$200M Bascom Fund Targets Troubled Loans

(To read more on the multifamily market and the debt and equity markets, click here.)

IRVINE, CA-The Bascom Group, which started out 10 years ago by turning around troubled apartment buildings, has now turned its attention to troubled loans in the multifamily sector. Bascom and New York City-based Warburg Pincus Real Estate I have launched a $200 million fund to invest in non-performing loans and distressed multifamily properties.

Bascom co-founder Jerry Fink says that some borrowers of high-interest-rate conduit loans that originated in the 1990s “are struggling” to repay loans due to high defeasance costs and concerns over high loan-to-value ratios. According to David Kim, also a Bascom co-founder, the new venture with Warburg Pincus presents a value-added opportunity for Bascom while offering loan originators and note holders a chance to “quickly and seamlessly dispose of distressed assets” because the new fund can close on an all-cash basis.

The Bascom-Warburg Pincus JV will purchase both non-performing and sub-performing loans by investing in the underlying senior and mezzanine debt. It will target deals in the $1 million to $100 million range from banks, B-piece buyers, conduits loan sales advisers and other lenders, and will also look for distressed properties that it can buy directly.

Bascom believes that the fund’s capacity to close on an all-cash basis will appeal to loan servicers, lenders and investors because it will enable them to “move challenged assets off their balance sheet quickly,” says Chad Sanderson, Bascom Group business development manager. He says the JV sees significant potential for deals in the South, Southeast, Midwest apartment and condo markets, “given the rising distress” in those markets.

Bascom, which bought most of its initial assets in Southern California but has since expanded to other markets, has completed transactions valued at more than $3.8 billion since its founding in 1996. The $3.8 billion includes more than $700 million through Sept. 30 of this year.

Although Bascom is probably best known for its value-added multifamily deals, it has also built its portfolio in other sectors. Its joint ventures with the Southern California Industrial Fund LLC and Rushmore Properties LLC, for example, have acquired more than four million sf of commercial properties nationwide.

Warburg Pincus Real Estate I is a private equity fund with $1.2 billion of committed capital. The New York-based investment firm established the fund this year to focus on investments in North America, Europe and Asia.