Buyout firms Apollo Global Management LP and Centerbridge Capital Partners LLC made competing bids for CW Financial Services, parent of the second-largest manager of delinquent U.S. commercial real estate loans, according to two people with knowledge of the offers.
Berkadia Commercial Mortgage LLC, a partnership between Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp., was also weighing a bid for the New York-based company, said a third person familiar with the matter. The people asked not to be identified because the auction is private.
CWCapital Asset Management, a unit of CW Financial, is the special servicer of $143 billion of securitized real estate loans, including more than $18 billion that are delinquent, according to data compiled by Bloomberg. It has access to valuable pricing and payment information, said Ben Thypin, an analyst at researcher Real Capital Analytics Inc. in New York.
The new owner would be “in the driver’s seat on a lot of troubled loans,” Thypin said.
CW Financial may fetch more than $200 million in the auction, which is being run by Beekman Advisors, said one of the people. Officials at Apollo and Centerbridge, both based in New York, declined to comment, as did representatives for CW Financial, Horsham, Pennsylvania-based Berkadia and Beekman in McLean, Virginia.
CW Financial, a commercial real estate finance and investment company, is majority owned by a unit of Montreal- based Caisse de Depot et Placement du Quebec, Canada’s largest pension fund manager.
“The sale is in process and we have no announcement at this time,” Francois Gaboury, a spokesman for the Caisse’s Otera Capital subsidiary, said in a telephone interview. Commercial Mortgage Alert reported in March that Beekman had been hired to find a buyer.
Private-equity real estate funds, which have $80 billion to invest, are increasingly optimistic that deals will pick up, London-based researcher Preqin Ltd. said April 30. The outlook is “improved” after U.S. commercial values rose 5 percent last month from March, according to Green Street Advisors Inc., a real estate research firm in Newport Beach, California.
When commercial mortgages are packaged into securities, a special servicer is assigned to manage the assets and help direct a restructuring if the loans become troubled.
LNR Partners Inc. of Miami Beach, Florida, the largest special servicer, has been assigned about $181 billion of securitized debt, including almost $24 billion of delinquent assets, according to Bloomberg data. LNR Property Corp., the unit’s parent owned by Cerberus Capital Management LP, hired Lazard Ltd. to help restructure as much as $1 billion of debt, people familiar with the matter said on Jan. 14.
CWCapital would be the third special servicer to change hands since December. Berkadia bought Capmark Financial Group Inc.’s loan-servicing and mortgage-lending business for $468 million in December. Island Capital Group LLC, the New York-based firm run by real estate investor Andrew Farkas, agreed in March to buy the special-servicing and debt-fund unit of Centerline Holding Co. for about $50 million in cash and $60 million in assumed debt.
CWCapital’s largest troubled loan is $3 billion of debt on Stuyvesant Town-Peter Cooper Village, Manhattan’s biggest apartment complex, according to Bloomberg data. The 80-acre property, which is facing foreclosure, was purchased for $5.4 billion by Tishman Speyer Properties LP and BlackRock Inc. near the top of the market in 2006.
The firm also handles about a combined $940 million of troubled debt on Manhattan office towers at 1775 Broadway, 620 Avenue of the Americas, 575 Lexington Ave. and 119 West 40th St., and a $425 million loan on the Four Seasons Resort on the Hawaiian Island of Maui, according to Bloomberg data.
“CW may be the last major, independent special servicer to go on the market,” said Mohsin Meghji, a principal at New York-based restructuring firm Loughlin Meghji & Co. and chief restructuring officer of Capmark Financial. “There’s a short-term opportunity in servicing fees and gaining a window into so many commercial real estate restructurings has a lot of long-term value.”
Leon Black, the former head of mergers for Michael Milken’s Drexel Burnham Lambert Inc., co-founded Apollo in 1990. The firm managed $53.6 billion of assets as of Dec. 31, according to a regulatory filing. The firm’s Apollo Commercial Real Estate Finance Inc., a real estate investment trust, raised about $200 million in an initial public offering last year.
Centerbridge, Extended Stay
Apollo in March agreed to buy Citigroup Inc.’s real estate investment unit, adding 65 investments in 26 countries with a net asset value of $3.5 billion, a person with knowledge of the deal said at the time.
Centerbridge, with hedge-fund manager Paulson & Co. of New York, is leading a group that is bidding for hotel chain Extended Stay Inc. The Centerbridge-Paulson team, which also includes Blackstone Group LP, has committed to invest as much as $905.4 million in Extended Stay, which filed the largest bankruptcy case by a U.S. hotel owner in June.