Ladder Capital deals loan portfolio to Madison Realty Capital amid mortgage selloff

REIT, frequent lender to President Donald Trump, has been unloading assets to meet margin calls

TRD New York /
Apr.April 16, 2020 05:20 PM
Ladder Capital's Brian Harris and Madison Realty Capital's Josh Zegen (Credit: Ladder Capital; Madison Realty Capital)

Ladder Capital’s Brian Harris and Madison Realty Capital’s Josh Zegen (Credit: Ladder Capital; Madison Realty Capital)

Commercial mortgage investor Ladder Capital sold a group of loans for as much as $200 million as the real estate investment trust unloads assets to keep its books in balance.

Ladder sold the package of five loans to Madison Realty Capital last week for somewhere between $150 million and $200 million, sources familiar with the transaction told The Real Deal.

The loans back multifamily properties in New York City, New Jersey and Los Angeles, and included both performing and non-performing debt. The face value of the loans wasn’t clear.

A spokesperson for Ladder Capital did not respond to a request for comment and a representative for Madison Realty Capital declined to comment on the deal.

Ladder Capital — the REIT founded in 2008 by former UBS Securities bankers Pamela McCormack, Robert Perelman and Brian Harris — is in part known for being a frequent lender to President Donald Trump, having provided more than $250 million in debt to entities tied to him over the years.

In recent weeks, Ladder Capital has been selling assets as the Covid-19 pandemic decreased values for commercial mortgages, sources said.

Like other mortgage REITs that became active during the Great Recession, Ladder Capital relies heavily on borrowing to purchase and sell mortgage securities.

Mortgage REITs borrow short-term debt from banks in the form of repurchase agreements, which they use to buy mortgages with relatively little cash and pool them into commercial mortgage-backed securities, which they sell to bond investors.

But when the coronavirus hit, prices for CMBS loans fell. The mortgage REITs had to mark down the assets on their books and their repo lenders instituted margin calls that required the companies to add cash to their accounts in order to keep them in balance.

S&P Global Ratings lowered its rating on Ladder in late March from BB to BB-, citing the “possibility of margin calls” and saying it expects a “significant worsening of the credit quality of the company’s asset portfolio.”

Ladder Capital earlier this month said it had met all its margin calls and had more than $300 million cash on hand as of April 2.

Madison Realty Capital — headed by Josh Zegen, Brian Shatz and Adam Tantleff — completed the first closing round on its fifth private-equity debt fund with $700 million a few weeks before the coronavirus hit.

The company last year closed its fourth debt fund with $1.136 billion.

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229.


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