Carlton Markets Pools of FL, CA, NV Loans

NEW YORK CITY-Carlton Group CEO Howard Michaels says his company has been hired by an institutional seller to sell around $268 million in mostly sub- and non-performing residential development and hospitality loans in Florida, Nevada and California. Managing director Thomas McCarthy tells GlobeSt.com he cannot identify the institutional lender that retained his company.

Included among the two sets of loans are 28 assets that include a multi-tenant commercial/industrial building, the penthouse of a 16-story condo building, several large finished custom estate homes in a gated community and around 1,000 acres of undeveloped land zoned for large residential lots, according to offerings posted on the Carlton auction website. McCarthy says the loans are being offered on a competitive sealed-bid basis and prospective bidders can bid on the assets individually or collectively as portfolios.

He says the Carlton Group, which saw over $4 billion in equity and debt financing in 2008, has seen business grow slowly this year, but by the second half of next year, “we’re contemplating that business will be quite active.” He adds that at the auction site, he’s noticed that the bid-ask gap is narrowing.

Dan Fasulo, managing director at Real Capital Analytics, tells GlobeSt.com that loan offerings like this one have seen a spike in activity in recent months. However, he says that since most of the transactions are private in nature and don’t have to be recorded publicly, they are often difficult to track. Nonetheless, Fasulo says a number of these acquisitions have been made by investors looking for bargains.

“But there have also been acquisitions of a more defensive nature by investors that have other positions in the same deal like equity, mezzanine or first loan,” he says. Fasulo adds there have also been many lenders acquiring properties at foreclosure auction where they owned the loan on a property. The lenders will buy the loans “since they have the most to lose if a property sells for less than the mortgage, and they are usually in the position to offer the highest price.”

McCarthy notes a wide range of investors or investor groups doing business with his firm. Among them, he says, are “the hedge and opportunity funds. They often have a great deal of capital and can make a compelling case that they can close. We’re seeing previous developers who see opportunities to come back to that space for the long-term planning; they can buy now at very cost effective rates to position themselves for the recovery.”

In addition, Carlton is seeing “a lot of national real estate players who have domain expertise, those who view buying loans or a bank REO as a cost effective way to buy assets, a number of local players who know the regions where the assets are located and niche funds that have been around for a long time, since they’re very sophisticated buyers who comprehend the notes and nuances of what does or doesn’t lead to resolution,” McCarthy says.

He says that even within states like Nevada, Florida and California, areas hard hit by the recession, “certain (sub) markets are better than others.” He goes on to add “and certain product types are more liquid than others, so usually, there’s some gold in each asset. Some of these assets are simply victims of the recession and the markets they were in at the time they were underwritten.”

McCarthy tells GlobeSt.com that Carlton will be doing a mailer of these offerings to their various database groups, but adds that interested parties can access the asset information at its online auction site. McCarthy explains, “We like to provide as much information as possible on the web page upfront, so the indicative bids have some teeth, and are based in reality.”