UBS AG and Barclays Plc teamed up to beat at least four other banks to provide a $1.6 billion loan for General Growth Properties Inc., highlighting Wall Street’s growing appetite for commercial real estate debt.
The lenders, which plan to package the debt for sale as securities, bid against banks including Deutsche Bank AG, Morgan Stanley, JPMorgan Chase & Co. and Wells Fargo & Co., according to five people with knowledge of the deal. The mall operator plans to use the cash to refinance six mortgages on properties including the Fashion Show on the Las Vegas strip, said the people, who asked not to be identified because the discussions are private.
Demand is surging for commercial mortgage-backed securities as investors seek riskier assets with the Federal Reserve holding its benchmark lending rate at zero to 0.25 percent for a fourth year. Sales rose to $7.9 billion last month, the most in almost five years, with banks offering new deals linked to everything from strip malls to skyscrapers, according to data compiled by Bloomberg.
Switzerland’s largest bank is boosting its commercial real-estate lending even as it cuts other units, with plans to eliminate as much as 10 percent of its investment banking staff after profit slumped 55 percent in the first half of 2012.
Representatives from UBS, Barclays, Deutsche Bank, Wells Fargo and JPMorgan declined to comment. Officials from Morgan Stanley and General Growth didn’t immediately return telephone calls and e-mails seeking interviews.
Borrowers with debt coming due such as Chicago-based General Growth are benefiting from the growing investor appetite for the securities.
General Growth, which emerged from the largest real estate bankruptcy in U.S. history in November 2010, has refinanced $10 billion debt in the last couple of years, Chief Financial Officer Michael Berman said last month.
That’s “just a stunning number in the real estate business,” Berman said in a Sept. 12 presentation to investors for a Barclays financial services teleconference. General Growth is the second-largest U.S. mall owner behind Simon Property Group Inc.
A record $232 billion of commercial mortgage bonds was sold in 2007 before issuance came to halt as credit markets seized the following year after the failure of Lehman Brothers Holdings Inc. As much as $45 billion may be sold this year, from $28 billion in 2011, according to Credit Suisse Group AG.