KeyCorp officials say they expect Key Commercial to get a major bounce from the deal, which will enable the permanent lending division of Key Commercial Real Estate to originate and service loans on behalf of insurance companies and pension fund clients. The purchase agreement was signed May 6 and the transaction, which is structured as an asset purchase, is expected to close within 60 days. Financial terms have not been released.
According to company executive vice president and CFO Paul Kopsky, Swiss Re subsidiary Conning's mortgage loan and real estate business represented roughly 25% of the firm's total business in 2000, when the then-public company moved back into the private sector. Kopsky would not reveal any more recent financial data.
Kopsky tells GlobeSt.com the decision to shed the firm's mortgage business "was decided in conjunction with the owner; Swiss Re is interested in focusing on the core business of Conning, which includes asset management and research. They were focusing on the future of Conning." For Key Commercial, the deal has two major advantages: First, acquiring Conning's loan business broadens Key Commercial's menu of products and services; in addition, it affords the company opportunities to move construction loans and interim financing off the balance sheet as permanent loans.
The unit, which Swiss Re acquired from MetLife in July 2001, originates, services and securitizes multi-family, retail, industrial and office property mortgage loans on behalf of pension fund and life insurance company investors. The business currently services approximately $4 billion in commercial mortgage loans through its St. Louis office, and originates loans through offices in Atlanta, Chicago, Dallas, Denver, Los Angeles, San Francisco and Washington, DC. A Key spokesman tells GlobeSt.com the acquisition will add roughly 60 employees to Key's mortgage unit. "One of the nice things about the deal is that there's so little overlap because this is a product set we just did not have," he says. "We're keeping their offices in place and virtually every employee they have."
The Conning acquisition will mark Key's third major commercial real estate buy in two years. In 2000, the firm began strategizing to morph itself into a national player on the commercial mortgage financing front. Its acquisition of National Realty Funding and Newport Mortgage beefed up Key's CMBS, Fannie Mae, Freddie Mac and FHA lending capabilities. According to Key president John E. Case, the Conning buy goes a long way toward realizing Key's business plan. "Conning's life company and pension fund expertise is an excellent fit with Key Commercial Mortgage," Case says. "We now have one of the most comprehensive commercial mortgage product offerings in the industry, which should allow us to meet virtually any commercial real estate financing need our clients might have."
Key Commercial Mortgage is one of the nation's largest commercial real estate lenders with approximately $8.5 billion in annual financings. KeyCRE provides construction and interim loans, equity and permanent commercial mortgages nationwide. KeyCRE is a unit of KeyCorp subsidiary KeyBank National Association. KeyCorp has assets of approximately $81 billion.
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