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Invesco Mortgage Capital Inc. Message Board

  • thomasj1803 thomasj1803 Sep 30, 2011 9:31 AM Flag

    CAPITAL for purchase, not morts themselves

    IVR FINANCED THE DEAL, DIDN'T BUY THE MORTGAGES, according to the release...

    Invesco Ltd. (NYSE:IVZ) today announces that its wholly-owned subsidiaries WL Ross & Co. LLC and Invesco Advisers, Inc., and, Square Mile Capital Management LLC and the Canyon-Johnson Urban Funds have teamed to acquire a portfolio of performing and non-performing commercial real estate loans from Bank of America.


    Capital for the investment was provided by Invesco Mortgage Recovery Fund, a fund co-managed by Invesco Real Estate, Invesco Fixed Income and WL Ross & Co. LLC; Invesco Mortgage Capital Inc. (NYSE:IVR - News), a mortgage REIT managed by Invesco Advisers, Inc.; Canyon-Johnson Urban Fund III, and a fund managed by Square Mile Capital.

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    • Some statements in this thread really misrepresent what actually happens on a transaction like this.

      IVR is actually not investing DIRECTLY here at all. IVR gets no slice.

      So the premise that Wilbur Ross picked out the best risk /reward pieces for his company and stuck IVR with the junk is BS.

      An Invesco entity called the Invesco Mortgage Recovery fund invested with a couple of listed partners.

      The Invesco Mortgage Recovery fund started out as a PIPP fund and has transitioned to address further opportunities in commercial and residential mortgages.

      Wilbur Ross's company (WL Ross) is now a division of Invesco (Invesco bought the company).

      Invesco itself, WL Ross and IVR are all investors in the Invesco Mortgage Recovery fund.

      So, essentially IVR invested ALONG SIDE Wilbur Ross in this transaction. IVR's risk / reward profile in this deal is EXACTLY the same as Wilbur Ross (and all of the investing entities in the Invesco Mortgage Recovery Fund).

      IVR has participated in this entity for several quarters. In terms of overall capital allocation, it's a distant 4th (after agency, non-agency, CMBS).

      IVR has made pretty good money every quarter on this fund and before subscriptions closed IVR had the opportunity to increase it's commitment to the fund and declined. Even though the fund is quite profitable, it operates with relatively low leverage. Management stated that while they've done very well on the PIPP / Invesco Mortgage Recovery fund, they can earn higher returns on agency and non-agency mbs and on CMBS.

      The above is all verifiable via IVR's presentations, earning calls and SEC filings.

      It's good to read other perspectives on investments. But lousy when it's just made up bs.

      • 2 Replies to st3ve27
      • All I know (since you havent really said anything in your post that suggests there isnt credit "slicing" going on with WILBUR taking the B piece (a transaction he is know for world over), banks taking the AAA superduper (which is always well bid) and IVR taking the Mezz piece WHICH IS WHAT THEY HAVE DONE IN THE PAST based on the credit breakdown ofbwhat they already own--mosty suppoet AJs and AMs and BBBs from earlier vintages) is that I woulnt want to own that stuff on a levered basis.

        Again, why do you think IVR is involved herevat all if everything is pro rata? First of all, they CANT buy the B piece or lowest rated highest yielding tranche because the company charter PROHIBITS it.

        Leaving aside the fact that WILBUR would NEVER need money to buy that piece anyway, it is small and he has lots, that leaves the Mezz and the SUPER DUPER for the other participants.

        Again, given that the majority of CMBS buying IVR has dine has been in support bonds, given that the last cc and the JMP presentation both had management saying they saw "value" in those securities and that they had "stabilised" (love that one), I am just putting 2 and 2 together.

        You, on the other hand, are making a "word salad" and not really saying anything about what this transaction was.

        Tell us then what did IVR buy? Did they take a share of the equity? Did they only do SUPER DUPERS at tiny returns?

        Please, the floor is yours, but SAY SOMETHING.

      • facts when you say IVR has made some pretty good money every quarter............If that were indeed the case,the share price would not be$14 and falling....Wilbur is 'using' IVR to place funding which is difficult to acquire elsewhere and has small reward relative to being 2nd in line for big time losses...Are you familiar with Wilbur's 'past' in terms of any legal issues he has had......many think of him as a somewhat unsavory character and some think even worse things than that!.....You deserve to lose every nickel you throw into thid 'black hole'.........hope, hype, and wishing are not the best of investment strategies.....are you related to Barry Obama????? roflmao!

    • What does this mean then?

      "have teamed to acquire a portfolio"

      • 3 Replies to rlp2451
      • Let me try to add some color. These type of distressed sales of distressed properties and mortgages are occuring all of the time as different institutions have to delever to meet other goals. The sellers generally hold auctions through investment banks or web-based platforms where qualified bidders gain access to the due diligence on each loan/property. The participants in these auctions include large investment partnerships that are sponsored by different advisors and formed specifically for the purpose of buying these portfolios. IVR and Ross's different entities are likely participants in these partnerships. They may be limited partners, they may have provided equity or debt.

        Don't draw the wrong conclusion about the statement that the portfolio was sold at a 25% discount. These are competitive auctions and by definition, the Ross group bid the highest amount. The market price may be what the other bidders were willing to pay, but more importantly, the bidder's bid an amount that they think can generate their specific targeted return, based on their cost of equity and debt and the fees that have to pay. The 25% may really refer to the markdown that the seller had to take from what they were carrying the portfolio at, which wasn't based on reality.

        The bidders in these auctions are knowledgeable real estate investors who generally have the same targeted returns and costs. Even so, their valuations on specific properties can vary widely -- I've seen one bidder value one property at $50k and another value it at $0, yet their overall bids for the whole portfolio were closely in line.

        The other important point is that these auctions are occurring all of the time which puts downward pressure on asset values.

      • What it means is that everybody takes a slice of the deal with different risks.

        WILBUR buys the B piece, the lowest rated highest return. He has complete control over the building, and decisions to make it reperform.

        IVR provides the next layer of financing, and supports the most senior piece, which most any bank woll provide given the support.

        There are a couple of things to understand here.

        First, WILBUR and IVR are NOT THE SAME. You are NOT him.

        He is using IVR as capital to fill the hardest part of the structure, the so called MEZZ.

        The risk reward for the B piece buyer is clear. He can get all his money out quick or lose it all quick. If he losses it all, YOU are now in the first loss position, but with substantialy less control and much less return before and after.

        This is why WILBUR is involved at all.

        You think he sits around all day looking at what IVR management is doing with MBS in FNMA?

        You are just cheap, controled money.

        That is why WILBUR is WILBUR.

        You better hope he gets it right.

      • I don't know for certain, but from the language I think that the buying subsidiaries borrowed money from IVR to pay for the deal.

 
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