CT Realty Corp. is looking to get in,and out,of a new line of business.
The Newport Beach-based real estate investor and developer and Orange-based Fasthold Capital Inc. have bought $33.5 million in troubled mortgages for about 100 homes in California, Washington and Arizona.
It’s CT Realty’s first foray into mortgages. But the move isn’t out of character for the company, said Robert Campbell, CT Realty president.
“CT’s game plan has always been to look at new markets,” said Campbell, a veteran of local commercial real estate. “We try to get in early and not stay too long. Hopefully this is a short-term business.”
The venture expects to keep the loans for two or three years, he said.
The plan is to sell some of the loans to buyers of distressed assets. In some cases, borrowers will be offered incentives for a deed-in-lieu of foreclosure, where the borrower gives up a home to forgive a loan balance.
The strategy for the rest will be to refinance or restructure, according to the company.
“We’ll arrive at conclusions quickly,” Campbell said. “Our goal is to keep people in their homes.”
Most of the homes are occupied by borrowers, with loans ranging from 45% to 100% of the homes’ values.
CT Realty said it bought the loans from an undisclosed investment bank.
Sources said the seller was New York-based Lehman Brothers Holdings Inc., which filed for bankruptcy protection last week as its mortgage and real estate investment losses ballooned.
Partner Fasthold Capital is a distressed debt buyer formed last year. The company,which will oversee the day-to-day operations and loan workouts,said in June it had raised more than $300 million to buy distressed mortgages. As of July, it had acquired more than $60 million worth.
Fasthold’s History
Fasthold’s founders hail from the mortgage industry, including Cypress-based subprime lender Right-Away Mortgage Inc., which closed last year, and Laguna Hills-based National Mortgage Network Inc.
Campbell said the two companies were introduced by Newport Beach-based Mariners Asset Management LLC, which is handling oversight of due diligence and management of the loans for CT Realty.
CT Realty has been involved in more than $2 billion worth of property acquisitions, sales and developments. Other than a 2006 condominium investment in Long Beach, it has stayed clear of housing.
The company got its start in 1994 by acquiring distressed commercial loans, according to Campbell.
“This is much more time-consuming,” he said.
CT Realty has four asset managers for the home loans. They are in charge of about 25 deals each. At a maximum, an asset manager can handle as many as 35 loans before more managers are needed, Campbell said.
More loan buys are likely, he said.
The company also is likely to take another look at buying troubled commercial loans during the next year. Lenders appear to be shopping more of their loans, although few sales have been announced.
“Banks are starting to get pressure from regulators to take their least healthy loans off their books,” Campbell said.
