Crown NorthCorp, Inc. (“Crown” or the “company”) provides comprehensive financial services to holders of real estate and asset backed interests in Europe and the United States. Principal business activities include third-party asset management and loan servicing. The company, formed in 1994, is a Delaware corporation presently operating through seven offices in Europe and two in the United States. As of December 31, 2006, Crown and its operating subsidiaries employed 210 people.
With the acquisition of Westfalenbank AG, effective October 26, 2006 (see Item 6 for a more complete description), a bank chartered under the laws of Germany, the company will utilize the bank’s expertise and experience to capitalize on emerging opportunities in the German and European mortgage markets. The Westfalenbank acquisition provides Crown a platform to support and expand all of the company’s management, servicing and loan origination businesses. The Westfalenbank transaction is discussed in greater detail in a certain Form 8-K filed by the company on January 12, 2007 and a Form 8-K/A filed by the company on March 16, 2007 and is hereby incorporated by reference herein.
Crown receives revenues from: third-party asset management agreements through which the company administers commercial, multifamily and residential real estate and loan assets for the accounts of others; contracts to service on an active or standby basis individual loans, loan portfolios and assets in securitized transactions; mortgage banking activity; asset evaluations; transaction support; risk management and financial advisory services; and the administration of the interests of various corporations, partnerships, trusts and special-purpose entities. Compensation arrangements are wide-ranging and may include recurring management, loan origination or servicing fees; disposition fees associated with transactions; and incentive fees or profit-participations based on the overall performance of particular portfolios.
Third-Party Asset Management . The company offers comprehensive management services to holders of real estate and financial assets. These services include fund or portfolio management, advice on asset acquisition or disposition, due diligence reviews and development of portfolio strategies. Clients receiving these services include partnerships, investment consortiums and funds, financial institutions and governmental entities. Management contracts are generally for indefinite terms and typically provide for recurring revenues. Additionally, Crown or one of its affiliates may have a residual equity interest in an entity formed by Crown’s client to hold the assets under management. If the managed assets are resolved within certain agreed parameters, Crown may receive returns on such equity interests. The company focuses on asset management opportunities in emerging or niche market sectors that offer opportunities for growth as well as recurring loan servicing revenues.
Crown’s management activities in Europe encompass portfolios of commercial and residential real estate assets. Assets under management are presently concentrated in Belgium, Germany, Finland and the United Kingdom.
Although asset management activities in the United States had diminished significantly in recent years as successful dispositions have occurred, the Company has recently seen an increase in clients and renewed activity in the distressed real estate sector. In 2006 the company was named as special servicer on two rated securitizations. The number of loans in both securitizations total 939 loans with a total unpaid principal balance of approximately $1.01 billion. Managed assets in the U.S. currently include multifamily and commercial projects as well as multifamily housing projects impacted by U.S. government subsidies.
Loan Servicing and Mortgage Management . Crown offers its clients comprehensive loan servicing and mortgage management. The company’s services include primary servicing of loans performing according to their contractual terms; special servicing of distressed or delinquent loans and standby servicing relationships calling for Crown to step in if a primary servicer fails. In the Benelux region of Europe, Crown jointly owns and operates, with a European bank, a Belgian company offering master servicing capability comprising transaction reporting and servicer oversight, for mainly securitized asset pools; currently with in excess of $22 billion under management.
In Europe, Crown services portfolios of residential, commercial and consumer loans. Customers include investment banks, institutional lenders, investors in securitized transactions and portfolio managers and advisors. U.S. servicing operations are concentrated on commercial loans.
Over the course of several years, Crown has developed servicing systems and procedures that are regularly reviewed by internationally recognized ratings agencies. In Europe, Crown’s UK based commercial and residential servicing operations were the first to receive ratings from multiple ratings agencies. Crown’s commercial servicing operations in the U.S. have also received ratings. Crown intends to obtain similar accreditation for its newly acquired German loan servicing operations and its jointly owned Belgium Company.
Loan Origination . Crown owns a minority interest in an entity that originates sub-prime residential loans in the United Kingdom. These loans are immediately sold into conduit or correspondent programs that accumulate loans for sale and/or securitization. Crown’s UK operating subsidiary has been contracted as servicer by the loan originator and has retained servicing for the majority of the loans after securitization. Crown intends to establish a similar platform in Germany.
Asset Management . Crown, together with investors, actively pursues the acquisition of real estate portfolios in which it acts as portfolio asset manager. The company’s most recent assignments have been in the Nordic Region of Europe.