AMERICAS NEWS: New line of attack

Special servicers have been floundering under the pressure of a rising tide of CMBS defaults. However, fresh from a $417 million recapitalisation, the largest firm of them all – LNR Property – is now on the offensive, having created a new real estate debt and CMBS investment platform and fund.

LNR, which was taken private in 2005 by private equity firm Cerberus Capital Management, launched the $200 million debt fund and investment management group last month, hiring former Deutsche Bank executives Justin Kennedy and Tobin Cobb as joint chief executive officers.

The move comes on the back of a recapitalisation of LNR made by Cerberus, Oaktree Capital Management, iStar Financial and Vornado Realty Trust in July. Under the deal, Vornado acquired a 26.2 percent stake in LNR for $116 million cash and the equity conversion of a $15 million mezzanine loan.

Kennedy and Cobb are expected to target high-yield real estate debt and CMBS investments with the fund, which was seeded with capital from Cerberus, Oaktree, iStar and Vornado. At Deutsche Bank, Kennedy was global head of the real estate capital markets group and before that was head of CMBS trading at Goldman Sachs. Cobb was co-head of the bank’s US commercial real estate business and prior to that spent five years in DLJ’s CMBS group. LNR declined to comment.

In July, Otéra Capital, a subsidiary of Canadian pension fund Caisse de dépôt et placement du Québec, sold the second largest special servicer, CW Financial, to Fortress Investment Group for an undisclosed sum. The auction reportedly attracted bids from Apollo Global Management and Centerbridge Capital Partners, with Warren Buffet’s Berkshire Hathaway and Leucadia National also believed to have weighed a bid.