Hudson partners with Apollo on NPL deal

Hudson Realty Capital and Apollo Global Management have acquired a $200 million portfolio of nonperforming commercial real estate loans from United Community Bank, the firms announced in a statement Tuesday.

The transaction represents the third deal on which Hudson Realty and Apollo have partnered, according to the release. The transaction includes approximately 300 positions across several states. Property types include office, multifamily and retail.

The firms supplemented the acquisition with debt purchased from a CMBS trust on an Atlanta-area industrial complex, according to the statement. Hudson Realty had not responded to a request for comment at press time.

“Our established presence in the Southeast, combined with a deep knowledge of the real estate market, allows us to identify and quickly respond to investment opportunities,” said Hudson Realty managing director Renee Lewis in a statement.

In June 2013, United Community Bank announced that it had sold classified assets that included performing classified loans, nonperforming loans and foreclosed properties. The sale helped lower United’s nonperforming assets to $31.8 million as of June 30, or 0.44 percent of total assets, according to a second quarter earnings report.

Many community banks have begun to unload riskier assets to come into compliance with Basel III regulations formalised by the US Federal Reserve earlier this year. Those regulations increased the risk weighting on commercial real estate loans that are past due, which affects banks’ minimum capital requirements, according to a synopsis compiled by law firm Gibson Dunn.

“The classified assets sold this quarter included performing classified loans, nonperforming loans and foreclosed properties, of which a significant portion were in a bulk sale,” said United Community's president and chief executive officer Jimmy Tallent in a statement announcing the June sale. “The sale accelerates the improvement in our credit quality and financial performance and improves our regulatory standing while lowering our classified assets ratio (classified assets to Tier 1 capital plus allowance for loan losses) to below 30 percent.”

It is unclear whether the assets acquired by Apollo and Hudson Realty are the same as those sold by United Community Bank earlier this year. Tallent and the bank’s chief financial officer Rex Schuette could not be reached for comment at press time.

Apollo’s real estate business is equipped to invest across a variety of platforms, including nonperforming and deeply discounted loans, according to its website. “This acquisition is closely aligned with one of Apollo's real estate strategies to pursue opportunistic investments involving operationally complex assets in stable and improving markets nationwide,” said Apollo real estate partner Coburn Packard in a statement. Packard did not respond to a request for further comment.