Benson Elliot takes advantage of €187m CMBS loan default

The London-based private equity real estate firm is poised to become the beneficiary of a defaulted CMBS in Germany issued against a residential-led portfolio comprising almost 2.5 million square feet.

Benson Elliot, the London-based private equity real estate firm, announced today it has exchanged contracts with subsidiary companies of Speymill Deutsche Immobilien Company, the collapsed German residential property investor, to acquire an 80-property portfolio.

The deal marks a rare example of a resolution of a defaulted CMBS loan against a portfolio of assets in Europe. According to the announcement, Benson Elliot has negotiated the deal with the loans special servicer and receiver Ernst & Young, which was advised by Ashurst, Cains, a separate company called In-West and Ernst & Young Real Estate.

The firm, which declined to reveal how much it paid to gain control of the properties – dubbed the TOR portfolio – but it is investing capital on behalf of its Benson Elliot Real Estate Partners III fund for which it raised €510 million in February 2009. It also said it had secured debt financing for the transaction from Landesbank Berlin.

Through this transaction, Benson Elliot will acquire out of receivership more than 3,000 residential units and “ancillary” commercial units across Germany although three quarters of the properties are in Berlin, Frankfurt, Munich, Hamburg and Cologne. They comprise almost 2.5 million square feet of space that was, up to the end of 2011, 91 percent occupied.

Trish Barrigan, senior partner at Benson Elliot, said: “We’re at the beginning of a long, slow unwind of a period in which property portfolios were hurriedly assembled and aggressively financed. The TOR portfolio may be one of the first defaulted CMBS portfolio loans to be resolved – it certainly won’t be the last.”

Originally assembled in 2006, the TOR portfolio was under the control of Speymill Deutsche which created it piece by piece through a series of transactions. It was subsequently debt financed via a CMBS loan, part of a wider issuance called MESDAG which closed in April 2007. The TOR loan was transferred to special servicing in November 2010 after a loan payment default – one of a series of issues suffered by Speymill Deutsche which saw its shares suspended from London’s AIM stock market in May 2011.