Big RE Auction Set to Upend This $4.4 Billion Loan Pool: Will this affect you?

31st October 2013 · Comments Off

CWCapital Asset Management LLC, one of the largest Special Servicers, is set to sell $2.57 billion of commercial real estate owned and notes, including 8.9 million square feet of office property, 3.2 million square feet of retail property, and 2,129 hotel rooms.

The present interest rate environment, combined with ascending real estate values, makes it an opportune time for CWCapital to sell. Auction.com will host the sale with the help of a leading national brokerage firm. Bidding begins November 13th.

What does a sale of this magnitude mean for the remaining loans in those pools, for those Borrowers, and for the market at large?

Disruption Leads to…

Several major assets on the auction block belong to the same $4.4 billion pool. Three of the larger loans in the pool feature outstanding loan balances of $43MM, $50MM and $80MM with current appraised values of $20MM, $23MM, and $50MM, respectively. Add this up and the losses on these three loans alone may be between $75MM and $100MM. This loss will effectively wipe out the current controlling class, which has only $49MM of bonds in its class.

The “de-frocking” of the controlling class, when it happens, will likely put into motion the following events:

  • A new “senior” controlling class will automatically be installed–bondholders who hold bonds one grade higher than the existing CC
  • A new controlling class representative will emerge
  • The new CC representative will possess the power to appoint a new Special Servicer
  • A shift in servicers, should it come to pass, foretells a possible revaluation in loans and some uncertainty for Borrowers

With a sale this big and a $4.4 billion dollar pool at stake, we at THG are keeping our ears to the ground on this one!

If you have a loan in Loan Pool MLCFC 2007-5, the $4+ billion pool that could be upended come Nov 13th, you might want to pay particular attention to this upcoming sale. There could be other pools affected, as well. Contact THG to stay in touch with your loan and pool.

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