Sabal Financial Group LP in Newport Beach has acquired four more portfolios of loans tied to distressed commercial real estate, boosting the company’s assets to almost $4 billion.
The privately held firm was formed in 2009 and specializes in buying bad debt, primarily commercial real estate loans and land.
Sabal’s most recent buys include a $96 million portfolio from San Francisco-based Bank of the West. The loan bundle is secured by properties and land in California, Arizona, Colorado, Oklahoma and Iowa.
“The Bank of the West portfolio was appealing to us because of its land holdings,” Chief Executive Pat Jackson said. “There are barriers to entry and a general lack of development space, resulting in a constrained land supply, which will have higher values as the real estate market continues to recover.”
Sabal has “a substantial amount of land,” primarily for homebuilders, Jackson said.
The company kicked off a lending platform in June for residential homebuilders, as part of an expansion of its focus to go beyond the season of loan workouts. The program provides financing for infill development and smaller private projects throughout the West Coast.
“The intent is not to simply be a participant in the distressed cycle,” Jackson said. “We are taking a long-term view. It’s a natural next step for us as a company to go beyond buying broken debt. We expect to start looking at originating new, performing loans to meet the market demand.”
Other Portfolios
Sabal also acquired a $121.5 million portfolio from a regional bank based in the Southeast. The package contains 44 performing and nonperforming loans that are tied to land and properties in a number of states, including Texas, Florida, North Carolina and South Carolina.
Another of its recently acquired portfolios—which brings its acquisitions to date to 15—includes $69 million in loans from Winston-Salem, N.C.-based Branch Banking and Trust Bank. The loans are heavily concentrated in North Carolina and South Carolina.
Sabal also got an undisclosed amount of loans from Needham, Mass.-based CW Capital LLC, a finance and investment firm focused on multifamily and healthcare lending.
Sabal has been buying loan packages from the Federal Deposit Insurance Corp., as well as from banks. Competitor firms include Rialto Capital Management LLC, a subsidiary of Miami-based homebuilder Lennar Corp.
“There’s not a super deep list of competitors in this field, unlike other types of assets,” Jackson said. “It’s not uncommon that we’d be betting on a portfolio with another handful of competitors.
“We are lucky that we are working in a space that requires more senior people [and] a longer-term view,” he added. “It requires a lot of technology to properly manage the assets and it’s more expensive.”
Commercial Vet
Sabal recently named commercial real estate veteran Mark Foster as general counsel of the firm, a newly created position.
Foster arrived from New York-based Rockefeller Group Development Corp. in New York, where he served as vice president and senior real estate counsel, overseeing transactions, management and operations for the company’s West Coast region. He also spent time at suburban Philadelphia homebuilder Toll Brothers Inc. as general counsel.
“Mark brings a more corporate approach to how we’re doing our legal work, to be able to bridge all the real estate issues, our everyday work, plus more corporate issues as we grow,” Jackson said. “We have staff attorneys focused on transactional and litigation-related issues. We have attorneys we deal with in the marketplace who have their own private firms. [Having Mark] knits together all our various legal requirements. The complexity of the company increases with further growth.”
Chicago-based Morningstar Credit Ratings LLC recently designated Sabal as “a commercial mortgage special servicer.” It cited Sabal’s “history of successful and expanding special-servicing assignments and resolutions” in a report.
“Having a third-party ratings agency come in and validate our business puts a fine point on us,” Jackson said.
The rating also is an indication of an ongoing commitment for Sabal, which will be getting regular checkups every six months.
“We have to focus resources internally to maintain that,” Jackson said. “When you apply to get rated, you have to have a certain degree of confidence that you’re going to bode well. We think we’re now operationally savvy enough to make this an embedded piece of operations.”
