Fortress to buy loan servicer from Caisse de dépôt

Apollo and Centerbridge reportedly lost out to Fortress for the US’ second-largest special servicer, which was expected to fetch $200m.

Fortress Investment Group is expanding its reach into the loan servicing sector wtih the purchase of CW Financial Services, which runs the US’ second-largest special servicer CWCapital.

The New York-based firm said it was buying the company from Otéra Capital, a subsidiary of Canadian pension fund Caisse de dépôt et placement du Québec. Otéra also issued a statement confirming the deal, though no financial details were disclosed. The transaction is expected to close in the third quarter.

CW had been put up for sale earlier this year, with Beekman Advisors running the auction. According to a Bloomberg report in May, CW Financial was expected to fetch more than $200 million.

Beekman was unavailable for comment at press time.

The auction reportedly attracted bids from private equity firms Apollo Global Management and Centerbridge Capital Partners, with Warren Buffet’s Berkshire Hathaway and Leucadia National – which recently teamed up to buy Capmark Financial’s servicing and mortgage business – also reportedly weighing a bid for CW, according to sources previously cited by Bloomberg.

Special servicers are facing mounting CMBS maturities over the next five years, with data provider Trepp forecasting that more than $75 billion of securitised commercial real estate loans could currently have a 1.0x debt service coverage ratio or less.

Fortress has already acquired two other servicing companies, agreeing to buy GMAC Financial Services’ European residential mortgage business, Residential Capital LLC, earlier this year and in 2006, acquiring US mortgage servicer Nationstar from homebuilder Centrex for $554 million in cash. in 2007, Fortress shuttered Nationstar’s loan origination business and turned it solely into a loan servicer.

A Fortress spokesman said the CW deal followed on from these two acquisitions, and would help expand the firm’s presence in commercial real estate loan servicing. “[The CWCapital] platform puts us front and centre of the commercial [real estate] market,” the spokesman added.

CWCapital is the second largest special servicer in the US, according to the Mortgage Bankers Association, dealing with almost 13,000 CMBS, CDO and other asset-backed mortgages worth more than $162 billion, as of the end of 2009.

One of CWCapital's largest – and most high-profile – loans is the $3 billion Stuyvesant Town/Peter Cooper Village securitised senior mortgage, which was handed over to CWCapital by borrowers Tishman Speyer and BlackRock Realty after they defaulted on a monthly debt payment in January. A federal judge last month ruled that CWCapital could start preparing to auction off the 80-acre New York multifamily complex, four months after first launching foreclosure proceedings.

The largest special servicer in the US is LNR Partners, representing $191 billion of loans as of the end of 2009, while Centerline Servicing is third with $108 billion of loans.

Last month, Cerberus Capital Management-backed LNR launched a $400 million rights offering to recapitalise the business. The firm also hired Goldman Sachs and Bank of America Merrill Lynch to arrange a new $445 million loan that, together with the equity rights offering, will refinance a $868 million senior secured-term loan.