Consolidation Extends to CRE Servicing

Two commercial mortgage servicers are exiting the ranks of major servicers as a result of being acquired, in a sign that acquisitions in the sector are still going strong. In one deal, Wells Fargo is acquiring Reilly Mortgage Group, a McLean, Va.-based multifamily lender with a Fannie Mae Delegated Underwriting and Servicing presence, for an undisclosed amount. And in the other, FirstService Corp., a Toronto-based property services firm, has acquired a majority stake in Cohen Financial, Chicago, also for an undisclosed amount. The servicing portfolios are not the major impetus for the acquisitions, but they do change hands as a consequence.

Reilly Mortgage originates over $1.5 billion in new loans a year and also has a multifamily servicing portfolio of about $10 billion, according to Wells Fargo. The acquisition will add to Wells Fargo's over $95 billion commercial mortgage servicing portfolio, but Wells is more geared to adding to its lending offerings, as well as to gaining a presence in the Fannie Mae DUS space. Reilly provides financing to owners and operators of multifamily properties through Freddie Mac, Fannie Mae and FHA lending programs.

"Reilly Mortgage will significantly broaden Wells Fargo's ability to serve the needs of multifamily housing properties, and give us a presence in a number of new markets across the country," said Ed Blakey, head of Wells Fargo's Commercial Mortgage Group. "Wells Fargo, in turn, will be able to offer these customers a broader array of products and services to help satisfy all their financial needs and help them succeed financially."

Reilly Mortgage was the first mortgage banker approved under the Fannie Mae DUS program in 1988, according to Wells Fargo, and also one of the first companies approved as an FHA MAP (Multifamily Accelerated Processing) lender.

"Reilly Mortgage's success is due to its consistent focus on the multifamily sector," noted Tom Szydlowski, president and CEO of Reilly Mortgage. "Our expertise in originating, underwriting, structuring, selling and servicing multifamily real estate loans reflects Reilly Mortgage's employees specialized knowledge, and our strong relationships with FHA, Fannie Mae and Freddie Mac, and our borrower clients. We look forward to bringing these strengths to Wells Fargo."

This acquisition is expected to close in the third quarter of 2006. The business will then become part of Wells Fargo Wholesale Banking's specialized financial services group.

In the other deal involving FirstService Corp.'s acquisition of a majority stake in Cohen Financial, CEO Jack Cohen and his senior management team will hold on to the remaining equity interest in the firm, FirstService reports.

In addition to being a commercial mortgage servicer, Cohen Financial is a commercial mortgage banker and also provides advisory services in the real estate area. The company originated over $5 billion in commercial real estate-related loans last year, according to FirstService, and has an over $5 billion commercial mortgage-related servicing portfolio.

Mr. Cohen believes that the acquisition will help accelerate the growth of Cohen Financial "both internally and through acquisition." And Jay Hennick, CEO and founder, FirstService, said, "We intend to continue investing for long-term growth in this strong and growing industry segment." Considering these statements, it seems that the combined company is likely to continue to add to their servicing presence. What seems to be the impetus for this acquisition though is to gain a presence in the mortgage banking arena and to provide more comprehensive services to clients of the property services platform.

Doug Frye, president and CEO, Colliers International, a company affiliated with FirstService, said, "Cohen Financial's strong reputation and commercial mortgage and real estate investment banking expertise represent a tremendous addition to our growing commercial real estate operations and another opportunity to leverage our extensive broker network while offering a broader portfolio of services and knowledge to our clients." In a similar move last year, CB Richard Ellis, another real estate services firm, created a capital markets group that integrated its investment sales and mortgage banking businesses into a single global division. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com