IMH Secured Loan Fund, a real estate investment company, has received the required 51% approval needed from existing investors to go public.
The Scottsdate, Arizona-based company announced support for its IPO late last week. At the end of December 2009, IMH appealed to its shareholders to agree to an IPO in order to raise $300 million. IMH opened it doors in 2003 and invests exclusively in short-term commercial mortgage loans. Its loan portfolio grew until 2008 when it stopped taking in additional capital from investors.
It has $750 million worth of commercial mortgage debt in its portfolio.
However, some disgruntled investors unhappy with the handling of the fund, came together to form a limited liability company called LGM Capital Partners. This company is made up of real estate and financial investors, who say they have the experience to successfully turn the fund around.
LGM had been holding open meetings in Arizona, where most of IMH’s shareholders are based, in order to persuade investors to let them take over the fund.
LGM called for the removal of the fund’s present manager, Investors Mortgage Holdings. LGM wanted to install itself as the fund’s manager and the group wanted to provide its own valuation of IMH's portfolio, said Todd Mikles one of the founders of LGM.
Currently, stakeholders are not given the actual value of their assets, according to LGM which wanted to the assets. Gradual liquidation of assets will maximize value, Mikles said. He added that IMH is selling its portfolio of commercial mortgage debt quickly and may not be getting the best price.
Mikles also claims that 99% of IMH’s $750 million commercial mortgage debt portfolio is in default. Furthermore, he said, the fund is losing $750,000 a month.
IMH said $517 million of the $750 million portfolio is in default.
Mikles said he has "heard" that LGM has employed RBC Capital Markets, Jefferies & Co., and JPMorgan as underwriters of the IPO. Jefferies declined comment for this story. RBC and JPMorgan did not respond to queries. IMH declined to comment.
IMH has filed paperwork with regulators announcing its plans to go public; no details on the underwriting team were available.
IMH is in a quiet period and declined to answer any questions about its IPO process.