Carlton Group Offers $307 Million In Distressed Assets

Nonperforming and REO asset pools are rising in both commercial and multifamily properties, pushing servicers to use sealed bid sales as an essential tool to move these assets.

Carlton Group, a real estate banking firm based in New York, is helping its servicer clients do just this. The company was recently retained on behalf of various CMBS trusts to sell approximately 66 nonperforming loan and REO assets worth $307 million.

Forty-four percent of the assets totaling $136 million are retail and 29% worth $88 million are multifamily. Located in Texas, Florida, Michigan and California, the assets are being offered on a competitive, sealed-bid basis with bids.

"The assets in this pool are very much in line with what's happening across the board for the CMBS loans that special servicers handle. If you look across the country, I also think it's reflective of the fact that retail properties are probably defaulting at a bit faster rate than multifamily," said James Gosse, director of loan sales in the company's Atlanta office.

The pool includes a mix of assets located in states that have been hit hard by the economic crisis.

"We've got about 20% in Michigan where there is serious pain related to the auto industry. There's quite a bit in Ohio, Florida and Arizona. Texas and New York are some of the stronger states. Maryland and Connecticut would still be considered strong."

The multifamily assets range in size from 50- to 500-unit multifamily apartment complexes in addition to occupied and cash-flowing retail centers. Bidders are able to look at individual assets.

Over the past 12 months, the pain in the retail sector has made headlines, which hasn't been helped by consumers tightening their belts and being uncertain about what is around the corner. "Multifamily properties are having trouble in many cities because the inventory got so built up. Some of that was condo inventory that has been turned back to multifamily and it kind of trickles down in a painful way," said Mr. Gosse.

When Carlton started the sale it had seven REO properties. Now there are nine."One of the interesting ones is a 471,000-square-foot enclosed mall in Texas," he said.

"You will find a nice mix of smaller multi-tenant retail centers anywhere form 10,000 or 20,000 feet up to 100,0000."

Buyers of the loans are generally underwriting the collateral. They expect to take possession and finish the foreclosure. This type of sale is cost-efficient because it allows servicers to create a competitive environment, he said. "It's a good way to have everyone come and bid aggressively."

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