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Markaz Launches US Distressed Debt Program

The target size of the Markaz US Distressed Debt Program is USD100 million.

July 22, 2010 2:07 by

Kuwait Financial Centre “Markaz”, one of the Middle East’s leading investment banking and asset management companies, announced the launch of the US Distressed Debt Program, which will invest in non-performing and sub-performing commercial mortgages with net targeted annual returns of more than 15%.

Mr. Sami Shabshab, President – MarGulf Management, Inc. the wholly owned US real estate investments arm of Markaz, said,”With over USD1.2 trillion of commercial real estate mortgages maturing in the next four years, lenders will continue to face challenges. Sellers are, therefore, liquidating these distressed loans at large discounts to underlying collateral values. This is creating a unique opportunity to generate significant risk-adjusted returns by investing in sub-performing and non-performing first lien whole-loan commercial mortgages.”

He continued, “The upside potential is great as gaining exposure to underlying real estate at low costs will enable us to reap the benefits from aggressive property management and forecasted improvement in economic conditions.

The key opportunity drivers include the ability to acquire loans from distressed sellers at significant discounts, improved ability to select high-quality assets, capturing value through negotiating a workout repayment with the borrower or through foreclosure and asset management, and downside protection through collateralized loans and borrower guarantees. Margulf acquired two loans in the second quarter ended June 2010, collateralized by properties in California, and has already received several offers from potential buyers.”

The target size of the Markaz US Distressed Debt Program is USD100 million, of which Markaz is seeding USD10 million in proprietary funds. The investment period is two years, and the Program’s term is four years. It is managed by MarGulf, the US Real Estate group of Markaz headed by Mr. Sami Shabshab.Headquartered in Los Angeles, California, MarGulf has been active in almost all phases of real estate for over 22 years.

The team is responsible for numerous tasks including: sourcing of debt acquisitions; due diligence review of loan and property information; analytical assessments and cash flow/value projections of underlying assets; submarket and onsite property inspections; critical reviews of loan borrower credit and other documentation; renegotiation of loan terms and conditions with existing borrower; property and asset management of properties acquired by foreclosure; and the ultimate disposition of loans and/or real estate.

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