$100M in Distressed CMBS Hits the Market

NEW YORK CITY-The $99.7-million portfolio of 11 non-performing CMBS loans, which Mission Capital Advisors and Rockwood have just brought to market on behalf of a special servicer, isn’t necessarily a microcosm, Mission Capital’s Will Sledge tells me. Except, perhaps, in the sense that it runs the gamut of property types and that we’re likely to be seeing more of these sales.

Largest of the asset types by unpaid balance is office, although that figure is skewed upward by a single non-performing loan on a 94,400-square-foot property in Manhattan that was more than 50% vacant as of Dec. 31, 2010. Its UPB of $47 million comprises nearly half the pool’s total.

“I don’t know that there’s a broad message in this portfolio,” says Sledge. “Assets such as these are regularly managed by the special servicer and identified on a case-by-case basis for sale. This happens to be the current makeup of that portfolio.”

He adds that when it comes to selling loans for special servicers, Mission has been busiest lately with retail, although office and multifamily aren’t far behind. Sledge declines to identify the special servicer behind this sale, but notes that Mission regularly works with CWCapital Asset Management, LNR Partners and others.

That being said, Sledge adds, “We’ll continue to see asset sales of this makeup and size, perhaps even larger, on a go-forward basis.” He says that secondary and tertiary markets will probably be the focal point of such portfolio sales in the months ahead. “In some of the more primary markets, a lot of the low-hanging fruit is being picked and is already making its way through the sales process.”

According to the offering memorandum, the portfolio also includes loans backed by office assets in Phoenix and in Hammonton, NJ; retail in San Bernardino, CA and the suburban markets of Canton, MI; Tamarac, FL; and Peoria, AZ; a 101-key hospitality asset in Sarasota, FL; a manufactured home community in Niagara Falls, NY; and a medical office property in Longwood, FL. Mission and Rockwood are soliciting indicative bids for either individual loans, any combinations thereof or the entire portfolio, with a May 2 deadline for indicative bids and a May 10 deadline for final bids, according to the memorandum.

Two years ago, Sledge told GlobeSt.com that allowing would-be bidders to mix-and-match had advantages for both buyers and sellers. “We let investors pick their spots,” he said in 2009. “For instance, a homebuilder in Florida who’s looking to take down additional lots and dollar-cost-average, his basis may not be willing to play in Texas. So you allow investors to take down the asset classes, performance types and geographic locations that they’re interested in and focus on an asset-by-asset basis. That usually results in higher overall pull-through in pricing for the seller.”

Today, Sledge says, the same advice applies, although he adds, “It could also be that out-of-town buyers and private equity funds that are looking to take down larger chunks of debt may be even better bidders than local buyers. They may be more aggressive and have lower cost of capital. A local player who in your mind is a better fit for the asset may be outbid by someone who has cheaper money and a larger asset management machine behind them.”