September 27, 2013
Commercial Real Estate Direct
First Financial Network Inc., one of the longest tenured loan-sales specialists in the country, has put together a multi-seller loan-sales event involving some $100 million of mixed-quality loans. And it plans similar quarterly events. Its initial offering includes loans from four sellers. Final bids are due Oct. 22.
Commercial Real Estate Direct Staff Report
First Financial Network Inc., one of the longest tenured loan-sales specialists in the country, has put together a multi-seller loan-sales event involving some $100 million of mixed-quality loans. And it plans to follow it up with similar quarterly events.
The event is the first of its kind for First Financial, which was founded in 1989 and is headquartered in Oklahoma City. Indicative bids have been turned in and a final round of offers is slated for Oct. 22.
Meanwhile, it's already laid the groundwork for a follow-up event. While details of what would be offered haven't been disclosed, First Financial has set a Nov. 13 deadline for indicative bids and Dec. 10 deadline for final bids. It's aiming to complete sales by the end of the year.
The company historically has focused on helping individual clients sell pools of loans and individual loans through sealed-bid offerings. That was well and good when banks were packaging large pools of loans for sale. But loan-sales volumes this year are running at levels that are roughly half what they were last year. That's simply a sign of the times. With interest rates at rock-bottom levels, property owners are more easily able to refinance loans that in more normal times would be under water.
The result is that banks are selling smaller and fewer loans than they were last year and before.
Meanwhile, the smaller loans and portfolios that are being brought to market typically don't attract the deep-pocketed investors that are looking to place large chunks of cash in distressed or otherwise high-yielding loans. They often are too small to attract any substantial investor interest.
First Financial is trying to address those issues. It's telling banks that their small loans would get marketed widely if offered as part of a $100 million sales event. At the same time, it should be able to draw big players looking to efficiently purchase large volumes of loans.
Other loan-sales specialists have held multi-seller events, but many of those had mixed results. Often loans were offered with unrealistic pricing expectations, which typically turns prospective buyers off.
"This might not be a completely new idea," explained Bliss Morris, the company's founder and chief executive. "But the process is new."
The company won't take a fee for listing a loan, rather it will only get paid when an investor makes an offer that meets or exceeds the seller's strike, or reserve price. It's confident that whatever it brings to market will sell. It has, it says, a near-perfect record of completing the sale of any loan it so far has brought to market. It does that through relentless due diligence and ensuring that its clients' pricing expectations are realistic.
"We want our clients to know that when we bring a portfolio to market, we'll sell it," Morris explained.
For its multi-seller sales events, First Financial has adopted a two-stage bidding model. It will ask investors to submit an indicative bid that would be based on high-level due diligence. Doing that would provide additional pricing comfort to its clients. If offers are well below what was expected, those investors don't have to invest in due-diligence reviews. It then will invite investors to conduct thorough due diligence and turn in final offers.
In addition, First Financial is going to great lengths to ensure that its sellers have the data and documentation needed to complete a sale of loans. And it has fine-tuned its online due-diligence platform to accommodate its proposed multi-seller sales events.
The company will sell a wide range of loan assets through its events, from commercial mortgages to judgments, deficiencies and charge-offs.
For additional information on First Financial's upcoming events, contact the company at (405) 748-4100.