In terms of dollars, that means about $136 million of the $307-million pool is retail, such as a 471,444-square-foot enclosed regional mall in Texas, and McCarthy says the entire pool is dominated by assets that are up and running. "In any bank portfolio, you might find a healthier mix of broken condominium loans and REO, as well as development and land transactions," he says. "Whereas this sale is almost all vertical assets." He adds that there will probably be more vertical assets coming up for sale than there have been previously.
Most of the assets--which also include about $88 million of multifamily--are generating positive cash flow, although perhaps not to the degree they were before, McCarthy says. "They run a cross-section from no duress to where the occupancy and rent rolls are down and they're struggling." Not surprisingly, there's an emphasis on assets in states "hit a little harder than others" by the recession, including Michigan and Ohio, although some from healthier markets such as Texas and New York.
"We've got a very strong interest in this sale," says McCarthy. He explains that the most competitive bidders tend to be "national players with a domain expertise for the collateral type. Somebody who's a great operator of retail or multifamily, for example, as opposed to a generalist in every property type. And they have a very evolved exit plan for the asset."
At the opposite pole, great success is often had by local bidders. "Maybe they don't have as low a cost of funds as the national players, but they can bid with a bit more conviction," McCarthy says. "They know the local brokers who can give them a more definitive answer. They know the people who might be able to perform any deferred maintenance; they know leasing agents, and they may be aware of opportunities for the asset that someone who isn't tapped into the local market wouldn't know." Outside of those two general categories, he says, the successful bidders are "people who know exactly what they want."
As 2010 progresses, says McCarthy, "We're seeing more bidders and seeing more deals close." He adds that "the percentage of vertical assets will be higher" "in future loan sales. Moreover, he says, "We're seeing the bid/ask gap narrowing a bit. Certain parts of the country may be stabilizing. Buyers are a little more realistic and buyers are a little more aggressive. We're seeing some very positive opportunities for buyers and sellers."
The current pool was put together by a special servicer on behalf of the CMBS trusts, and McCarthy says we may see larger pools like this one, assembled by astute servicers. "Special servicers look on this as an arrow in the quill," he says. "There's a lot of pent-up demand and this is a very cost-effective way of creating a competitive environment to sell the assets."
The assets are being offered on a competitive, sealed bid basis with bids due Feb. 25. Prospective bidders may bid on an individual asset, any number of assets or the entire portfolio. Visit www.carltonexchange.com for more information.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
