NEW YORK CITY-Locally based Fortress Investment Group’s acquisition late last week of CWCapital gives Fortress control of a $183.6-billion portfolio of loans and securities, including more than $160 billion in special servicing assignments. It also effectively closes the books on the recent buying spree for market-leading special servicers, especially as LNR Partners has launched a recapitalization of its business.
“That was really the last frontier,” Mike Kent, US president of asset and property management services for Colliers International, tells GlobeSt.com. He questions whether investment firms that were left out of the run on leading special servicers will be able to find comparable opportunities.
“Special servicers were the last independent silo, if you will,” says the Los Angeles-based Kent. “I don’t know that there are other business lines to move towards. People are just expanding their service lines and looking to become more efficient in their existing silos.” Growing revenue through acquisitions will now have to be accomplished on a piecemeal basis, he adds.
With the CWCapital acquisition, Fortress is acquiring a vertically integrated loan origination and servicing company. “Fortress has broad, global capabilities in real estate, credit and structured finance,” Fortress says in a release. Combining its capabilities with CWCapital’s expertise will result in “a unique capacity to participate in, and benefit from, the real estate market’s recovery and reconstitution,” the release states. Bloomberg reported last month that CWCapital, which is majority owned by Montreal-based Otera Capital, had attracted other bidders included Vornado Realty Trust and Apollo Global Management LP.
The deal for CWCapital, which published reports say is worth between $200 million and $300 million, was the latest in a series of high-profile deals for special servicers. This past December, Berkadia Commercial Mortgage arose from the ashes of the former Capmark Finance’s servicing and mortgage banking businesses. It was acquired by a joint venture of Berkshire Hathaway Inc. and Leucadia National Corp. for at least $490 million.
In March, Centerline Capital Group sold its special servicing and real estate debt fund management arm to Andrew Farkas’ Island Capital Group LLC for $110 million. The price tag included $50 million in cash and $60 million in assumed senior debt. The Related Cos., which is controlled by the former chairman of Centerline’s board of trustees, Stephen M. Ross, assumed $5 million of the pre-transaction debt. A portion of the sale proceeds were also used to pay off about $116.3 million of unsecured debt.
Most recently, LNR Partners, the largest special servicer with a $191-billion portfolio as of Dec. 30, 2009, took itself out of the running as an acquisition target, at least for now. It announced a recap last month, launching a $400-million equity rights offering and also engaging Goldman Sachs and Bank of America Merrill Lynch as lead arrangers on a $445-million senior secured loan.
The combined proceeds from the loan and offering will be used to refinance an $868-million senior secured loan, cancel a $150-million revolver loan and pay fees and expenses. LNR’s existing $420-million holding company debt would be converted to equity as part of the recap.
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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.
