Also This Week: Vornado Consolidates Ownership of Springfield Mall; Red Stone Closes on Two Tax-Exempt Multifamily Bonds; Resource Buys Non-Performing Note on Birmingham Apartments; and KBS Buys Non-Performing Notes on Two Office Buildings in Atlanta
The Federal Deposit Insurance Corp. closed on the sale of a series of loan portfolios.
In the first deal, the FDIC sold a 40% equity interest in a newly- formed limited liability company created to hold assets with an unpaid principal balance of approximately $204 million from 12 failed bank receiverships.
The winning bidder of the FDIC Multibank CRE Venture Loan and REO Structured Transaction 2010-2, Northern Pool was ColFin Milestone North Funding LLC, a consortium of investors organized by Los Angeles-based Colony Capital. The purchase price was 27% of the unpaid principal balance. The Cogsville Group LLC of New York is minority-owned and partnered with Colony.
As an equity participant, the FDIC will retain a 60% equity interest in the LLC and share in the returns on the assets. The FDIC offered 1:1 leverage financing to the LLC, which will issue to the FDIC purchase money notes of $28.5 million. The sale was conducted on a competitive basis with the FDIC receiving bids for either a 40% ownership interest or a 20% ownership interest in the LLC.
The FDIC as receiver for the failed banks will convey to the LLC a portfolio of approximately 557 distressed commercial real estate loans, of which more than 50% are non-performing. Collectively, the loans have an unpaid principal balance of approximately $204 million. About 82% of the collateral in the portfolio is in Michigan. As the LLC's manager, Colony will manage, service, and ultimately dispose of the LLC's assets.
All of the loans were from banks that failed during the past 20 months.
In a second deal, the FDIC closed on a sale of a 40% equity interest in a newly- formed limited liability company created to hold assets with an unpaid principal balance of approximately $137 million from five failed bank receiverships.
The winning bidder of the FDIC Multibank CRE Venture Loan and REO Structured Transaction 2010-2, Western Pool is Colony Milestone Co-Investment Partners LP, a consortium of investors also organized by Colony Capital. The purchase price was 60.10% of the unpaid principal balance. The Cogsville Group again partnered with Colony.
As an equity participant, the FDIC will retain a 60% stake in the LLC and share in the returns on the assets.
The FDIC offered 1:1 leverage financing to the LLC, which will issue to the FDIC, as receiver, purchase money notes of $42.6 million. The sale was conducted on a competitive basis with the FDIC receiving bids for either a 40% ownership interest or a 20% ownership interest in the LLC.
The FDIC as receiver for the failed banks will convey to the LLC a portfolio of approximately 198 distressed commercial real estate loans, of which more than 38% are non-performing. Collectively, the loans have an unpaid principal balance of approximately $137 million. About 78% of the collateral in the portfolio is in Utah. Colony will manage, service, and ultimately dispose of the LLC's assets.
In a third deal, the FDIC sold a 40% equity interest in a newly-formed limited liability company (LLC) created to hold assets with an unpaid principal balance of approximately $279 million from nine failed bank receiverships. The winning bidder of the Western Residential Acquisition and Development pool of the 2010-2 Multibank Structured Transaction was Cache Valley Bank in Logan, UT, with a purchase price of 22.22% of the unpaid principal balance.
As an equity participant, the FDIC will retain a 60% stake in the LLC and share in the returns on the assets. The FDIC offered 1:1 leverage financing to the LLC, which will issue to the FDIC a purchase money note of $30.6 million. The sale was conducted on a competitive basis with the FDIC receiving bids for either a 40% ownership interest or a 20% ownership interest in the LLC.
The FDIC as receiver for the failed banks will convey to the LLC a portfolio of approximately 761 distressed residential acquisition and development loans, of which more than 50% are delinquent. Collectively, the loans have an unpaid principal balance of approximately $279 million. About 81% of the collateral in the portfolio is in Utah, Arizona, California, and Nevada. Cache Valley will manage, service, and ultimately dispose of the LLC's assets.
All of the loans were from banks that failed during the past 14 months.
Lastly, RoundPoint Financial Group purchased a 40% stake of a $603 million mortgage loan portfolio from the FDIC in conjunction with RBS Financial Products Inc.
The FDIC retains a 60% equity interest in what is a newly created venture that will acquire the pool of mortgages. RoundPoint Capital Group and RoundPoint Mortgage Servicing Corp. will oversee the management and servicing of all loans in the portfolio.
Vornado Consolidates Ownership of Springfield Mall
Vornado Realty Trust acquired the mortgage loan secured by the Springfield Mall in Fairfax County, VA. Vornado paid $115 million for the loan, which had an outstanding balance of $171.5 million.
In a separate transaction, Vornado acquired its partner's interest in the partnership that owns the 1.24 million-square-foot Springfield Mall in exchange for $25 million of 5% preferred units of Vornado Realty LP.
In connection with these transactions, Vornado will record a financial statement gain of approximately $98 million in the fourth quarter of 2010.
Red Stone Closes on Two Tax-Exempt Multifamily Bonds
Red Stone Partners, a national real estate finance company closed on two fixed rate tax-exempt bond purchases.
Recently closed transactions include, the Orchards Apartments, a 220-unit affordable, family property in Kansas City, MO. Red Stone acquired and restructured $9.18 million of tax-exempt bonds to facilitate a refinancing of the property. The Orchards, built in 2005, offers a mix of one- and two-bedroom floor plans with amenities including a fitness center and swimming pool.
The second, Flipper Temple Apartments, is a 163-unit multifamily property in Atlanta, GA. The property benefits from a long-term Section 8 HAP contract and has historically operated at 100% occupancy. Red Stone is providing financing through the direct purchase of $9.6 million of tax-exempt bonds. Equity was provided through the syndication of approximately $7.14 million low income housing tax credits. The property will undergo a substantial rehabilitation totaling approximately $44,500 per unit.
Red Stone has committed to close an additional $70.65 million in tax-exempt financings before year-end 2010. The properties include a combination of "80/20" market rate transactions, 4% LIHTC bond transactions and preservation transactions with HUD Section 8 HAP Contracts. Financing terms range from five to 18 years.
Resource Buys Non-Performing Note on Birmingham Apartments
Resource Real Estate Opportunity REIT, through an indirect wholly owned subsidiary, purchased, at a discount, two non-performing promissory notes both secured by a first lien mortgage on a multifamily community known as Crestwood Crossings Apartments from Capmark Bank. The contract purchase price was $6.25 million.
The notes were originated Nov. 30, 2007, in the original principal amount of $11 million. The A Note was originally for $6.825 million bearing a 6% per annum fixed interest rate and a B Note of $4.175 million bearing a variable interest rate equal to LIBOR plus 2%.
Crestwood is a 270-unit garden-style apartment community constructed in 1980 and in Birmingham, AL. As of Nov. 9, the property was 74% occupied.
The borrower under the notes is CV Apartments LLC.
The maturity date of the loan was Dec. 1, 2010, but the borrower failed to pay the outstanding principal and interest due on the maturity date.
Resource's strategies include: restructuring the loan, negotiating a discounted payoff or foreclosure. As of Dec. 10, the outstanding loan balance was $10 million.
KBS Buys Non-Performing Notes on Two Office Buildings in Atlanta
KBS Strategic Opportunity REIT, through an indirect wholly owned subsidiary, purchased, at a discount, a non-performing first mortgage loan (the Northridge Center I & II mortgage) for $7.1 million plus closing costs.
It acquired the loan from Bank of America, as successor by merger to LaSalle Bank National Association, as Trustee for the Registered Holders of CCMT 2005-C3.
The Northridge Center I & II mortgage is secured by two office buildings containing 188,509 rentable square feet constructed in 1985 and 1989, respectively. The buildings are at 365-375 Northridge Road in Atlanta, GA and, collectively, are currently 83% leased, with a lease of 61,216 square feet expiring on Dec. 31, 2010.
The tenant under this lease has indicated that it will not renew this lease. So as of Jan. 1, 2011, the buildings will be collectively 49% leased.
KBS will explore various strategies including the following: negotiating with the borrowers for a reduced payoff, restructuring the terms of the loan, or foreclosing on the collateral.
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Mark Heschmeyer