CWCapital Asset Management LLC, a firm specializing in troubled commercial mortgages, is marketing $345 million of distressed debt in its biggest sale ever as investors circle souring loans.
CWCapital, the second-largest servicer charged with resolving problem real estate contained in securities, is selling a portfolio linked to properties spanning the U.S. from Brooklyn, New York to Pasadena, California, according to Mission Capital Advisors, the manager of the sale. Retail buildings account for the largest share of the pool, comprising 36.3 percent, followed by office buildings at 28.2 percent, according to Mission.
So-called special servicers, who deal with delinquent landlords on behalf of commercial-mortgage bondholders, are offloading bad debt as defaults pile up. CWCapital, which oversees about $21 billion in delinquent mortgages tied to office buildings, shopping centers, hotels and apartments, is selling as property investors wait for a flood of debt sales.
“Funds have raised a significant amount of capital to buy a tsunami of distressed debt,” according to Harris Trifon, a commercial-mortgage debt analyst at Deutsche Bank AG. “That tsunami never came. There is a lot of pent-up demand for that part of the market.”
LNR Property LLC, the largest special servicer, oversees about $23 billion in delinquent commercial mortgages, according to data compiled by Bloomberg.
The sale from CWCapital is composed of debt on 76 properties in 27 states, listed as non-performing, defaulted at maturity or bankrupt, according to Mission. The loans range in size from under $1 million to $16.5 million.
“The market for distressed debt has grown increasingly aggressive as clarity related to asset values emerge,” said Will Sledge, a managing director at Mission Capital. “Also driving demand is the need for private equity to deploy capital raised in the early stages to take advantage of the impending sell-off.”
The delinquency rate on commercial-mortgages bond deals recorded the largest increase since November 2010 in March, jumping 42 basis points to 10.04 percent, according to Wells Fargo & Co. Property owners fell behind on $4.3 billion in debt tied to everything from skyscrapers to strip malls, compared with about $3.3 billion the prior month, Wells Fargo analysts led by Marielle Jan de Beur said in a report last month.
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