Macquarie Group Ltd., Australia's largest investment bank, is forming a group to originate U.S. commercial-property loans and trade securities tied to the debt, seeking to gain a toehold as delinquencies and maturities surge.
Randy Reiff, who ran commercial mortgage finance and commercial mortgage-backed securities at Bear Stearns Cos. and JPMorgan Chase & Co., will head the New York-based group, Macquarie said by e-mail. Reiff was most recently president of Spartan Real Estate Capital of New York.
Macquarie's credit trading division is entering the commercial-mortgage business amid plunging prices and record defaults. More than $60 billion in loans bundled into bonds mature in 2011, according to Bank of America Corp. Macquarie aims to take part in restructurings and refinancings as the debt comes due, said Michael McLaughlin, head of Macquarie's New York-based credit trading unit. Reiff will report to McLaughlin.
"We want to be in a position to capture that in whatever format it takes," McLaughlin said.
Borrowers are struggling to refinance with values down 41% from October 2007 highs, according to Moody's Investors Service. Late payments on commercial property loans packaged into securities are at a record 7.5%, according to Moody's, and may reach 11% by yearend.
Macquarie, of Sydney, intends to start originating commercial mortgages as many banks pull away from real estate lending, creating a void, McLaughlin said. The loans may be pooled with others to be sold in newly issued commercial mortgage-backed bonds, he said.
Macquarie's credit trading group, started in March 2008, focuses on high-yield and distressed corporate credit, and the bank will target similar buyers with real estate investments.
"A lot of commercial real estate risk is on the books of banks and insurance companies," McLaughlin said. "The market has been waiting for the big cleansing."
Mark Lebowitz, 44, Spartan's director of capital markets, and James Conopask, 41, the firm's chief investment officer, are also moving to the new group. Three other Spartan employees are joining the Macquarie team: Simon Breedon, 31, Matthew Weinstein, 28, and Andrew Flack, 27.
A record $251.1 billion of bonds tied to commercial mortgages were sold in 2007 after $223.3 billion in 2006, according to data compiled by Bloomberg. Sales of the debt halted in 2008 as the credit crisis sapped demand, choking off funds to borrowers. Even with government aid, only $3.04 billion of the debt was issued last year. About $1.67 billion has been sold in 2010.