Investment Manager Seizes Opportunities in Distressed

In order to capitalize on the distressed commercial real estate market, Marathon Asset Management in New York acquired two commercial real estate investments that emanate from its debt operations.

Marathon, an investment manager whose core focus is credit investing, acquired a defaulted note, sourced directly from a regional U.S. commercial bank, collateralized by a St. Petersburg, Fla., residential condominium/rental project. As a result of the purchase, Marathon expects to negotiate a settlement with the borrower or assume control of the project.

"It is consistent with our strategy of working with lenders to acquire nonperforming distressed debt on high-quality real estate located in major metropolitan areas," said Ron Bernstein, co-head of Marathon Real Estate.

Marathon also originated a $24 million senior mortgage secured by a 386-room, 13-story full-service hotel in New York. Proceeds of the loan were used to effectuate a discounted pay-off of the existing senior mortgage from a third-party lender.

"The hotel borrower had the opportunity to take advantage of an attractive, discounted pay-off opportunity, but needed to obtain the required funds in less than a month," said Scott Schwartz, co-head of Marathon Real Estate.

"By working with the borrower to reliably structure and execute loans under tight time constraints in a manner that fit its needs, Marathon provided a new money lending solution that was accretive for this borrower."

In another commercial development, CapitalSource Inc., Chevy Chase, Md., completed the sale of 40 long-term care facilities to Omega Healthcare Investors Inc. in accordance with the terms of the agreement between the parties executed in November 2009.

At the closing, CapitalSource received net proceeds from Omega of $270 million, which included the assumption of $182 million of Department of Housing and Urban Development mortgages and $20 million of other debt, net cash proceeds of $65 million and $3 million of Omega common stock. In addition, CapitalSource received $15 million of Omega common stock as consideration for certain escrow amounts transferred at closing.

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