Resolution Capital Management, SA Follows the NPL Market to Eastern Europe

Irvine, Calif. – (May 4, 2016) Resolution Capital Management, SA, a joint venture between Distressed Capital Management, LLC and Residential Mortgage Solution, LLC, is a child borne from the two California based asset managers. RCM is the next step for the two, as they bring their focus to the distressed residential non-performing loan markets in Central and Eastern Europe.

“We were excited when DCM approached us with this auspicious partnership. They saw value in my team’s long history and experience in valuing assets from the bottom up,” said Jack Getzelman, President of RMS. “Fusing RMS’s command on valuations and M3 technology on one hand, and DCM’s deep understanding of securitization and foreclosure on the other, gives RCM the muscles to take on the Central and Eastern European market.”

The decision to start its operations in Poland was made back in March 2015, after more than a year of research and due diligence by DCM for the best country to enter into in 2016. The research focused on three main driving points: foreclosure timelines, the value of the assets, and ‘time to sale’ statistics. The results surprisingly placed Poland at the top, with Romania and Hungary following as close seconds. While the rest of the players followed the obvious plays in Italy, because of its 10 year backlogs, RCM skipped over the herds that were stuck in Spain and Italy and became the first to access the Polish market a year before anyone else.

“Our initiative was to understand not what the market is today, but what it would be two years from now,” says Matthew Browndorf, Chief Investment Officer, “expending our resources to do independent research unearthed maiden territory. It is now proving its worth as we are currently closing our first two trades of the year.”

Last week, RCM secured its lease for its offices in Wroclaw, Poland and made some aggressive executive hirings to manage its operations across the Atlantic.

 

Distressed Capital Management, LLC

Distressed Capital Management, LLC (“DCM”) is an emerging asset manager focused on real estate development, securitization and performing and nonperforming commercial and residential real estate loans (“NPLs”). DCM boasts top talent with a management team responsible for over $30b USD in securitizations and best exemplifies the vertical integration of Plutos Sama’s holdings in its cross-utilization of services with Wilson Keadjian Browndorf, LLP and BP Fisher Law Group, LLP. For more information please visit http://www.distressedcapital.com/

 

Residential Mortgage Solution, LLC

Residential Mortgage Solution, LLC is an asset manager that offers a turn-key solution for Servicer Surveillance to oversee and manage sub and non-performing residential mortgage assets. They also provide REO Asset Management services to ensure that REO portfolio owners receive timely, decision-quality analysis for effective liquidation strategies in real time.

RMS’ skilled oversight team is enabled by its revolutionary, web-based search and analysis engine called Mortgage Market Management, or M3. RMS utilizes its sizable advantage with M3 to mitigate loss, enhance loan portfolio performance and protect the value of its customers REO portfolio. For more information please visit http://www.residentialms.com/

California JV pushes into Polish NPLs, eyes Hungary, Romania

Published on www.debtwire.com

Written by Al Yoon and Monica Filkova

April 26, 2016

Resolution Capital Management has made its first purchases of residential NPLs in Poland, where deep discounts and a relatively robust economy are seen boosting returns, according to company executives.

RCM, a Polish asset manager formed in 2015 by former CSFB banker Jack Getzelman and corporate lawyer Matthew Browndorf, this month closed on PLN 476m (USD 122.65m) in Polish NPLs from Getin Noble Bank, the second biggest bank controlled by Polish investors, according to Browndorf and Getin Noble’s website.

The joint venture between Getzelman’s specialty finance company Residential Mortgage Solution and NPL manager Distressed Capital Management – both in California – expects a steady flow from Polish banks at IRRs exceeding the mid-teens, said Browndorf, DCM’s CIO. RCM plans to work the loans out or foreclose.

“If it wasn’t such a high IRR, I wouldn’t be over there,” he said. “I think we’re going to be there a while.”

To be sure, there are still risks tied to the European economy where policy makers are working to preserve a shaky economic recovery. Many CESEE (Central, Eastern and Southeastern European) countries have recently enacted or are introducing new laws regarding property ownership, bankruptcy and debt resolution.

But in Poland, there are signs that loan quality is improving as a robust labor market bolsters housing, according to a February report from Poland’s central bank. That was especially true for cooperative banks where NPLs constituted only 4.6% of consumer loans, compared with 6.6% for commercial banks as of 3Q15.

In addition, demand for housing is on the rise, in part due to government support for first time buyers, and rents have started increasing attracting institutional investors to the residential space.

Getin Noble Bank is a big residential mortgage lender with a book of PLN 34.6bn (USD 8.91bn), according to its quarterly accounts as of 30 September. Impaired loans represent 16% of assets, with NPLs 90 days past due at PLN 3.3bn. This compares to a 3.2% impaired housing loans ratio for the Polish market as a whole and underscores Getin Noble’s motivation to sell.

Polish banks have sold assets at steep discounts in the past.

Kruk SA, a listed Polish debt recovery specialist, acquired a EUR 170m (USD 191.96m) portfolio at a 68% discount from Getin Noble Bank in March 2014 as it made its first foray into residential mortgages, according to a company press release. Later that year, Kruk reported that it had also acquired a EUR 106m portfolio at an 84% discount from Bank Zachodni WBK.

KPMG’s February European Debt Sales report records a EUR 240m portfolio sale in 2015 by Raiffeisen Bank International. The Austrian bank has another EUR 237m transaction in progress, according to Deloitte’s recent Deleveraging Europe 2016 report.

The sales are part of a boom in property-backed NPL sales in Europe’s eastern region. Some EUR 2.2bn in deals have already been agreed to in 2016 after annual sales across CESEE more than tripled to EUR 5.6bn in 2015, according to published reports.

The largest residential deal is Hungarian OTP Bank’s February acquisition of AXA’s EUR 1bn credit book, as reported (see analysis, 11 April). Dutch insurer Aegon is in the final stages of selling EUR 360m in Hungarian residential mortgages, meantime, as reported.

And while RCM is targeting Poland as its top priority, the firm is also reviewing bank portfolios in Hungary and Romania. In both countries, low loan prices and shorter foreclosure timelines make NPLs an attractive bet, said Browndorf. RCM opened a Wroclaw office this month.

The firm veered away from investments in Western Europe. In Italy, for instance, it can take NPL owners a decade to secure properties, he said. DCM and RMS remain active buyers of US NPLs.

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