Capmark Increased Office, Hotel Loans as Zell Saw Top
Bloomberg reports: Capmark Financial Group Inc., the lender that filed for bankruptcy this week, was making billions of dollars in property loans just as investor Sam Zell was exiting the U.S. office market in early 2007.
In 2006 and 2007, Capmark originated $60 billion in commercial mortgage loans, most for office buildings, according to the Oct. 25 bankruptcy filing. While Capmark was lending, Zell was selling Equity Office Properties Trust at the top of the market for $39 billion, including debt.
Capmark collapsed under the weight of the loans it made and the debt that financed its leveraged buyout by a group led by Goldman Sachs Group Inc. and KKR & Co. By the time of the filing, Capmark had $18.5 billion in corporate debt, including $6.9 billion due in 2010 and $8.54 billion due in 2011, according to data compiled by Bloomberg. As commercial property prices started falling, loan defaults accelerated. Payments were at least 60 days late on $4 billion of the $24.1 billion in loans Capmark listed as managed assets on June 30. That was up 166 percent from Dec. 31.
"They were aggressive lenders and the company was highly leveraged," said Jeffrey Rogers, president and chief operating officer of Integra Realty Resources Inc., the largest U.S. commercial real estate valuation company. Capmark, based in Horsham, Pennsylvania, is an Integra client.
Of the loans Capmark originated, office, multifamily and retail properties account for the biggest share of those that are delinquent. Of the non-performing loans, $444.7 million were made to office buildings, $282 million to apartment owners, and $243.7 million to retail properties, as of June 30.
"After the new ownership took over in 2006, they got even more aggressive," said Dan Fasulo, managing director of Real Capital Analytics Inc., a New York-based research firm.
Real Capital identified 234 properties with Capmark financing, 62 of which had fallen into foreclosure, default or distressed status.
View the full article on Bloomberg: Capmark Increased Office, Hotel Loans as Zell Saw Top
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Posted by: Matthew Stone