Sunday, March 7, 2010

Island Capital buying Centerline's Special

The fund and servicing operations are going for $110mm...

Special servicers are responsible for managing troubled real estate loans and help oversee debt restructuring and negotiations with owners. Centerline was the special servicer on 81 CMBS transactions totaling $109.7 billion, and responsible for workout or resolution of 419 troubled assets totaling $5.5 billion as of Sept. 30, according to Fitch.

Seems cheap, right? The low-end fees off the specially serviced assets account for a little more than half the price ($50-60mm, easily, in year 1), and the par value of their fund has got to be $2-5billion, which is obviously underwater, but it's worth something. Let's just say they owned
3% of each deal ($3.29 billion in par), and half of it is cashflows 12 more months with a 5% coupon - $164mm per year, 25% cashflowing 12 months - $82.275mm. Someone should take all their deals, see how much of the B-pieces are still alive, and dig into this number more specifically, but I bet Farkas is getting a sweet deal here. Probably bought it at <1x EBITDA.

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