As the new year began, the Federal Deposit Insurance Corp consummated its second largest (only Starwood's 2.77B purchase of the Corus Bank CRE portfolio last year was larger) CRE loan pool sale.
Using Deutsche Bank as an advisor, The transaction included "1,200 loans with an aggregate unpaid principal balance of $1.02 billion, consisting of substantially all senior secured commercial real estate loans. Approximately, 70% of the loans were delinquent and about 75% of the collateral of the portfolio is in Georgia, California, Nevada and Florida. About one-third of the total was reportedly backed by land and not buildings. All of the loans were from 22 banks that have failed during the past 18 months.
The portfolio was effectively acquired at 44% of the unpaid principal balance of the loans, with a purchase price by the Colony Investors of $90.5 million (exclusive of working capital and transaction costs) for its 40% equity interest."
The article goes on to state that "from last January through Nov. 30, the FDIC announced loan sales with a total book value of $1.66 billion. The commercial real estate loans sold went for about 51% of book value combined. Broken down by quality of loan, the bulk of those sales were for performing loans ($1.16 billion), which sold at 57% of book value. The FDIC sold $387.5 million in nonperforming CRE loans last year at 39% of book value. The remainder of those loans sold last year were for mixed portfolios of performing and non-performing loans.
Those totals do not include Starwood Capital Group's winning bid of $2.77 billion for a portfolio of distressed commercial real estate assets valued at $4.5 billion that the FDIC seized from failed Corus Bank NA. Starwood's bid came in at 61.6% of book value."
Here is my question. Do the FDIC benchmarks established by these trades translate into an industry wide "standard" of expectation?
What do you think?
Ron,
ReplyDeleteOne thing to consider on the Starwood acquisition is the loans had been written down significantly before Chorus went under. Also they only had to come up with 6% of the capital the rest was a loan guaranteed by FDIC and FDIC equity. If they do become the benchmark Banks will need to raise significant capital to absorb these losses.
Mike Conaghan
(608) 233-1479
Ron, Great information. Do you know of any restrictons the purchasing entity has regarding the disposition of the non-performing assets?
ReplyDeleteTim Moriarty
214-206-5484
I don't believe it will set a standard for any sales of distressed loans from banks or other lenders who have not failed and been taken over by the FDIC, because of the fact that the FDIC can insure that there are no offset claims or defenses to the enforcement of those loans, because of the application of federal law, and the ability of the FDIC to bifurcate any borrower counterclaims, offset rights, defenses, and so on, and separate those clams from the loans themselves. I would expect, therefore, that there would be a premium attached to any sales of distressed loans by the FDIC.
ReplyDeleteRegards,
David Ambrose
drambrose@ambroselaw.com
Thanks for the comments. Tim what are you referring to as "restrictions". To buy FDIC CRE loans from one of the 5 loan sales platforms (Debtx, FFN, etc) I know you need to be an "accredited investor" and attest to such on their CA. But other than that; money talks.
ReplyDelete