Note auctions are becoming more popular as an effective way of disposing of smaller distressed assets, especially for servicers that have historically shown high liquidation volumes, according to a Barclays Capital commercial mortgage securitization research report released late Tuesday.
As examples, Barclays cited a recent $300 million Arizona note/REO auction by Auction.com and reprised some of its observations about a previous Las Vegas auction.
In these note-auctions, winning bids have been often much higher than the reserve, according to Barclays, citing the recently concluded Vegas auction.
The notes in the more recent Arizona auction are up for sale online June 27-29. There are three CMBS deals (WBCMT 2007-C31, JPMCC 2006-LDP9, and CD 2005-C1) that have the largest exposure to the auction at close to $30 million each, according to Barclays.
Barclays also identified two more of nine other REO assets up for sale as part of CMBS collateral and said most of the loans have relatively small balances of $7 million each on average, with only eight loans greater than $10 million by outstanding balance. A Tucson portfolio in the JPM transaction is the largest. Two special servicers are involved, primarily LNR but also C-III. The loans have been in special servicing on average for about 13 months. The reserve price implies severities of 80%.
