Although a household name when it comes to residential mortgages, Countrywide Financial Corp. is a newcomer to lending on commercial real estate. But just 18 months into its venture, it has already grown its business to rival many of the major players.
In May, it wrapped up its biggest retail real estateto date with a $320-million financing to help fund the acquisition of six regional malls for a partnership of Australia-based General Properties Trust, Babcock & Brown and Birmingham-based REIT Colonial Properties Trust.
In 2005, its first full year of operation, Countrywide Commercial Real Estate Finance completed a total of 420 loan transactions, totaling $5.9 billion. The company is well on its way to doing 500 transactions totaling $7.5 billion in business this year, says Chris Tokarski, managing director for Countrywide Commercial.
“We ramped up [our retail lending division] very rapidly and will continue to do so,” he says, noting that $6 billion of the company's five-year target of $20 billion annually is earmarked for retail deals. Tokarski says the company will consider any type of retail deal, including anchored and unanchored neighborhood centers.
“Retail will be the largest piece of what we do this year,” says Boyd Fellows, managing director for Countrywide Commercial.
Countrywide Commercial offers a niche program of loans from $500,000 to $5 million, with a $10,000 cap on closing costs. The company is targeting deals of $5 to $75 million, but a significant percentage of deals so far have been in excess of $75 million.
Colonial had wholly-owned six properties, all of which are located in secondary southeastern markets. The alliance with General Properties, the major interest partner, and Babcock & Brown, which brokered the deal and secured financing, allows Colonial to sell 90 percent of its interest in these centers, but continue to manage them.
Colonial is divesting of its mall properties to focus on open-air lifestyle centers, power centers and mixed-use, says John Moss, Colonial senior vice president for retail. The company is constructing two power centers and an open-air lifestyle center in Birmingham; a mixed-use development in Gulf Shores, Ala., with 417,000 square feet of retail; and has more mixed-use and lifestyle projects on the drawing board. Malls now account for just 4 percent of its NOI, down from 31 percent at the beginning of 2005.
“There is huge consolidation going on in the regional mall business, so we decided it was the right time to divest of that segment of our portfolio,” Moss notes, pointing out that at one time, malls represented about half of the company's NOI.