New Carlton Vehicle to Fund $300M in First Mortgages

At a time when many big banks are reducing how much business they give to mortgage brokers, New York-based Carlton Strategic Ventures L.L.C.–the principal transaction group of Carlton–has formed a $300 million first mortgage joint venture with an institutional real estate investment firm that will originate first mortgage loans up to a 65 percent loan-to-cost ratio. CSV Mortgage Capital will be targeting first mortgage loan transactions across the country with a total transaction size of $20 million to $100 million. The venture will target borrowers who have an opportunity to acquire their loans from the existing lenders at a discount and need first mortgage proceeds to facilitate the recapitalization; a partially occupied building (with a lease to be signed where the borrower needs tenant improvement and leasing commission capital) in a fundamentally strong and tight market; transitional properties which require tenant improvement or leasing dollars to lease a vacant space or re-tenanting to add value; and borrowers who need capital either to refinance their existing loans or for opportunistic acquisitions. The new CSV venture intends to invest in first mortgage loans in a time when this type of debt is virtually non-existent in the market. On Dec. 10, CPN reported that commercial mortgage delinquencies are up, but still historically low, according to figures from the Mortgage Bankers Association. The 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose 10 basis points, to 0.63 percent, in 3Q08, compared with the previous quarter, according to the organization’s third-quarter Commercial/Multifamily National Delinquency Report. Over the past 10 years, year-end CMBS delinquency rates have averaged 0.97 percent. So maybe CSV is on to something. CSV Mortgage Capital plans to include all asset types except land up to $100 million. Separate from this venture, an affiliate of CSV Mortgage Capital has already acquired more than $500 million in performing, discounted loan assets which consisted of 10 separate stand alone transactions located in prime markets across the United States. CSV has been most active in acquiring hospitality and office assets. Additionally, CSV Capital L.L.C., another affiliate of CSV, has an existing $400 million joint venture with a major insurance company to originate and provide mezzanine and preferred equity loans on a principal basis.