Sale of Italian portfolio expected to fall short of €210m outstanding debt

By James Buckley - Monday, October 09, 2017 15:25

BNP Paribas has been instructed to sell a portfolio of 11 Italian offices for a price which is not expected to repay the €210.7m outstanding balance on the Fortezza II loan, which spun into the legacy Lehman Brothers Windermere XIV CMBS.

Fortress Investment Group’s Italian unlisted closed–end real estate fund Torre RE Fund I acquired the portfolio of properties, which are largely located in Rome, for around €342m in April 2007, financed by a seven-year €252.23m Lehman Brothers loan which spun into Windermere XIV.

Mount Street Loan Solutions today said the latest valuation of the portfolio was circa €135.8m and that “offers below the current loan balance from perspective purchasers will be considered by the parties involved”.

A long term standstill agreement in respect of the Fortezza II loan was entered into in November 2015 under which a sales process would begin for any properties not sold by 1 June 2017.

In 2014, the loan’s servicer Hatfield Philips put forward a detailed term sheet for loan restructuring and agreed a disposal plan. It set debt repayment milestones for April 2015, January 2016 and April 2016, which it had hoped would result in full recovery of the debt.

Lone Star, which held all the junior securitised bonds below the class As and the B-note, bought the Windermere XIV bonds as part of its acquisition of the Excalibur collateralised debt obligation (CDO) from Germany’s Bundesbank. As part of financing strategy for the purchase of the first Excalibur tranche, Lone Star then lined up Credit Suisse to buy all the class As. Credit Suisse has since sold the class A notes around the major investment grade European CMBS bond buyers – including banks, insurance companies and fixed income trading desks.

The original CMBS out of the Lehman Windermere conduit saw the pan-European securitisation of commercial loans, with the pool comprising eight loans secured by a diversified portfolio of properties located in Finland (34.5%, Italy (28.4%), France (24.1%), and Germany (12.9%).

The loan collateral comprised a mixture of offices (67.8%), retail (22.0%), industrial (5.5%), mixed-use (4.2%), and other assets (0.5%). In total, the collateral comprised 596 properties let to 1,705 different tenants via 3,439 leases.

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