Mariner Takes Stake in $760M FDIC Portfolio

WASHINGTON, DC-Mariner Real Estate Management, a real estate investment and management firm in Leawood, KS, has taken a major stake in a massive portfolio via a structured transaction with the Federal Deposit Insurance Corp. Similar to other structured sales with the federal agency, Mariner took a 40% stake in the $760-million portfolio for $52 million. The portfolio includes approximately 1,100 residential and commercial acquisition and development loans located in 24 states from 20 banks closed by the FDIC.

The FDIC is retaining the remaining 60% equity interest, after providing the limited liability company with 1:1 leverage through the issuance of approximately $105 million in non-recourse, 0% interest financing and a $25-million advance facility for working capital needs. Cohen Financial in Chicago is providing the loan administration and asset management services for this transaction.

The deal is notable because Mariner Real Estate Partners is a mid-sized equity player--a group that the FDIC has been criticized by for failing to make opportunities available to its structured program, says Thomas Galli, an attorney with Greenberg Traurig, who represented Mariner in the deal. “Mariner’s execution on portfolios in that program proves that criticism to be without merit,” he tells GlobeSt.com.

Senior executives at Mariner Real Estate invested a significant amount of time to track portfolios in prior FDIC structured transactions and adopted a “patient wait” strategy for a portfolio that fell off the radar of large private equity firms and other investors, Galli explains. “The two portfolios on which Mariner executed were precisely those that did not attract the interest of the larger and regular bidders for FDIC-structured transactions.” In short, he says, Mariner’s strategy of patience was brilliant. “I have been very impressed with their level of sophistication and their practical approach on the performance of due diligence,” he says.

Galli has the experience to judge: namely, he has represented three different clients on four of the last five commercial real estate and land loan portfolios in structured transactions done by the FDIC--essentially, cornering this particular legal niche. The portfolios he has worked on have had loans secured by various types of real estate located throughout the country for an aggregate unpaid principal balance of over $3 billion.

Greenberg has been prepping for this opportunity for some time, Galli says. “We have invested an extraordinary amount of time to position for the provisions of services on the volume of nonperforming loan portfolios that are trading and will trade soon in greater volume,” he adds, including establishing special teams in each of the states in which the firm has offices and developing a proprietary program to streamline legal fees.

Now, Galli is getting ready for what he perceives to be the next two waves of loan portfolio acquisition opportunities. Those opportunities will occur through teaming by healthy banks and real estate private equity firms to acquire failed banks (and their loan portfolios) from the FDIC, and a replication in private sector portfolio transactions of the principal terms of the FDICs structured transactions, he says. "We will start to see these waves reach shore in the next two quarters and continue for some time thereafter," he adds.

Ryan Anderson, co-president and partner at Mariner, tells GlobeSt.com that this will be a long-term hold. “We don’t intend to go in there, fire-sale like, and turn it around for cash. We want to buy and hold, and aggressively work out of this stuff, and with our FDIC partnership to try to recover the highest amount we can,” he says.

Marty Bicknell, CEO of Mariner, said Chicago-based Cohen Financial will provide loan administration and asset management services for the portfolio, which includes loans from 20 banks in 24 states. Tim Mazzetti, a partner and EVP with Cohen, says his company will be growing its offices in size and staff due to the affiliation. “We currently only service about 150 defaulted loans. This significantly will ramp up our platform, and put us up there with the big boys,” he tells GlobeSt.com.

Mazzetti says his firm has geared up to grow special servicing, and he doesn’t see any end in sight with delinquencies and defaults continuing into 2011. He says the jobless rate rise to 9.6% in August shows fundamentals have a long way to go to create a sustainable recovery. “Without a massive dump of assets, like in the mid-1990s, the economy is probably going to bounce along the bottom for some time. It could be 2015 or even 2020 before we get back to a healthier market,” he says.