The largest auction of troubled assets in the commercial mortgage-backed securities market is showing the strength of investors’ appetites for real estate as more distressed properties from the crash come up for sale.
Goldman Sachs Group Inc. pulled a loan from a commercial-mortgage bond deal sold last week after investors balked at the debt amid concern that underwriting standards are slipping in the $550 billion market.
Charles Ishay planned to hold on to 895,500 square-feet (83,195 square-meters) of office space in suburban Cleveland after the mortgage servicer LNR Property LLC agreed to change terms on $135 million of debt taken on during the 2007 market peak. Orix USA killed that plan.
Commercial mortgage defaults are poised to keep rising as loan modifications fail to prevent borrowers from running into trouble again amid collapsed real- estate values, according to Royal Bank of Scotland Group Plc.
A group of commercial-mortgage backed securities investors including Angelo Gordon & Co. and Winthrop Realty Trust sued a junior lender and other parties, alleging a “brazen scheme,” to steal more than $60 million from bondholders, according to a New York court filing.
Nassar Hussain, a London-based managing director of Merrill Lynch & Co., was so concerned by the cheap mortgages being offered to commercial real estate borrowers in 2007 that he sold his holdings, resigned and moved to Dubai to work in private equity.