NEW YORK (Reuters) – Bayview Mortgage Capital Inc, a newly formed company with links to Blackstone Group, on Monday filed to raise up to $500 million in an initial public offering, aiming to use the money to buy distressed real estate loans from banks and other lenders and investors.
The company — whose parent is Bayview Asset Management, which is partly owned by private equity firm Blackstone Group LP (BX.N) — is just the latest of a series of initial public offerings backed by big investment firms looking to take advantage of troubled mortgages and souring investments in residential and commercial real estates.
The planned IPOs include units of such firms as Apollo Management [APOLO.UL], Alliance Bernstein Holding LP, Starwood Capital Group and Colony Capital LLC.
According to a filing with the U.S. Securities and Exchange Commission, the new company plans to use the real estate investment trust (REIT) tax structure, which will allow it to bypass most corporate-level income taxes by distributing at least 90 percent of its taxable income directly to shareholders.
The company plans to buy and manage residential and commercial mortgage loans, mortgage-backed securities, real estate-related securities, real estate, and various other forms of real estate investment it believes are undervalued.
“We believe that the decline in the prices of mortgage loans during the current economic downturn is, in large part, due to increasing default rates and declining values of real estate collateral,” the company said in its filing.
As of Dec. 31, 2008, there were more than $4 trillion in U.S. residential mortgage whole loans outstanding, mostly held by depository institutions.
Bayview Mortgage Capital will be managed by Bayview Fund Management LLC, a wholly owned subsidiary of Bayview Asset Management LLC, which is 46 percent owned by Blackstone affiliates.
Bayview Fund Management manages several funds including BOF-I, which had $1.98 billion in capital commitments as of May 31, and an investment strategy similar to the new company. Funds managed by Blackstone are the majority investors in BOF-I.
Bayview is a Coral Gables, Florida-based full-service real estate investment and mortgage finance firm with 800 employees. It buys, services and manages residential and commercial mortgage loans and mortgage-backed securities.
Bayview’s mortgage team, led by David Ertel, has purchased more than $17 billion of primarily residential mortgage loans in the secondary market involving more than 2,000 counter parties and more than 9,000 transactions.
Bayview historically has played in the “scratch and dent” market — buying performing, sub-performing and nonperforming loans, primarily at a discount to par value.
The new company plans to sell $20 million of shares of its common stock to David Ertel, Bayview Asset Management’s chairman and chief executive officer.
(Reporting by Ilaina Jonas; Editing by Gary Hill)