5 billion credit agreement, with a claim of $4.6 billion; Deutsche Bank Trust Co. Americas, as trustee for the 5.875 percent senior notes and the floating senior notes due 2010, with claims of $1.2 billion and $637.5 million, respectively; and Wilmington Trust FSB, as successor trustee for the 6.3 percent senior notes due 2017, with a claim of $500 million, according to court papers.
Late Payments
Capmark filed for bankruptcy following a drop in revenue from loan origination, servicing and its portfolio, said Chandan, who is also an adjunct professor at the Wharton School at the University of Pennsylvania in Philadelphia.
As of June 30, $4 billion in loans were late by 60 days or more, out of a total portfolio of $24.1 billion in securitized or owned mortgages, according to Capmark’s most recent quarterly report. That was up from late payments on $1.52 billion in loans out of a $26.9 billion portfolio as of Dec. 31.
Commercial property values in the U.S. have plunged since 2007 as employers cut jobs and the recession reduced demand for offices, retail space and rental apartments. The Moody’s/REAL Commercial Property Price Indices fell 3 percent in August from July, bringing the decline to almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.
Unleased Space
U.S. office vacancies are at a five-year high, apartment vacancies are at a 23-year record, and retail centers are showing the greatest share of empty store-fronts since 1992, according to real estate research firm Reis Inc. All that unleased space makes it harder for landlords to pay their mortgages to lenders such as Capmark.
Property investors including New York developer Harry Macklowe, whose trophies included Manhattan’s General Motors Building, and Tishman Speyer Properties LP, which controls the Chrysler Building and Rockefeller Center, are being affected by plunging values and a dearth of credit.
Losses from commercial real-estate lending pose the biggest threat to U.S. banks as the loans deteriorate, leaders of Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and Office of Thrift Supervision told the Senate Banking Committee earlier this month.
Capmark had its senior unsecured ratings lowered to C from Caa1 by Moody’s Investors Service Inc. after the announcement of the potential sale, release of the operating results and restructuring efforts, according to a Sept. 9 credit opinion published by Moody’s.
‘Substantial Losses’
“Unsecured lenders and bondholders, either in a default or restructuring scenario, would experience substantial losses,” Moody’s said.
KKR, the New York-based private-equity company run by Henry Kravis and George Roberts, wrote the investment in Capmark down to zero as of March 31 of this year, according to data provided by KKR’s publicly traded investment vehicle.
Andrea Raphael, a spokeswoman for Goldman Sachs, declined to comment on the status of her firm’s investment in Capmark.
The case is In re Capmark Financial Group Inc., 09-13684, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.
Monday, September 28, 2009
IRS Relaxes Rules for Modification of Commercial Mortgages
Effective Sept. 16th, 2009 the IRS has issued a new rule (IRS Revenue Procedure 2009-45 http://www.irs.gov/pub/irs-drop/rp-09-45.pdf) that eases the restrictions on modifications of commercial mortgages that have been packaged into commercial mortgage backed securities.This action allows borrowers to open discussions with the loan servicer prior to any default in an attempt to work out the loan. Prior to this new rule only a very small number or loans in a servicing pool could be modified and they must already have been in arrears.
Commercial property owners can get a free consultation by calling 1-866-496-9897
Friday, September 18, 2009
Commercial property defaults may set record - study
By Ilaina Jonas
NEW YORK, Sept 8 (Reuters) - Commercial mortgage defaults of loans made by banks are projected to peak in 2011, and could set a new record next year, according to a report released on Tuesday by Real Estate Econometrics.
The real estate research firm revised its early projections for the rest of the year, viewing the default rate of mortgage loans on office buildings, hotels, shopping centers hotels and other non-residential income earnings property to be 4.2 percent, up the most recent forecast of 4.1 percent.
Falling rental rates, higher vacancies and the absence of a functioning credit market have combined to undermine borrowers' abilities to keep current with their monthly payments.
Real Estate Econometrics also raised its default projections for next year and 2011 to reflect a larger number of loans moving from delinquency to nonaccrual -- loans lending institutions do not expect to be repaid in full.
In the second quarter, delinquent commercial mortgage balances across all banks fell by about $2 billion, while those in nonaccrual balances jumped $6.5 billion.
The shift corresponds with banks working to identify and mitigate losses associated with problem loans earlier in the delinquency period and a rise in the share of delinquent loans that will require modification or foreclosure, Real Estate Econometrics said.
At 2.88 percent, commercial mortgage defaults in the second quarter were at their highest level since 1993/1994, the report said.
The most aggressively underwritten commercial mortgages begin to mature in 2011 -- just as property fundamentals and prices are stabilizing, Real Estate Econometrics said.
Higher expected defaults are expected to be especially troubling for smaller banks because their exposure to commercial real estate is significantly higher.
For institutions with more than $10 billion in assets, commercial real estate concentrations are 9.5 percent of net loans, while those with less than $10 billion in assets, concentrations surpass 20 percent, the study said.
At 28.4 percent, exposure to commercial real estate is highest for institutions with $100 million to $1 billion in assets, Real Estate Econometrics said. (Reporting by Ilaina Jonas; Editing by Anshuman Daga)
Subscribe to:
Posts (Atom)
