Global Viewpoints

A10 Capital Provides $4.6 Million to Finance a Distressed Debt Purchase

Edited: Jennifer Brenner Andrade
Source: A10 Capital

A10 Capital, a fully integrated firm that finances commercial real estate and provides services to resolve troubled assets, announced today that its lending group provided $4.6 million to finance a distressed debt purchase. A10’s customer is an opportunity fund that bought the defaulted loan, with a $22 million face amount, for approximately $10 million. The acquired note is secured by a very large multi-family complex with over 85% occupancy. The purchased note was in default because the property was over-leveraged by the current owner.

The distressed debt financing provided by A10 Capital enabled the opportunity fund to leverage their returns and magnify their projected IRR on the purchase. The transaction was structured on a non-recourse basis to the general partners of the fund. A10’s financing also increased the opportunity funds purchasing power by providing a majority of the capital to the transaction. A10 Capital closed the transaction in less than three weeks.

“We were happy to finance the purchase of this defaulted loan since we share the fund’s belief in the property and the price, and have confidence in their ability to resolve the debt in a safe and profitable manner,” said Jerry Dunn, CEO, A10 Capital. “A10’s highly experienced team worked 'elbow-to-elbow' with the opportunity fund to assist them in due diligence and the closing of this complex transaction on the required timeline.”

A10 Capital finances commercial real estate and provides advisory and management services for the workout of all types of troubled loans and real estate assets. A10’s team has closed over $20 billion of commercial transactions and has significant experience operating in distressed environments dating back to the RTC in the l980s.

PREI Establishes High Yield Debt Platform

Edited: Jennifer Brenner Andrade
Source: PREI

Prudential Real Estate Investors has hired a team of leaders in the commercial real estate debt industry to establish a global high yield debt investment platform that will serve institutional clients worldwide. PREI® is the real estate investment management and advisory business of Prudential Financial, Inc.

Jack Taylor has joined PREI as a managing director and head of PREI’s global high yield debt business, which has offices in New York, London, and Parsippany, N.J. Taylor reports to Allen Smith, PREI’s chief executive officer. Joining Taylor are Steven Plust and Stephen Alpart, both managing directors and industry veterans who have worked extensively with Taylor. The new hires follow the addition earlier this year in London of Andrew Radkiewicz and Andrew Macland, both managing directors, as well as Matthew Crowther, vice president, and Brian Scally, an associate. The London-based team reports to Taylor.

“As pioneers in these markets, Jack, Steve and Steve have decades of experience on the buy and sell sides, with years of experience managing debt investments for clients with a fiduciary perspective,” said Smith. “They bring skill and creativity, along with the capital markets expertise and the experience of multiple real estate cycles necessary to find opportunities in these markets with the potential to provide attractive risk-adjusted returns for our clients.”

Current conditions have created a dramatic shortage of debt capital in the commercial real estate markets, offering significant investment opportunities. PREI will continue to offer products that invest in mezzanine and other high yield debt strategies. The business will initially focus on the U.S. and Europe.

“PREI, with its worldwide reach and extensive local contacts, is the ideal home for our team to build an integrated platform,” Taylor said. “The historic dislocation unfolding in the real estate debt markets, resulting in a capital constrained and secularly deleveraging environment, has created an enduring opportunity for our clients to participate in attractive debt investments.”

Before joining Prudential, Taylor was a partner at Five Mile Capital Partners LLC and the portfolio manager for its flagship Structured Income Fund. Earlier, he co-led real estate investment banking for the Americas and Europe at UBS and previously led the Real Estate Group at Paine Webber. Earlier, he was head trader and manager of the CMBS business for Kidder, Peabody & Co., Inc. He holds a law degree from Yale, a master’s degree in international relations from the London School of Economics and Political Science, and a bachelor’s degree in philosophy from the University of Illinois.

Plust was most recently a managing director and member of the investment committee at Five Mile Capital Partners with Taylor. Previously, he was an executive director at UBS and a managing director at PaineWebber where he was involved in all aspects of the firm's commercial real estate debt business. Earlier, he was a senior vice president, working on structured products and commercial real estate at Kidder, Peabody, where he advised the Resolution Trust Corporation on asset dispositions and securitizations. He holds an MBA from Columbia University and a bachelor’s degree in chemistry from Rensselaer Polytechnic Institute.

Alpart was most recently a managing director and co-head of opportunistic lending in the debt funds business at Capmark Investments, and previously was a managing director in the merchant banking division of GMAC Commercial Mortgage. Earlier, he worked with Taylor and Plust while an executive director at UBS and a managing director at PaineWebber. He was also a senior manager in the real estate consulting unit at Kenneth Leventhal & Co., advising on workouts, restructurings, recapitalizations and distressed asset sales. He holds an MBA in finance and real estate from New York University and a bachelor's degree from Washington University.

General Mills Selects Rockefeller Group Development Corporation to Build 1.5 Million S.F. Distribution Facility

Edited: Jennifer Brenner Andrade
Source: Rockefeller Development Group

Rockefeller Group Development Corporation (RGDC) has been selected by General Mills to construct a 1.5 million square foot distribution center in Social Circle, Georgia, located 50 miles east of Atlanta. According to real estate research and portfolio strategy firm PPR, the facility is the largest build-to-suit distribution center to be built in 2009.

"The Rockefeller Group is excited to be a part of General Mills' initiative to drive efficiency in its Southeast distribution operations," said Kevin R. Hackett, President and Chief Executive Officer of RGDC and Rockefeller Group International, Inc. "We are honored to be developing this state-of-the art facility in Social Circle and to have a tenant of General Mills' caliber."

RGDC will build the 1.5 million square foot facility on a 130 acre site on East Hightower Trail in Walton County, Georgia that is serviced by Georgia Railroad and CSX Intermodal, making it ideal for distribution. RGDC will seek LEED-silver certification for the building which will include more than 25,000 square feet of office space to accommodate General Mills' administrative operations for the site. General Mills has the option to expand the building by 143,000 s.f. to a total of more than 1.6 million square feet.

"General Mills is thrilled to have The Rockefeller Group as developer of the Social Circle facility," said Mike Nordstrom, Vice President of Corporate Services, General Mills. "Their national presence, reputation as a developer, and expertise in building large distribution facilities, especially within a very tight timeframe, contributed to their selection."

Site work on the project has begun with completion targeted for the second quarter of 2010.

Sequoia Equities Launches Distressed Real Estate Platform

Edited: Jennifer Brenner Andrade
Source: Sequoia Equities

Sequoia Equities has launched a distressed real estate platform, Sequoia Debt Ventures (SDV). Building on Sequoia's 30-year history of real estate investment, SDV will focus on the monetization and value maximization of distressed residential and commercial assets for banks, private equity firms, real estate funds, government entities and investors. Sequoia has positioned itself as a provider of turnkey investment, property management and workout solutions.

"While the opportunities today are similar to those we saw during the RTC," noted CEO Mark Carter, "we formed SDV, to manage the enormity of distressed debt and real estate we are seeing and the additional complexities that are part of this cycle."

Since early 2008, Sequoia has been acquiring real estate debt and continues to work with banks, the FDIC, and private equity groups to add to Sequoia's portfolio. Sequoia is leveraging its existing investment partners and seeking new investment partners to capitalize on these timely opportunities.

Founded in 1973, Sequoia Equities, Inc. is a privately held real estate investment manager with more than $1.6 billion in real estate assets under management and over 280 employees.

Emerging Real Estate Launches Brand-New, Investor-Focused Development in Berlin

Edited: Jennifer Brenner Andrade
Source: Emerging Real Estate

Emerging Real Estate, one of the UK's leading emerging property-investment consultancies, has just launched its latest investor offering in Berlin. The development, Mitte Life, has a selection of benefits designed specifically for the UK investor market, with prices starting at euro 138,000.

Situated in the bustling and hugely popular Mitte district, Mitte Life is an exclusive development that is made up of some 61 fully furnished and serviced apartments and lofts. The site is divided into three different sections: the front building, the side wing and the garden house.

This classical and fully renovated building houses a wide choice of light and airy properties to suit all investor needs and budgets, from studios to five-bedroom apartments that range in size from 50m2 to 201m2. Investors in Mitte Life will enjoy the high-quality materials used in every apartment, such as oak-wood parquet flooring and intelligent home systems. Onsite facilities include a day spa, a Jacuzzi and a private exotic garden. In addition, 34 parking spaces add to the building's overall rentability and appeal.

The Mitte Life site is within easy walking distance of the Berlin's central station, is adjacent to the world famous Natural History Museum and is just a few minutes walk to the city's famous Friedrichsstrasse, know for its excellent shopping and numerous coffee bars.

With property prices still very low and Germany's economy regaining its old strength, now is the perfect time to purchase an apartment in a luxury development like this.

The development is also just 200 metres away from the new home of the country's intelligence service, which is relocating from Bonn to Berlin. Construction on this new building complex started in 2007 and about 4,000 people will be working there by 2011. All of this is, again, great news for investors.

The estimated completion date for Mitte Life is September 2009.

Tim Morgan, managing director of Emerging Real Estate, said; "Berlin is now one of the world's most exciting cities. International and German investment is changing both the face and fortune of the city and, coupled with a strong tradition of letting, this means the property market is set to be a strong proposition for investors, even in the current climate."

Tim concluded, "This demand will enable investors to get involved in what is still one of the most dynamic property-investment hot spots in the world."

Capitol Acquisition and Two Harbors Investment Merge, Form New $260M Residential Mortgage REIT

Edited: Jennifer Brenner Andrade
Source: Capital Acquisition Corp.

Capitol Acquisition Corp. ("Capitol"), a public investment vehicle, Pine River Capital Management L.P., a multi-strategy asset management firm with over $800 million in assets under management, and Two Harbors Investment Corp. ("Two Harbors"), a newly organized real estate investment trust (REIT), announced today that they have signed an agreement and plan of merger pursuant to which Capitol will be acquired by Two Harbors. Two Harbors intends to focus on residential mortgage backed securities and will be externally managed by PRCM Advisers LLC ("PRCM"), a subsidiary of Pine River Capital Management L.P. ("Pine River"). The transaction is expected to be completed by the end of the third quarter of 2009, pending approval by Capitol's stockholders and warrant holders and subject to certain closing conditions, including the amendment of Capitol's charter to remove certain provisions customarily contained in the charters of special purpose acquisition companies, in order to permit the merger.

"We believe Two Harbors represents a compelling opportunity for investors to capitalize on historically unprecedented values in the $11 trillion U.S. mortgage market," said Mark Ein, Chairman and Chief Executive Officer of Capitol who will become Vice Chairman of Two Harbors upon completion of the transaction. "We are excited to partner with Pine River and their veteran team with a proven track record of investing in residential mortgage backed securities. We believe that Two Harbors, as a newly formed REIT, created at or near book value with no legacy assets, will be well positioned to generate attractive risk-adjusted returns," added Mr. Ein.

Two Harbors intends to pursue a relative value strategy targeting all subsets of the RMBS market. This strategy seeks to capture inefficiencies created by the current dislocations in non-Agency and Agency securities, and longer-term opportunities in residential mortgage assets.

Under the terms of the merger agreement, the common stock of Capitol issued through Capitol's November 2007 initial public offering will convert on a share-for-share basis into 100% of the common stock of Two Harbors. Capitol's founders will retire 100% of their pre-IPO founders' shares. As a condition of the transaction, Capitol's warrant holders will be asked to amend the strike price of their warrants to $11.00 per share in exchange for extending the warrant expiration by one year to November 7, 2013.

"We are delighted to partner with the Capitol team to create an efficient public vehicle for investors to access the RMBS market," said Brian Taylor, Founder and Chief Executive Officer of Pine River who will serve as Chairman of Two Harbors upon completion of the transaction. "Together with Capitol's team of accomplished investors and executives, we look forward to offering Pine River's expertise in portfolio management and mortgage backed securities to a new group of investors," added Mr. Taylor.

Two Harbors' investment team will be led by Co-Chief Investment Officers Steve Kuhn and Bill Roth. Mr. Kuhn joined Pine River from Goldman Sachs Asset Management in January 2008. He has over 16 years of experience investing in and trading mortgage backed, asset backed and related securities at Goldman Sachs, Citadel and Cargill. Mr. Roth will join Pine River effective June 16, 2009 after having worked at Citigroup Global Markets Inc. since 1981, most recently as a Managing Director in the firm's proprietary trading group managing mortgage backed and asset backed securities portfolios.

Two Harbors will be externally-managed by PRCM, a wholly-owned subsidiary of Pine River. Pine River is a leading independent global alternative investment advisor with over $800 million in assets under management, 54 employees, 19 investment professionals and six partners, with an average of 18 years experience in the alternative investment management industry. Pine River has regulatory registrations in five nations and operates from offices in New York, London, Hong Kong, San Francisco and Minnesota. Under a management agreement between PRCM and Two Harbors, PRCM will earn an annual management fee of 1.5% of shareholders' equity, but will not charge any additional performance fees.

The management of Two Harbors will be led by Chief Executive Officer Tom Siering, who joined Pine River as a Partner in 2006 from EBF & Associates where he was head of the Value Investment Group. Jeff Stolt, a Pine River Partner and Chief Financial Officer, will serve as Two Harbors' Chief Financial Officer.

Credit Suisse Securities (USA) LLC is serving as financial advisor to Pine River. Clifford Chance US LLP is advising Pine River and Graubard Miller and Latham & Watkins LLP are advising Capitol.

Upon completion of the merger, the approximately $260 million currently held in trust by Capitol, less expenses and any amounts released to Capitol's common stockholders electing their right to conversion or used by Capitol to purchase shares in forward sales or other transactions, will be used by Two Harbors for the purposes of investing in residential mortgage backed securities. The merger is conditioned upon a minimum amount of proceeds remaining after expenses and completion of such conversions or forward sales.

Under a sub-management agreement between PRCM, Pine River and CLA Founders LLC, an affiliate of the founders of Capitol, CLA Founders LLC will receive a portion of the management fees paid to PRCM in exchange for providing services in support of PRCM's performance under its management agreement with Two Harbors.