Iron Hound Lends Chetrit a Hand

By Scott Baltic, Contributing Editor

Robert Verrone, Iron Hound

As the culmination to about three years of complex negotiations, Iron Hound Management Co., L.L.C. has completed the restructuring of a $317 million CMBS loan on a 56-property national multi-family portfolio on behalf of CRE investor and developer The Chetrit Group, Iron Hound announced Monday. The loan is secured by 5,400 apartments in Florida, Indiana, Kentucky, Ohio and Pennsylvania.

The loan was originated at $335 million in May 2007 by Merrill Lynch for the portfolio’s then purchaser, New Jersey–based Empire American Holdings L.L.C.

The loan was divided into three pools, all three of which were securitized and all three of which later went into delinquency simultaneously, Iron Hound principal Robert Verrone told Commercial Property Executive. The loan was transferred to special servicer LNR Partners in December 2010.

The restructuring, negotiated by Verrone, with LNR on behalf of the lender, incorporated several signature steps that reportedly took more than three years to complete:
• The loan was restructured into two components: a $205 million A piece and a $112 million B piece, incorporating a 12-month maturity extension.
• An assumption was arranged from the original borrower (Empire American) to buyer The Chetrit Group.
• The loan’s preferred equity piece, owned by Arbor Commercial Mortgage, was extinguished.

Two of the pools were worked out a few years ago, Verrone told CPE, and the third pool (Pool #2) was the final piece.

“We dedicated more than three years to crafting, negotiating and completing a complex restructuring plan to ensure the excellent long-term prospects for the properties and the loan,” Verrone said in a prepared statement. “Our relationship with the special servicer enabled us to coordinate this successfully and to craft a solution to satisfy all parties.”

Bringing in The Chetrit Group was a key element of the eventual solution, he told CPE.

The CMBS debt being split into A and B notes is significant because the portfolio was securitized as a $335 million loan, but later split into individual loans for each of the properties, Sean Barrie, a research analyst with Trepp L.L.C., told CPE.

“We’ll know more when August’s remittance report comes in for the deal,” Barrie continued, “but we could be looking at another re-restructuring of this portfolio. The loan has been distressed for a few years now, so the modification could help the loan borrower, as they can find a new borrower for the B-note chunk of debt (which depends on if the debt structure changes).”