CMBS, Distress Debt Plays Returning to Market

See full article here - I excerpted the last few bits on distressed debt below:

When it comes to investing in distressed debt deals, Sotoloff says the best value is found the securities space. “We were able to buy a significant amount of legacy loans,” he said. “There haven’t been as many as we expected, but that’s testament to the Fed’s efforts to keep liquidity in the market and keep banks afloat.”

The market has indeed shown a tremendous amount of rescue capital opportunities, said Gollenberg. “What was once a trickle of deals is now starting to become a steady stream of resolutions come through, where actual assets—those bank-owned properties—are starting to be resolved.”

More loans are coming out of special servicers, said Lesser; expect a few billion dollars worth to come out of that segment this year. European loan portfolios are also being sold, but it’s been very slow going. Two biggest sources, added Salem, are direct relationships with regional banks and special servicers. “More banks are starting to let go of assets.”

Kline, too, sees more activity out there than there has been in the past. “No doubt we’re going to see fewer banks over the next few years.”

Which led Donahue to comment that perhaps “too big to fail is creating too small to survive.”

Blackstone raises $10 billion in 7th Real Estate Fund

The wsj reports.

Blackstone Group LP has raised more than $10 billion in less than a year for its latest real-estate fund and is looking to raise an additional $2 billion by year's end

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This time around, Blackstone was able to raise the amount in less than a year—and about $4 billion since January—a faster pace than the previous fund, these people said. A second closing for the fund is expected next week.

Big distressed deals getting done

The WSJ highlights several distressed deals going to institutional buyers...

In the case of the Drake site, the partnership has signed a deal to pay off about 10 creditors that hold the $510 million loan the developer took out primarily to acquire the site. The creditors are getting paid as much as 90 cents on the dollar and as little as zero, the people with the knowledge of the matter said.

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Meantime, Blackstone is aiming to control the restructuring Highland by buying a chunk of so-called mezzanine debt with a face value of about $320 million from Wachovia Corp. That piece of debt, in a key position between the equity and the first mortgage debt backed by the hotels, gives Blackstone a significant say in how any restructuring unfolds, people familiar with the matter said.

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Currently, the Federal Deposit Insurance Corp. has about $30 billion in real-estate debt that had been held by the scores of banks that have failed since the economic downturn, according to the agency. CMBS servicers also are emerging as sellers because, unlike banks, they have limited flexibility to extend or restructure troubled loans. Carlton Group, a loan-sale adviser in New York, is currently marketing $307 million CMBS loans in one of the largest sales by a nongovernmental agency.