Carlyle leads race to buy White Tower CMBS assets: source

LONDON Fri Jun 4, 2010 8:04am EDT

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LONDON (Reuters) - Private equity house Carlyle Group is the frontrunner to buy about 700 million pounds ($1.03 billion) worth of London offices linked to the failed White Tower commercial mortgage-backed securitization (CMBS), a source close to the discussions told Reuters.

Carlyle is in advanced talks to buy the Thames Portfolio that comprises five of the assets supporting the 1.15 billion pounds White Tower 2006-3 CMBS, which defaulted in July 2009 after a sharp correction in UK commercial property prices.

The steep market downturn, triggered by a collapse in global credit markets, slashed the value of the property portfolio backing the CMBS to 929 million pounds at end-June 2009, almost half their worth when the bonds were first structured and sold.

Carlyle has offered to buy the Thames Portfolio for about 440 million pounds, the source said, about 26 million pounds under the asking price set by brokers Knight Frank and CB Richard Ellis.

The private equity house is also in detailed negotiations to buy Alban Gate, a sixth office put up for sale by the bonds' special servicer CB Richard Ellis Loan Servicing (CBRELS), for about 270 million pounds, the source said.

Successful sales of these assets could raise repayment prospects for the most senior classes of White Tower's troubled bonds, although it is unclear just how much noteholders could be paid back.

The purchases will be funded using a mixture of bank debt and a portion of equity provided by Carlyle's third European property opportunity fund, Carlyle Europe Real Estate Partners III, which was launched in 2007 after raising 2.2 billion euros ($2.68 billion).

Last month, research from Britain's De Montfort University showed about 55 billion pounds of UK property loans and mortgage-backed securities were due for refinancing in 2010, haunting banks still waiting for values of many lower-quality property assets to hit a floor.

(Reporting by Sinead Cruise)

($1=.8205 Euro)

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

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