I don’t understand the new math!
I admit I am a dinosaur in that I learned my math skills when math was actually taught in the public school system. I fail to understand the math of the Gen X and Gen Y financial people though. Here’s the story – perhaps someone can explain to me the errors of my thinking!
A hedge fund holding the note on a hotel in Tulsa was not in a position to extend the loan. Like so many other hedge funds it was bleeding financially. The borrowers were asked to refinance the debt. When a commitment letter was issued to refinance the debt the hedge fund notified the borrowers that they had sold the note just days before at a substantial discount even though the hedge fund manager knew a commitment was being issued from the new lender. So instead of receiving $11MM for the debt the hedge fund received $5MM. Their justification was that they were able to sell off a portfolio of loans at the discounted rate.
Far be it for me to question the business model of this hedge fund but I can say that if I were an investor in that fund I’d have my attorney all over them for their lack of management skills. Why on earth would any fund manager throw $6MM out the window when the fund is bleeding financially? When asked if the fund manager was an investor in the fund he admitted he was not. Are some fund managers so callous with other people’s money that they are willing to lose $6MM in order to stroke their ego and brag that they sold a portfolio of a mere $50MM at deep discounts? Thank God this manager does not manage my money!
Anyway – if you have a hospitality loan package that needs a home we are looking for a property to lend upon. Minimum of $5MM please.
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