LNR Said to Consider Investing in Pool of Cantor Fitzgerald Property Loans
LNR Property Corp., the real estate finance company partly owned by Vornado Realty Trust (VNO), is seeking to buy the most junior portion of a $600 million pool of commercial property mortgages made by Cantor Fitzgerald LP, according to a person with knowledge of the deliberations.
The deal would be Miami Beach, Florida-based LNR’s first purchase of the debt since the market for newly issued commercial-mortgage securities sprung back to life 11 months ago, said the person, who declined to be identified because negotiations are private. The company bought about one-third of the market’s riskiest debt before the financial crisis halted sales in 2008, according to JPMorgan Chase & Co. data.
Investors are pouncing on commercial real estate opportunities as prices show signs of stabilization after plunging as much as 45 percent from 2007 peaks. LNR’s investment comes as bond sales tied to the properties surge, with at least $8 billion in deals made or planned so far this year, compared with $11.5 billion in all of 2010. Selling the riskiest slice of real estate debt in a pool, known as the b-piece, is a prerequisite to issuing those securities.
“It’s an attractive space for those that are seeking higher yields and have a good understanding of real estate,” said Patrick Sargent, a partner at Dallas law fim Andrews & Kurth LLP.
Cantor’s Registration
Cantor Fitzgerald, the New York-based firm seeking to transform itself into a full-service investment bank, said in a regulatory filing yesterday it may issue as much as $1 billion in commercial-mortgage bonds.
Sandra Lee, a spokeswoman for New York-based Cantor Fitzgerald, didn’t return telephone calls seeking comment. Jennifer Brown, a spokeswoman for LNR, declined to comment.
LNR cut its debt by 67 percent last year to $425 million and raised a $200 million commercial property fund, according to company statements. Vornado, iStar Financial, Cerberus Captial Management LP and Oaktree Capital Management supplied LNR with cash to pay down the debt, the company said in a July statement.
The market for b-pieces in CMBS has been dominated by a small group including BlackRock Inc., Rialto Capital Management LLC and hedge fund H/2 Captial, according to deal documents.
LNR is the largest specialist in charge of resolving delinquent loans packaged into bonds, overseeing $26.4 billion in troubled debt, according to data compiled by Bloomberg. So- called special servicers typically purchased the junior portions of commercial-mortgage backed bonds prior to the financial crisis.
Sales of commercial-mortgage bonds may rise to $45 billion this year, according to JPMorgan. They plummeted to $3.4 billion in 2009 as credit markets seized. The market peaked with $234 billion in CMBS sales in 2007, Bloomberg data show.
To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
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