Tuesday, February 9, 2010

East West Bank Shops Big Loan Portfolio

Commercial Mortgage ALERT

February 5, 2010

East West Bank is marketing $244.5 million of commercial mortgages, most of them backed by condominium properties in California.

The offering is the latest in a series over the past year by the Pasadena, Calif., bank, which is handling the marketing campaign itself.

Many of the 30 loans in the current offering are distressed, investors said. In addition to the California collateral, a few loans are backed by office buildings and land in New York, Arizona and suburban Seattle. About one-third of the portfolio has already matured. The other loans have maturity dates extending as far out as 2018.

Among the largest loans is a $28.4 million recourse loan on a new condo property just outside San Francisco, in Daly City, Calif. The three-year floater was originated in 2006 for a local firm that developed the property, which contains 72 condos, 11,000 square feet of retail space and 129 parking spaces. The borrower defaulted after construction was completed last July. East West Bank is expected to be busy in the secondary loan market this year, as it works through the distressed assets it assumed from United Commercial Bank of San Francisco.

After the $10.9 billion-asset United Commercial failed in October, the FDIC sold about $10.2 billion of its assets to East West Bank via a loss-sharing agreement. East West is expected to shed some of the bank’s troubled assets.

As of Sept. 30, the parent of United Commercial had $5 billion of commercial real estate assets, consisting of $2.3 billion of commercial mortgages, $1.5 billion of construction and land loans and $1.2 billion of multi-family loans. Nineteen percent of those loans were nonperforming.

By comparison, the $12.5 billion-asset parent of East West Bank held $5.7 billion of commercial real estate loans, of which only 2.9% were nonperforming. East West’s portfolio contained $3.6 billion of commercial mortgages, $1.1 billion of construction and land loans and $1 billion of multi-family loans.