Wednesday, June 2, 2010

Villas Parkmerced - CD 2006-CD2 - $550mm

h/t crabsofsteel, rw, and sw.

Villas Parkmerced was in the news last week because they are defaulting on their loan. To the point initially made by crabsofsteel, it's Rockpoint and Stellar Management, and they are in second place (behind Lichenstein's Lighstone) for the worst CRE deals. One of their favorite trades was to go after decent multifamily projects in rent controlled municipalities (this one in San Fran, also Riverton in NYC), throw in a ton of leverage, a few upgrades, kick out the pesky rent control tenants, and move in the market paying renters. Vantage Properties and Apollo RE Advisors were another prolific JV in this same space - they're the proud owners of Savoy Park, Broadway Portfolio, Esquire Portfolio, and others.

As if to make the precise point that it's really not any easier in San Francisco than it is in NYC, Villas Parkmerced has been involved in tenant harassment suits going back at least as far as September 2008.

Apparently, they don't believe they'll be able to refinance at maturity (in October of this year) and are now with the Special. They have not missed any payments to date, unless they skipped this month, which really wasn't clear from the article. The senior note is performing fine with a 1.5x DSCR at the end of 2009 - however, the senior is $300mm, and there is an additional $250mm. At 5.65% coupons -- $31.075mm in debt service. They're clearing $30mm in NOI and NCF at YE 2009 at 100% occupancy, but were underwritten to $40mm NOI. Anyways, they're short.

Loan Structure - I may have some of the details off, but here's a rough guesstimate at the loan structure based on the servicer notes, the prosup for the deal, and a few other comments. Not sure who the owners are, but that would be interesting... I believe portions of it, if not all, are in SPAF 2006-1 and PRIMA 2006-1, both CRE CDOs, but I don't really have the details for these.

Loan Part Size Loan Number Location
A1 $300,000,000.00 30252733 CD 2006-CD2 Pooled
B1 $ 50,000,000.00 30254323 CD 2006-CD2 Directed (VPM tranches)
B2 $ 25,000,000.00 30254324 ?
C $ 35,000,000.00 30254325 ?
D1 $ 20,000,000.00 30254263 ?
D2 $ 10,000,000.00 30254262 ?
D3 $ 30,000,000.00 30254326 ?
E $30 ,000,000.00 30254264 ?
MEZZ* $ 50,000,000.00 30252735 ?
*note I saw a few different versions of the capital stack, and changed this slightly since the initial posting.

At a 9% cap, using YE 2009 NOI, it's worth $334mm. At a 5% cap, that shoots up to $602mm. The upside is that the bigger deals seem to be getting financing more easily, and this one has a decent story.

Try to buy the rakes cheap? The AJ traded last week after the news, but no color. The A4 trades relatively tight. The A2 & A3 should be trading wider than they are given the extension risk (but in Bloomberg, anyway, extending this out 24 - 48 months doesn't affect the cashflows - me thinks they have a broken model on this deal. You have to be really careful with their cashflow models in CMBS, they make more mistakes than their more expensive counterparts).


crabsofsteel said...

Thanks for the attribution; I like your blog and do what I can to make it useful.

Two points:

- Bloomberg is great for a quick snapshot of a given CMBS but there are reasons you should not rely on it for cashflow modelling. It is the old Conquest crowd, a failed analytical service which once belonged to S&P. By buying them, Bloomberg came 10 years late to the game and thus are the last place anyone who knows better looks. No exposure -> no feedback so errors go uncorrected.

- With loans like ParkMerced where the borrower has said "mod me or else" it is easier to mod if the loan remains current so default interest and late fee issues can be avoided. Unless Stellar has really thrown in the towel, which would surprise me given the NCF from the properties, I don't expect it to necessarily go delinquent.

Concrete Jungle said...

I agree. I've talked at length with the Conquest guys the last couple of years. They've come a long way, and I don't see how Trepp or Intex will survive. BBG's come a long way in the last two years, but they still have a long way to go because their are obvious faults in the CF models, that you just don't see as often with Intex, for instance. Plus, you call Intex with an error and they look into it and help you - you call Bloomberg and their first response is that you must be incorrect, and then they dick around and waste your time.

Still, at 1/3rd the cost, and rapidly improving CMBS analytics, BBG is a contender today.

Trepp needs to sell itself to Realpoint/Morningstar. Maybe Intex survives because they're really that much better and cover more markets.

crabsofsteel said...

Trepp have already sold themselves. I believe they belong to the Daily Mail, a UK news firm. Intex is private. Bberg is private.

Trepp will survive because they are the best-in-class for CMBS. Intex will survive because they handle everything, not just RMBS and CMBS, so you have no other choice if you are looking at a kitchen-sink CDO. No one else I know of is serious about modelling CDOs.

Concrete Jungle said...

I didn't realize Trepp had been bought. Interesting. I might have known that and since forgotten it, actually... I'm getting old and that has started to happen.

Anonymous said...

If you walk the complex and note that SFSU-CSU is on break, and a number of units sit "empty" I do not believe they are at 100% capacity. Base on flyers on doors, drawn window shades, and unlocked door in the towers, and overpriced flipped units, they are probably closer to 80-85% if not lower....

crabsofsteel said...

the 100% is a year-end 2009 number. You're certainly right to think it's less now that school is out, but the data in CMBS is lagged and it's the same data for everyone. So we make do with what we have.

Anonymous said...

Agreed with Concrete Jungle - Bloomberg certainly has come a long way and I can see Trepp and Intex quickly being marginalized. As for service - You must be joking - No one at Trepp seems to know how their models work, Intex barely picks up the phone, with Bloomberg once you get through the initial layers of those idiot HELP desk , you will get to the right people.