Money managers from Ares Management LLC to Onex Corp. are borrowing at the fastest pace in six years to buy the type of speculative-grade loans that federal bank regulators warned last week is becoming riskier.
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.
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.
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.
UBS AG, which had more than $57 billion of losses and writedowns after the U.S. real-estate crash, is betting there’s enough demand for toxic commercial property assets to sell debt created at the height of the boom.