You choose, we deliver
If you are interested in this story, you might be interested in others from The Journal Gazette. Go to www.journalgazette.net/newsletter and pick the subjects you care most about. We'll deliver your customized daily news report at 3 a.m. Fort Wayne time, right to your email.

Business

  • Beer trend reversal brewing
    RICHMOND, Va. – Helping to quench a growing thirst for American craft beer overseas, some of the United States’ largest craft breweries are setting up shop in Europe, challenging the very beers that inspired them on their
  • SDI forges $1.6 billion deal for Mississippi mill
    Steel Dynamics Inc. is significantly expanding its steel production with the $1.625 billion purchase of a Mississippi mini-mill, officials announced Monday.
  • Existing-home sales dip in 1st half
    Sales are down from last year, but real estate officials say there’s reason to be upbeat.
Advertisement

Hedge funds prep for property bill

– Hedge funds are zeroing in on America’s malls and hotels.

Axonic Capital, LibreMax Capital and Saba Capital Management are among firms positioning to provide loans as more than $1 trillion in commercial real-estate debt originated before the property crash comes due over the next three years, aiming to bridge the gap for borrowers needing more cash than banks are willing to lend.

“New participants are capitalizing on that void,” said Richard Hill, an analyst at Morgan Stanley, who said he’s surprised by the range of investors entering the market.

“The wave of loans coming due is going to create a bottleneck. The image I get is a snake trying to swallow an elephant.”

Funds that buy corporate debt or mortgage-backed securities that package dozens of loans are targeting individual buildings, drawn by yields as high as 15 percent after returns elsewhere in credit markets shrunk. The firms are wagering commercial property values will continue to rebound after recouping 75 percent of their decline since 2009 even with the record wave of maturing loans.

About $350 billion in commercial-real estate debt comes due every year through 2017 after a borrowing binge last decade, according to Morgan Stanley.

The firms are aiming to provide mezzanine loans, which are eventually repaid after traditional commercial mortgages if a borrower defaults, making them a riskier bet in exchange for higher yields.

Advertisement