The loans are performing at present "due to the application of funds from an interest reserve that is being rapidly depleted, after which point there is a strong likelihood that the loans will become non-performing," Verona says in a prepared statement regarding the portfolio. It says the portfolio consists of multiple cross-collateralized, cross-defaulted loans made to a single borrower and secured primarily by the residential land.The bank intends to sell the loans as a portfolio, and not on an individual basis, and wants to complete the disposition by the end of the second quarter.

Chad Buelow, co-founder and managing principal of Verona, points out that the portfolio is hitting the market at a time when Southern California land prices are rebounding, with builders and other buyers now willing to come back into the market. Buelow's observation is borne out by a report on Southern California land prices that was issued in February by the Irvine-based Hoffman Co., a land brokerage firm that tracks land values in the region.

The Hoffman report said that land values in many areas of Southern California doubled or tripled in 2009 compared to 2008, when they hit bottom. The report pointed out that the most active land buyers today are home builders, both public and private, as opposed to the opportunity funds that were the buyers when the market was at bottom.

Verona principal Dan points out that prices can vary considerably from one geographic submarket to another and says that the $135 million Southern California loan portfolio is secured by land that is in "top markets that are supply-constrained."

Century City-based Verona, formed in 2009, is a commercial real estate capital markets, mortgage brokerage and advisory firm serving institutional, middle market and individual clients.