Friday, September 3, 2010

Structured Deal: Mariner Buys Stake in $760 Million of Loans From FDIC

Bloomberg News

Sept. 2 (Bloomberg) -- Mariner Holdings LLC said it bought part of a $760 million portfolio of real estate loans from the Federal Deposit Insurance Corp. as part of the agency’s sale of assets seized from failed banks.

A unit of Mariner, an asset manager based in Leawood, Kansas, paid about $52 million for a 40 percent stake in the portfolio, the company said in a statement today. The price is about 31 cents on the dollar including FDIC financing.

The FDIC has completed at least 18 structured asset sales, auctioning stakes in loans with a total face value of $21.2 billion, since May 2008, according to data on its website and purchaser announcements. The median price paid was about 39 cents per dollar of face value for the portfolios.

The FDIC is offering its private-sector partners zero- percent financing, management fees and new loans to complete construction of projects that can be held until the real estate market improves. David Barr, a spokesman for the Washington- based agency, declined to comment on the Mariner sale.

“It will be a while before the revenue rolls in,” Martin Bicknell, chief executive officer of Mariner Holdings, said in a telephone interview.

The FDIC gave Mariner Real Estate Management LLC about $105 million in financing at zero percent interest and a $25 million advance for working capital needs, the company said. Mariner Real Estate is the property investment unit of Mariner Holdings, which has $7 billion of assets under management.

18% to 20%

Mariner expects the FDIC investment to have an internal rate of return of 18 to 20 percent annually for seven years, with the company receiving 40 percent of the proceeds and the FDIC getting the balance after Mariner repays the financing, Bicknell said.

“It’s not really a matter of capital risk,” he said. “It’s a question of what the return will be.”

The portfolio consists of 1,100 loans for the acquisition and development of residential and commercial properties, Bicknell said. About 34 percent of the loans are in Colorado, 12 percent are in Nevada, and the rest are in 22 other states, he said. About a fifth of the loans are current on their payments. On a value basis, two-thirds of the loans are for residential projects, and one-third are commercial.

Loan Options

Mariner Real Estate said it hired Chicago-based Cohen Financial to provide asset management and loan administration services for the portfolio. Options for non-performing loans include payment restructurings, the sale of the loans, or the foreclosure and sale of the properties, Tim Mazzetti, executive vice president of Cohen Financial, said.

“If something is partially built, we might complete the construction if that gives us a better recovery,” Mazzetti said in a telephone interview.

Other buyers of FDIC loans include Oaktree Capital Management LP, Toll Brothers Inc. and Milestone Merchant Partners LLC, which paid about 40 cents on the dollar for 40 percent of a $1.7 billion portfolio. The companies announced the deal on Aug. 17.

The FDIC took over the assets of 118 banks this year through Aug. 20 as souring commercial and residential real estate loans impaired bank capital. The number of bank failures likely will surpass last year’s total of 140, FDIC Chairman Sheila Bair said in a July 9 interview with Bloomberg Television. That would result in the most in a year since 1992.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net .