CRE: GMAC-related Capmark Financial near bankruptcy

By Edward Harrison On Oct 24, 2009

A sign that the commercial real estate (CRE) market continues to cause headaches comes this weekend in the form of news of Capmark Financial’s imminent demise. Capmark is one of America’s largest commercial property lenders with about $10 billion in assets.

The New York Times’ Dealbook reports:

The Capmark Financial Group, the big commercial real estate finance company cobbled together from pieces of GMAC, may file for bankruptcy as soon as this weekend, a person briefed on the matter told DealBook on Saturday.

If that happens, the move would be unsurprising: Capmark warned last month that it might seek Chapter 11 protection after it reported a $1.62 billion quarterly loss.

Last month, the company agreed to sell its mortgage loan and servicing business to Warren E. Buffett’s Berkshire Hathaway and Leucadia National for as much as $490 million. That agreement carried a 60-day expiration date, or around Nov. 2 — unless Capmark filed for bankruptcy, which would give it another 60 days to complete the sale.

The company is only the latest to fall victim to continued trouble in the commercial real estate market, which many analysts have said will continue to deteriorate. Many small banks have collapsed this year under the weight of commercial loans.

Kohlberg Kravis Roberts, Goldman Sachs Capital Partners, Five Mile Capital and Dune Capital bought GMAC’s commercial real estate businesses in 2006 for about $1.5 billion, with GMAC retaining a 25 percent stake in the operation. K.K.R. has already written down the value of its Capmark investment to zero.

With the closure of seven small banks that brought the total this year to 106, this weekend shows a financial industry still under enormous strain. Commercial property, where Capmark was busy, is the area of greatest concern. This is one reason the Federal Reserve Bank of New York has received $2.12 billion in requests for government loans in October to purchase legacy commercial mortgage-backed securities (CMBS) under the TALF program.