Bloomberg News

Rialto Said to Plan Debt Tied to Distressed Commercial Mortgages

March 14, 2013

UBS AG (UBSN) and Wells Fargo & Co. (WFC:US) are marketing $218 million of bonds tied to commercial mortgages, some of which are in default.

The offering on behalf of Rialto Capital Management LLC is linked to a mix of assets acquired from 2010 to 2012, according to a person familiar with the deal who asked not to be identified because terms aren’t public.

Sales of commercial-mortgage backed securities are climbing as buyers seek alternatives to yields on government debt hovering at almost record lows. The demand is helping Wall Street banks create structures that enable real-estate investors to fund riskier holdings such as partially leased properties and foreclosed buildings in the $550 billion CMBS market.

With the Federal Reserve holding interest rates at about zero into a fifth year, issuance in the market is set to rise by 50 percent to $70 billion this year, according to Credit Suisse Group AG.

Rialto, a unit of Miami-based homebuilder Lennar Corp. (LEN:US), issued similar debt in April, according to data compiled by Bloomberg. The deal has since paid off, 11 months ahead of its projections, according to deal documents.

The new offering is linked to properties across the U.S., with Florida accounting for 17.6 percent, the documents show. The transaction is tied to 1,472 loans and properties, according to the documents.

The securities will be rated Baa3 by Moody’s Investors Service and BBB- by Kroll Bond Rating Agency, the person said.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • WFC
    (Wells Fargo & Co)
    • $50.45 USD
    • 1.27
    • 2.52%
  • LEN
    (Lennar Corp)
    • $42.96 USD
    • 0.01
    • 0.02%
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