Magazine article American Banker

Lazard Sells Loan Portfolio to a REIT for $280 Million

Magazine article American Banker

Lazard Sells Loan Portfolio to a REIT for $280 Million

Article excerpt


Starwood Financial, a real estate investment trust, has bought Lazard Freres' commercial real estate loan portfolio for $280 million, the two firms announced Wednesday.

Lazard is also investing $220 million in Starwood, in a deal that unites two leaders in mezzanine real estate lending.

The two firms will now jointly originate mezzanine loans and commercial mortgages that do not fit the increasingly strict requirements of the credit rating agencies.

"In the face of what is already a pretty capital-starved market, (the deal) thins out the potential providers even further," said Spencer Haber, chief financial officer at Starwood in New York.

Mezzanine loans are riskier than senior debt, but they are buffered by the borrower's equity-in the case of real estate, the amount of cash a developer or landlord has invested in a property.

Both firms believe there is opportunity in the mezzanine lending business.

Russian-related jitters in the bond market this summer prompted Wall Street firms, which are loath to hold commercial mortgages on their balance sheets, to back off from the real estate sector.

More recently, investment banks have been further discouraged from making real estate loans by the rating agencies, which have required higher equity levels for loans to be securitized, Mr. Haber said.

"We're able to take lower and lower loan-to-value positions and still charge healthy spreads," he said. …

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