NEW YORK CITY-Locally based Fortress Investment Group’sacquisition late last week of CWCapital gives Fortress control of a$183.6-billion portfolio of loans and securities, including morethan $160 billion in special servicing assignments. It alsoeffectively closes the books on the recent buying spree formarket-leading special servicers, especially as LNR Partners haslaunched a recapitalization of its business.

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“That was really the last frontier,” Mike Kent, US president ofasset and property management services for Colliers International,tells GlobeSt.com. He questions whether investment firms that wereleft out of the run on leading special servicers will be able tofind comparable opportunities.

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“Special servicers were the last independent silo, if you will,”says the Los Angeles-based Kent. “I don’t know that there are otherbusiness lines to move towards. People are just expanding theirservice lines and looking to become more efficient in theirexisting silos.” Growing revenue through acquisitions will now haveto be accomplished on a piecemeal basis, he adds.

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With the CWCapital acquisition, Fortress is acquiring avertically integrated loan origination and servicing company.“Fortress has broad, global capabilities in real estate, credit andstructured finance,” Fortress says in a release. Combining itscapabilities with CWCapital’s expertise will result in “a uniquecapacity to participate in, and benefit from, the real estatemarket’s recovery and reconstitution,” the release states.Bloomberg reported last month that CWCapital, which is majorityowned by Montreal-based Otera Capital, had attracted other biddersincluded Vornado Realty Trust and Apollo Global Management LP.

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The deal for CWCapital, which published reports say is worthbetween $200 million and $300 million, was the latest in a seriesof high-profile deals for special servicers. This past December,Berkadia Commercial Mortgage arose from the ashes of the formerCapmark Finance’s servicing and mortgage banking businesses. It wasacquired by a joint venture of Berkshire Hathaway Inc. and LeucadiaNational Corp. for at least $490 million.

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In March, Centerline Capital Group sold its special servicingand real estate debt fund management arm to Andrew Farkas’ IslandCapital Group LLC for $110 million. The price tag included $50million in cash and $60 million in assumed senior debt. The RelatedCos., which is controlled by the former chairman of Centerline’sboard of trustees, Stephen M. Ross, assumed $5 million of thepre-transaction debt. A portion of the sale proceeds were also usedto pay off about $116.3 million of unsecured debt.

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Most recently, LNR Partners, the largest special servicer with a$191-billion portfolio as of Dec. 30, 2009, took itself out of therunning as an acquisition target, at least for now. It announced arecap last month, launching a $400-million equity rights offeringand also engaging Goldman Sachs and Bank of America Merrill Lynchas lead arrangers on a $445-million senior secured loan.

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The combined proceeds from the loan and offering will be used torefinance an $868-million senior secured loan, cancel a$150-million revolver loan and pay fees and expenses. LNR’sexisting $420-million holding company debt would be converted toequity as part of the recap.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.