DIG Buys $195M SoCal Non-Performing Loan
The non-performing loan portfolio features 18 properties located in Southern California in four different asset classes.
Dornin Investment Group has made a significant opportunistic play. The Laguna Beach-based firm has acquired a non-performing loan for $195 million. The loan is for an 18-property Southern California portfolio that includes apartment, retail, office and hospitality assets.
Dornin Investment Group, also known as DIG, is an active buyer of non-performing loans since 2010, and the firms CEO and founder Chris Dornin says that its experience in the distressed loan market aided in this acquisition. The firm completed a quick due diligence in only 11 days and closed the acquisition in less than 30 days. This was impressive, considering the loan’s size and complexity. Kevin Mackenzie and John Marshall with JLL Capital Markets represented the firm in the transaction and arranged financing.
The transaction shows new opportunities to buy distressed loans. Early in the pandemic, CBRE analysts predicted that investors would have to wait to purchase non-performing loans because lenders were making accommodations to borrowers. Even in the CMBS space, borrowers have been able to negotiate loan forgiveness. In more traditional financing, like banks, CBRE predicted little opportunity for distressed loans because of the accommodations banks were making for distressed borrowers.
The prediction has largely been true. So far, there has yet to be a wave of distressed loan opportunities. However, distressed loan workouts have been on the rise in the first quarter of the year, which could be a sign of market transition, according to data from Real Capital Analytics. A report released earlier this year explained that RCA estimates the stock of potentially distressed loans could equal one quarter’s worth of CRE sales activity in the 2016 – 2019 period. If that distress is realized, volume would start correcting as sellers cut price expectations.
Other investors are also predicting more opportunity this year. In January, Lionheart Strategic Management and Schroders Investment Management North America announced plans to target $250 million in transitional and distressed real estate credit investments as part of a new loan acquisition agreement.