Sept. 29 (Bloomberg) -- Cortview Capital Holdings Inc. is jettisoning a commercial mortgage-bond team led by Bill Green, the former global head of real-estate capital markets at Wachovia Corp., after hiring the group six months ago.
“We looked at all of our businesses and determined that the best use of our capital was not in CMBS at this time,” said Michael Lacovara, a founder and president of Cortview, the broker-dealer backed by private-equity firm Warburg Pincus LLC. “It seemed more fair to Bill and his tremendous team to allow them to find a partner who could provide the capital they need.”
Cortview, which started a year ago with a $125 million investment commitment from Warburg, hired Green in March to enter the $600 billion commercial-mortgage backed securities market as the debt rallied and sales of new bonds surged. The broker-dealer is cutting the roughly 15-person team as firms cut back after relative yields soared on concern that the U.S. economy has stalled and amid Europe’s intensifying debt crisis.
Green, who spent seven years at Wachovia before leaving to run debt investments for Barry Sternlicht’s Starwood Capital Group LLC in December 2007, formed Tannery Brook Partners in August 2009 to counsel clients on distressed real estate. Green didn’t return calls for comment.
Wall Street banks have reduced inventories of commercial- mortgage bonds and pulled back from originating new property loans to package into securities as turmoil in credit markets eats into profits. Prices on some of the debt have plunged as much as 30 points from between 85 and 90 cents in mid-February, according to Bank of America Corp. analysts led by Alan Todd in New York.
The Charlotte, North Carolina-based lender, which had been predicting as much as $45 billion in sales this year, cut the issuance forecast for 2011 to $25 billion. Sales plummeted to $3.4 billion in 2009 compared with a record $234 billion in 2007, according to data compiled by Bloomberg. About $20 billion of the debt has been issued in 2011.
Investors are demanding 292 basis points, or 2.92 percentage points, to hold top-ranked commercial-mortgage bonds rather than Treasuries, according to a Barclays Capital index. Spreads reached 303 basis points on Aug. 25, the most since June 2010, and are up from this year’s low of 178 on April 26.
Lenders crowded the market after sales revived in November 2009. The number of firms looking to originate commercial mortgages for sale as bonds had quintupled to 25 from a year earlier by December 2010, according to a report from Standard and Poor’s at the time.
Cortview, based in Richmond, Virgina, will instead focus on credit products and its Memphis, Tennessee-based rates and investment-banking business, Lacovara said. It will continue to do securitizations of assets other than commercial real estate, he said.
In June, the firm hired 13 people from Jefferies Group Inc. to trade and sell investment-grade debt as it sought to grab a larger share of the so-called middle-market investment banking business.
Warburg Pincus made “a further substantial capital contribution to support Cortview’s growth,” the broker dealer said in a Sept. 27 statement distributed by Business Wire. The money will go toward sales and trading of credit, rates and mortgages, as well as investment banking and corporate finance.
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