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Thursday, 03 September 2015

Tremont Realty Originates $102.5Mln Bridge Loan Against N.Y. School

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Commercial Real Estate Direct Staff Report

Tremont Realty Capital has originated $102.5 million of bridge financing to facilitate the acquisition of 260 West 78th St., a two-building property on Manhattan's Upper West Side that houses the Collegiate School.

The Boston advisory shop, which funds loans on behalf of a separate account it manages and operates an intermediary business that places loans with third-party investors, took down a $37.5 million subordinate chunk of the financing, which has a three-year term. It sold the remaining $65 million A-note to a regional bank.

The property's buyer, Collegiate Asset Management, an affiliate of Collegiate Churches of New York, paid roughly $120 million for the property, which had been owned by the school.

The sale was orchestrated to help fund the school's construction of new facilities between 61st and 62nd streets in Manhattan's Riverside South neighborhood. Plans call for the school to move out of 260 West 78th by the end of next year. Because the property will be vacant in a relatively short period of time, it wouldn't qualify for permanent financing.

So Collegiate Asset turned to Tremont, a 15-year-old advisory business that was founded by former senior executives of Finova Realty Capital. It structured its financing with a three-year term, which would give the property's owner time to line up a development partner and construction financing.

Because Collegiate Asset was looking to maximize proceeds from the financing, Tremont decided to bifurcate the loan it originated, which represents roughly 80 percent of the property's total value.

The bank with which it placed the A-note was comfortable with the relatively low-leveraged nature of the piece it acquired. It also was involved in the loan's underwriting. Tremont, meanwhile, long has specialized in what it calls "stretch" bridge loans, which provide borrowers with generous proceeds, often as much or more than 80 percent of total value.

The A-note, because it has lower risk, pays a lower coupon, while the B-note, which carries the bulk of the financing's risk, generates a yield that was attractive to Tremont, which is said to pursue investments that generate yields in the low teens.

The collateral property is in an exclusive residential neighborhood and is expected to be redeveloped into very high-end apartments. Early buzz has it that the property would be converted into only 66 units, which might be sold as condominiums that could sell for prices that would start at about $2.5 million each.

Tremont expects to become a relatively active player in the bridge-lending business once again. Its separate-account client, a hedge fund, is said to have a healthy appetite for high-yielding property loans. So Tremont could very well put out some $300 million of loans in the coming year. It generally will pursue deals where it places $20 million of its capital at a time, which means it would target properties that could support at least $50 million of financing each.

It can take down an entire bridge loan, but because of its yield parameters, many of its deals might end up being structured like that against the Collegiate School. So operating a loan-placement advisory could give it an edge in placing the lower-yielding A-notes that might result from its financing efforts.

Tremont operates five offices besides its Boston headquarters, in New York, Chicago, Annapolis, Md., Hartford, Conn., and Newport Beach, Calif. It long has pursued investments in high-yielding property financings, and also has historically operated a loan-advisory shop. Before the capital-markets collapse, it had raised a number of funds that it used to capitalize its investments, all of which involved bridge or mezzanine financing that generally were subordinate to senior loans funded by life-insurance companies or CMBS lenders.

During the market downturn, when it became extremely difficult to raise capital, the company earned its keep by focusing on its advisory business.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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  • Syndicate to Realpoint: No
  • Cities: New York City
  • States: New York
  • Sector: Other
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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