NEW YORK CITY-Savanna Investment Management LLC has acquired $120 million in debt on seven office, residential and retail properties throughout Manhattan, Long Island and Connecticut. The New York City-based real estate and development firm purchased the loans from four major Wall Street banks at discounts of up to 30%. A Savanna source tells that the company will not divulge exact locations of the properties at this time.

The transactions through the $313-million Savanna Real Estate Fund I, continue to advance the firm’s opportunistic private equity investment strategy designed to take advantage of the credit crisis dislocation by acquiring subordinate bank notes. “While there are literally hundreds of potential debt deals to pursue in this climate, we have carefully picked a handful of notes secured by the kind of real estate we typically buy, own and operate,” says Nick Bienstock, a managing partner with Savanna. “Our objective with these types of investments is to generate equity-like return with substantially less risk. Our experience as a development company gives us the security of recognizing the true value of these assets.”

The Savanna source tells that the firm believes that credit for commercial real estate transactions will become increasingly scarce in the near-term, which will lead to additional debt buying opportunities for two reasons. “One main reason has to do with the ‘legacy/pre-crunch’ loans that banks are still holding,” the source says. “In particular, there are a few large investment banks who have not sold a lot of debt since last August whereas other banks were pushing hard to move debt off of their books by year-end 2007. One of the reasons that some banks held onto debt while others sold is that different banks are regulated differently, and the commercial banks were forced to recognize problems sooner than some of the investment banks. Another reason some banks held onto their debt is that they simply thought things would get better and that they had the staying power to wait until the credit markets improved, which has turned out not to be true.” The source continues that “our sense is that the banks that held onto loans with the hope that things would get better–i.e. credit would become more readily available–are now realizing that this is not the case, and are now looking to sell because they are getting capital calls from their line providers.”

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