REAL ESTATE FINANCE AND INVESTMENT
– December 22, 2010 –
A partnership between The Cogsville Group and Colony Capital has purchased two more non-performing and performing loan portfolios from the Federal Deposit Insurance Corporation. The partnership purchased the steeply discounted portfolios, which total $341 million, via the FDIC’s structured asset sales program, through which the agency generally grants zero interest debt over about seven years and retains 60% stake in the sold portfolio. It bought $1.8 billion in distressed assets from the FDIC in July.
The purchases were made via Cogsville Capital Partners Fund I LP. The fund has invested in loan portfolios with unpaid principal balances of $2.2 billion since its inception in late 2009 and has made acquisitions with co-investors such as BlackRock, WL Ross & Co., Invesco and Mount Kellet Capital, said Donald Cogsville, chief executive. The fund uses conservative debt of no more than 50% of its total investment and shoots for returns in the 20% range.
The most recent acquisitions, which total 700 million loans, are comprised of a $204 million portfolio concentrated in the North East and a $137 million portfolio concentrated in the West. The partnership acquired the portfolios for $0.27 and $0.60 cents on the dollar, respectively. The combined portfolios total 700 commercial real estate loans.
Cogsville is considering a follow-on fund to tap into future FDIC receiverships. “We anticipate that most of the 900 banks on the FDIC’s watchlist will eventually fail. Over the next few years, we estimate that will result in the FDIC selling $100 billion of real estate assets,” Cogsville said. “With $250 billion of non-performing commercial real estate loans in banks, and another $70 billion of non-performing commercial mortgage-backed securities loans with special servicers, we expect the dam will break as extend and pretend reaches its limits and balance sheets become healthy enough to withstand the inevitable writedowns.”