Centerline wipes out $1.6bn of 'liabilities' in restructuring

The real estate group has also sold its debt fund management and servicing arms to Andrew Farkas’ Island Capital Group for $110m as part of the reorganisation.

Centerline Capital Group has sold its debt fund management and special servicing arm to Island Capital as part of a restructuring deal that has wiped out $1.6 billion of liabilities.

New York-based Island, founded by Andrew Farkas in 2003, has been leading a recapitalisation of the property lender and real estate services firm. In a statement, Centerline confirmed Island would pay $110 million, including $50 million in cash and the assumption of $60 million in senior debt, for its debt fund platform and servicing arm.

[This deal] restores confidence in those who currently engage in business with us and opens the door for others to invest in new opportunities with a company that has a manageable debt structure in a pervasively distressed economic environment.

Marc Schnitzer, Centerline
president and chief
executive officer

Formerly known as CharterMac, Centerline is well-known for syndicating low income housing tax credits, as well as originating affordable, multifamily mortgages. LIHTCs, as they are known, are indirect US federal subsidies used to finance the development of affordable rental housing for low-income households.

Centerline claims to be one of the largest LIHTC syndicators with $9.3 billion of investor equity under management.

Today’s deal would see Island take a 40 percent stake in the company. The restructuring has also seen a $100 million equity infusion into Centerline, alongside the “eliminat[ion]” of $1.6 billion of liabilities and contingent exposure, the firm said.

The lender reduced its corporate credit agreement to $137.5 million from $208 million, extending the debt term seven years, while part of the debt fund platform sales proceeds was used to make discounted payoffs to unsecured creditors. Centerline also restructured liabilities of more than $800 million related to credit default swaps associated with some of LIHTC funds with Merrill Lynch and Natixis Financial Products.

Marc Schnitzer, Centerline president and chief executive officer, said the firm had worked closely with Farkas and Island Capital for “many months to make this transaction happen.

“Closing a transaction of this complexity is a tremendous accomplishment,” he added. “It restores confidence in those who currently engage in business with us and opens the door for others to invest in new opportunities with a company that has a manageable debt structure in a pervasively distressed economic environment.”

Centerlines asset manages approximately 1,500 affordable, multifamily properties in the US, and its government-agency lending platform has originated and services more than $9 billion of mortgage loans.

The statement said Rothschild acted as financial advisor to Centerline and the firm’s independent oversight committee, while law firms Paul Hastings and Richards, Layton & Finger, represented Centerline in the transaction. Weil, Gotshal & Manges represented the independent oversight committee and Proskauer Rose represented Island Capital.