Alok Swain

Commercial Real Estate: Distressed Borrowers not Distressed Properties

1) One other thing I noticed especially after reading CLP earnings release and I quote "In the first quarter we repurchased $96.9 million in notes for $70.6 million, representing a 27.1% discount or net gains of $24.3 million or $0.43 per share. To date we've improved our equity position through our repurchase program by approximately $50 million."

2) You can read here.
seekingalpha.com/artic...

3) The point being those who have access to credit (line) are buying back their own debt at a discount and making capital gains.

4) And whats more they are eventually taking their un-encumbered properties and borrowing against it from Fannie Mae for between 5% to 6% or so and then paying off their credit line. Wow!

5) Same company read "Earlier this week we locked the rate with Fannie Mae on an additional secured facility to provide financing of $145 million with a 10-year term and an interest rate of 5.29%. We're adding one additional property to this facility, which will bring total proceeds to approximately $155 million. The facility will be secured by eight multi-family properties and is expected to close later in the second quarter."

I consider that a wonderful strategy. Sort of like bond arbitrage. See. :-))

On Apr 27 08:05 PM malach hamovess wrote:

> distressed borrowers in the public market offer opportunities too;
> the unsecured bonds or notes of some 2nd tier reits are selling at
> highly distressed levels even as there is real equity value in their
> more junior preferred and common shares.
>
> often the gains on these notes will be accelerated as these reits
> use available cash to repurchase notes at a discount (but at prices
> higher than on can purchase same).
>
> it's not exciting, but it sometimes works.