FDIC Finds Buyer for $1 Billion in Troubled Commercial Loans
By: Carrie Bay
As receiver of the nation’s collapsed banks, many of which have folded under the weight of bad real estate deals, the FDIC has amassed a vast portfolio of distressed mortgages – the ones rescuing institutions didn’t want when they stepped in to take over the operations and assets of the many that have made the FDIC’s failed bank list.
But in the financial world, one company’s downfall can be another’s opportunity, and a number of firms are jumping at the chance to get their hands on these loans. On Friday, the FDIC announced that it has secured a buyer for a portfolio of $1.02 billion in distressed commercial real estate loans collected from 22 failed bank receiverships.
The private, global investment firm Colony Capital beat out 20 other bids for the portfolio of 1,200 commercial mortgages, of which 70 percent are delinquent, the FDIC said.
Seventy-five percent of the collateral of the portfolio is located in Georgia, California, Nevada, and Florida.
The structured transaction gives Colony Capital a 40 percent ownership interest in a newly formed limited liability company (LLC) created to hold the assets. The FDIC will retain the remaining 60 percent equity interest in the LLC.
Colony Capital paid $90.5 million (excluding working capital and transaction costs) for its stake, which equals approximately 44 percent of the unpaid principal balance of the assets, the FDIC said. The financing of the transaction includes $233 million of notes provided by the FDIC.
As the LLC’s managing equity owner, Colony Capital will provide for the management, servicing, and ultimate disposition of the 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,” commented Thomas J. Barrack, Jr., founder, chairman, and CEO of Colony Capital.
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