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Mortgage Bank Eyes Loan Workouts

Friday, February 19, 2010

Phillips Realty Capital, a 77-year-old mortgage bank that focuses on the Mid-Atlantic region, wants to step up its role as an advisor to cash-strapped property owners. The Bethesda, Md., firm plans to hire an undetermined number of commercial real estate specialists this year for a growing team that helps borrowers work out underwater loans. The group, for example, seeks to arrange loan extensions, raise debt or equity, or line up joint-venture partners.

The process can involve negotiating with special servicers and B-note holders on commercial MBS loans. "Capital is not going to come unless it has the right traffic cop to get it there, and that's where we come in," said chief executive C. Stephen Shaw. Phillips currently has some advisory contracts, but Shaw declined to specify the amount. He said that all told, the company has $500 million of active loan applications or advisory contracts.

Before the credit market tanked in 2007, Phillips arranged about $1.5 billion of mortgages a year on all property types. Most were placed with insurance companies, though some also went to banks and CMBS programs. Going forward, Phillips will also solicit capital from fund managers, investment shops, mortgage REITs and private equity vehicles. Staffers working on the advisory initiative include mortgage veterans Richard Bopp, Ryan Pinson and Fabrice Vasques, who joined Phillips last year. They previously worked on a 15-member commercial real estate finance team, led by Bopp, in the Tysons Corner, Va., office of Capmark. That lender and fund operator, based in Horsham, Pa., went bankrupt in October.

All three left Capmark last spring. Bopp and Vasques joined Phillips as managing directors soon after, but Pinson worked as a consultant to the FDIC before joining as a director in December. They report to Shaw, who now oversees an 18-member team of lending and analytics specialists. Phillips, which focuses on commercial property owners and developers in Maryland, Virginia and Washington, services about $1.6 billion of nonrecourse loans, most of which were funded by life insurers.