FDIC Kicks Off 2010 with $1 Billion CRE Loan Sale
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Written by Mark Heschmeyer (mheschmeyer@costar.com)
The Federal Deposit Insurance Corp. (FDIC) kicked off the year with a huge portfolio sale of commercial
real estate loans. Investment vehicles managed by Colony Capital LLC, a private, international investment
firm, including Colony Financial Inc., were the buyers through a newly formed limited liability company.
The transaction included 1,200 loans with an aggregate unpaid principal balance of $1.02 billion,
consisting of substantially all senior secured commercial real estate loans. Approximately, 70% of the
loans were delinquent and about 75% of the collateral of the portfolio is in Georgia, California, Nevada and
Florida. About one-third of the total was reportedly backed by land and not buildings. All of the loans were
from 22 banks that have failed during the past 18 months.
The portfolio was effectively acquired at 44% of the unpaid principal balance of the loans, with a purchase
price by the Colony Investors of $90.5 million (exclusive of working capital and transaction costs) for its
40% equity interest. The company’s pro rata share of the Colony Investors’ interest is between 24.9% and
one-third, or $22.5 million to $30.2 million. The financing of the transaction includes $233 million of notes
provided by the FDIC.
As a comparison, from last January through Nov. 30, the FDIC announced loan sales with a total book
value of $1.66 billion. The commercial real estate loans sold went for about 51% of book value combined.
Broken down by quality of loan, the bulk of those sales were for performing loans ($1.16 billion), which
sold at 57% of book value. The FDIC sold $387.5 million in nonperforming CRE loans last year at 39% of
book value. The remainder of those loans sold last year were for mixed portfolios of performing and nonperforming
loans.
Those totals do not include Starwood Capital Group's winning bid of $2.77 billion for a portfolio of
distressed commercial real estate assets valued at $4.5 billion that the FDIC seized from failed Corus Bank
NA. Starwood's bid came in at 61.6% of book value.
Deutsche Bank served as advisor to the FDIC on the sale to the Colony Investors. The sale was conducted
on a competitive basis with bids received on Dec. 17, 2009. A total of 21 groups submitted bids.
Colony Capital will provide for the management, servicing and ultimate disposition of the LLC's assets.
"Colony is honored to be selected to partner with the FDIC again and we look forward to working with the
FDIC over the coming years and resolving this portfolio," said Thomas J. Barrack, Jr., Founder, Chairman
and CEO of Colony Capital LLC and Chairman of Colony Financial Inc.
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