Friday, 16 October 2009
Commercial Real Estate Direct Staff Report
Waterstone Capital Advisors, a four-year old advisory firm that had specialized in the defeasance business, is shifting gears and moving into the due-diligence and servicing arenas.
The company is led by John Church, who for more than a decade led what became Wachovia Bank’s massive commercial mortgage servicing operation. It was formed in the nascent stage of the run-up in commercial real estate values and capitalized on that by providing advisory services to property owners looking to pay off their mortgages through defeasance.
It handled some $2.5 billion of such deals between 2006 and 2007. Those deals entail negotiating with loan servicers, rating agencies and lining up government securities with cash flows and terms similar to the mortgages being retired.
With defeasance volumes down sharply: http://www.crenews.com/index.php?option=com_content&task=view&id=62656&Itemid=127 – activity is driven primarily by escalating property values – Waterstone is planning to shift its focus to servicing loans on a third-party basis. In the meantime, it’s providing due-diligence services to investors. It is also providing third-party asset management to holders of foreclosed real estate.
The company’s new focus marks a shift back to its roots.
“Prior to doing defeasance, we were loan servicers,” explained Mike Schoenstein, a principal and co-founder of the company who has worked with Church at Wachovia, its predecessor First Union and before that at GE Capital Real Estate, when that company was buying distressed real estate assets from the RTC.
The company has no plans to play the role of a traditional CMBS special servicer. Instead, it will align itself with investors pursuing distressed loans from CMBS trusts, banks, FDIC, insurance companies and other lenders and manage the assets they acquire.
“There’s a big opportunity to buy debt,” Shoenstein said. “You need a skill set for that. We’ll be the servicer for the private market.” And if and when the securitized market comes back, Waterstone could play the role of CMBS special servicer.
The company has a staff of about 20, many of whom have a deep background in loan servicing, particularly special servicing, which requires workout expertise.
“We believe lenders and special servicers will increasingly utilize loan sales as a preferred disposition strategy, which will create greater demand from investors for customized loan servicing solutions. Our platform will service these types of loans for investors,” Church said.
Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.