CW Capital Auction

We're starting to see results from the CWCapital Auction trickle out in servicer reports and in the news.


In particular:

1. 119 West 40th Street (GSMS 2007-GG10) - latest file reflects a $171mm sales price (note this reflects the listed proceeds in the monthly report and is higher than the BBG article estimate). Unlike the other loans in this list, this is a loan sale (the others were REO already). It is 106% of outstanding loan balance, a 40% premium over the 9/2012 appraisal,  and resulted in a 30% loss severity.


2. Two California Plaza (GSMS 2007-GG10) - CIM purchased. No price or estimate available. Largest asset in the sale. BBG noted that part of the transaction included CIM taking over property at the end of 2014 (REO sale). The most recent appraisal was $343mm in 1/2013 vs a $468mm loan balance outstanding. 


3. Montclair Plaza (WBCMT 2006-C28) - CIM purchased for $170mm, 89% of outstanding balance, 13% over 2/2013 appraisal, 29% estimated loss severity (after accounting for advances, etc.).


4. Four Seasons Resort and Club Dallas (WBCMT 2006-C28) - BBG estimates $150.5mm sales price, 86% of outstanding loan value, 12% premium over the 9/2013 appraisal, 28% estimated loss severity (after accounting for advances, etc.).

As an aside, the BBG article mentioned PCV/ST in the context of the $3.4 billion appraisal from 9/2013, and the increasing likelihood of a disposition in the second half of 2014.

Stuy Town Tenant Group cuts out the middle man

The Stuyvesant Town-Peter Cooper Village Tenants Association tenant group wants to cut out the Special and deal directly with bondholders. Here is the letter to tenants, and here is the letter to CW Capital, the Special.

The group, which has been working with Toronto-based Brookfield Asset Management Inc. (BAM/A) on a plan to convert apartments into condominiums and pay off bondholders, said that CWCapital refuses to consider it. “It has thus far been unwilling to work directly with us and to share the information necessary for us to formalize a bid in advance of opening up the property to a formal sale process,” the association wrote. “CWCapital’s overall response to our attempts to engage it has been to stall and delay.”

Although some saw this as a negative, it clearly shows there is a bid for the property that could result in a $0 loss to the Trust. The lawyers are definitely taking their pound (or ton in this case) of flesh first though.

Astounding! Rare! May be in Jeapordy!

Big impact words used in multiple articles about loan that sells for more than it's outstanding mortgage balance:

The DJ News headline characterizes it as "rare",

CMBS Investors Get Rare Payoff On '07 Loan

DB says,

Harris Trifon, a commercial mortgage bond strategist at Deutsche Bank, characterized the sale as "astounding"

DJ states,

By actually turning a profit on the loan, which it has been trying to resolve for three years, troubled-loan specialist firm CW Capital Asset Management has demonstrated that in some cases, patience pays.

It sure does! They charged $10.6mm in fees! That is like 14.5% of the loan's balance - not only did they manage to not get sued by the CMBS trust holders, support their own weakened B-Piece position, make a great deal with BlackRock and Korman (the buyers), but they completely ripped the face off the sponsor while he was down. Awesome! Riveting!


Do you know what else is rare and astounding? The Ossabaw Island Hog. Pig roast anyone?

$186mm Hotel Loan with -0.03 DSCR Gets 5 year extension! Believe!

There are special circumstances associated with the Park Hyatt Aviara Resort loan, but I never would have believed I'd see the day where a loan losing over $1mm a month after debt service (about 1/2% of the total balance) would get extended for 5 years a full year before it's maturity date, but here we are.

After a long dispute and subsequent arbitration with Four Seasons, the operator, Broadreach Capital (the owners) were able to replace them with Hyatt. Hyatt intends to re-brand it as a Park Hyatt (looks like they've already done it). The change in management contributed substantially to the servicer's decision according to the Bloomberg story on it. It also notes that all the payments are current now and the default (September '10) was simply a strategic move to enter the negotiations.

The loan is Four Seasons Aviara Resort - Carlsbad, CA in WBCMT 2007-C30. CW Capital is the Special. 329 keys, 18 hole Arnold Palmer course, renovated in 2006. It's now scheduled to mature in February 2017.

Two California Plaza - Update your models to "PENDING MODIFICATION"

Located in the heart of the U.S.'s former subprime operations headquarters (#3 tenant was Aames), Two California Plaza ($470mm senior in GSMS 2007-GG10 representing 6.30% of the deal) long ago depleted debt service reserves and was coasting on cash from the sponsor (Maguire/MPG). As of the end of the first half of this year, it's NCF DSCR was at 0.92x with 84% occupancy - not horrible, considering, but most investors have been angling for this property to get modified.



Earlier today David Weinstein (MPG CEO) stated

Two California Plaza as part of its core set of assets, and expects to have the opportunity to explore various potential options for doing so once the asset is transferred into special servicing. At this time, we do not believe that funding current and projected operating deficits at this asset with the Company’s precious unrestricted cash is in the best interests of our stockholders.

It originally traded at the peak at a 5% cap rate, roughly. If you apply that same cap rate to today's cash flows, you get a value of $507mm, still above the senior. That is too optimistic a view, in my opinion, but it's not horribly off either for a trophy asset like this. A 6% cap rate dings the first mortgage.

The maturity date is not until 2017, and the coupon is 5.5%. Not clear on what type of modification they are after, but it is definitely headed that way.

Ackman/Winthrop Sells PCV/ST Stake to CWCapital

More than $3 billion in Loan Sales Coming...

Also on the CRENews website, from last week:

Since the beginning of September, loan-sales advisers have taken offers on some $1.5 billion of loans that they have been marketing on behalf of their bank, special servicer and government-agency clients. And the expectation is that substantially more loans - as much as $3 billion or more - will be offered in the coming weeks.

...
Among special servicers, LNR Partners, CWCapital Asset Management, C-III Asset Management and Midland Loan Services are each said to be preparing the sale of loans.

LNR will be offering $200 million of hotel loans through Jones Lang LaSalle and another $100 million of small-balance hotel loans through an auction venture of JLL and REDC. It will also be offering roughly $150 million of additional loans through DebtX.

Earlier this year, it [LNR] orchestrated the sale of a $1 billion portfolio that was comprised largely of small-balance loans. Those loans were sold through Eastdil Secured to four investor groups. But instead of going the bulk-sales route this time around, the Miami company is looking to sell loans individually.

CWCapital, meanwhile, will take bids for $207 million of loans later this month through Mission Capital. It has also offered loans through CB Richard Ellis and Eastdil.

The very excellent article goes on to list a number of other coming sales from banks including M&I, BB&T, KBW (for a third party) together are expected to sell another $2-3 billion in portfolio loans.

As previously noted, everyone was waiting to see how these late summer CMBS sales ($1.5 to $2 billion was CMBS loans via Eastdil and Mission Capital) went in order to judge what to do with the other $80 or so billion on special servicers' desks. At the end of the day, the big $1.04bln LNR package of small balance CMBS loans exceed expectations and were mostly bought up by a large financial institution and financed by another large financial institution (both household names) at higher than expected prices.

I don't know what that does to the market - so many buyers have to deploy capital or lose it, so maybe they acquiesce now that a high watermark has been set and they just keep bidding up prices. Surely sellers like the execution and will start flooding the market just as Orest Mandzy notes in the above article.

At the very least CMBS credit IO holders should probably start shortening their expected workout periods on the aged REOs. The LNR sale was officially announced on 4/29/2010 (there were some early looks in mid-April) and the losses were reflected on the loans on 7/21/2010. That seems pretty quick to me.

CWCapital suitors: Centerbridge, Apollo, Berkadia

From BBG:

May 13 (Bloomberg) -- Buyout firms Apollo Global Management LP and Centerbridge Capital Partners LLC made competing bids for CW Financial Services, parent of the second-largest manager of delinquent U.S. commercial real estate loans, according to two people with knowledge of the offers.
Berkadia Commercial Mortgage LLC, a partnership between Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp., was also weighing a bid for the New York-based company, said a third person familiar with the matter. The people asked not to be identified because the auction is private.
CWCapital Asset Management, a unit of CW Financial, is the special servicer of $143 billion of securitized real estate loans, including more than $18 billion that are delinquent, according to data compiled by Bloomberg. It has access to valuable pricing and payment information, said Ben Thypin, an analyst at researcher Real Capital Analytics Inc. in New York.

Sell Mortimer, Sell!

Specials are coming out of the woodwork with CMBS loan portfolios for sale. First it was a hundred million there, a hundred million here, then LNR comes out in March with the $1billion portfolio announcement and the actual list in May (2 months?). Now we're seeing a $500mm and $300mm lists since the LNR lists from two others...

This is going to hurt those credit IOs. Well, we're going to see some accrued interest recapture real quick and some realized losses real fast - that'll help the lower mezz that are cusping on shortfalls but not potential principal loss and the short AAA stack - but that'll be followed by much shorter workout periods on loans.

Going into this CRE disaster the typical work out period was a little over 1 year (from 1st default to sale of asset), then the world changed and we all assumed it was going to average around 2 years, and now ... we need to focus on 2 month resolutions on already defaulted mortgages, and 6-8 month resolutions on newly defaulted loans.

Thoughts?

Whale Hunting in Maui

WSJ reports that MSD is defaulting on the Four Seasons Maui mortgage - trouble should be expected given their partnership with Rockpoint on a number of properties at the peak.

MSD Capital LP, the private investment firm of Dell Inc. founder Michael Dell and his family, skipped the February payment on the debt as it seeks to restructure the loan, according to credit-rating company Realpoint LLC. The 380-room hotel's debt is split between two securitized mortgages, one of $250 million and one of $175 million.

Meanwhile, Beanie Baby tycoon Ty Warner's Ty Warner Hotels and Resorts reached a deal this week to extend by two years its mortgage on several resorts, including the 368-room Four Seasons New York, according to a person familiar with the talks. The mortgage had come due last January, but the four resorts pledged as collateral for the loan weren't generating enough cash flow to qualify for an extension.

Other Four Seasons hotels are working on compromises with their lenders. Mixed-use developer Millennium Partners LLC this month saved its Four Seasons San Francisco from foreclosure by bringing in Westbrook Partners LLC to pay $35 million of the hotel's $90 million securitized mortgage.

Four Seasons Dallas owner BentleyForbes LLC is negotiating with the special servicer overseeing the hotel's $183 million mortgage to revise the loan's terms. In the interim, the two entered a forbearance pact in which the special servicer has agreed not to foreclose as they try to work out a compromise.

In Hawaii, MSD Capital bought the Four Seasons Maui for $280 million in 2004. It then refinanced the property in 2006 with the two mortgages totaling $425 million.

CWCapital For Sale

Last week CMAlert noted that CWCapital was searching for an investor to take out Caisse de depot et placement du Quebec, which currently holds the controlling interest.

I'm refraining from including a link due to the annoying balloon pop up associated with the website where the story is - it actually blocks the content, and if you close it, it just comes back. The one sentence above is really the bulk of the story, and pop-up blocker will not block the balloon... I am but one man, and this is my protest.