The Federal Deposit Insurance Corp. chose a consortium led by Starwood Capital Group to purchase a portion of an LLC holding $4.5 billion of assets previously owned by Corus Bank and seized by the FDIC in September. The group will pay $554 million for a 40% stake in the troubled real estate loans. The FDIC will own the balance.
The portfolio was valued at $4.5 billion and contains more than 100 loans and 23 million square feet of REO assets in a variety of property types. The group will get a stake in 102 properties, including 79 condominiums, 14 multifamily buildings, eight office facilities and one land development project, spanning markets like Los Angeles, Miami, Washington, DC, New York, Chicago and Atlanta.
In addition to Starwood, the group includes TPG Capital, Perry Capital and WLR LeFrak. The companies will be providing equal equity capital for the purchase, although Starwood will run the day-to-day operations. According to a joint statement, the newly formed company will have a five-member board, consisting of two Starwood members, two TPG members and one Perry member.
"We are excited to partner with the FDIC in acquiring the assets of Corus Bank. The portfolio is unique-not only because of the average loan size, but also due to the exceptional quality and geographic diversity of the assets," says Barry Stemlicht, chairman and CEO of Starwood Capital. "The structure of this transaction affords the buyer to be patient to protect, maintain and enhance the assets while maximizing profit potential for the equity participants."
Kelvin Davis, a partner at TPG, says, "A number of TPG principals were very active in real estate investing during the last distressed cycle in the early 1990s, and we are excited to be participating in this promising opportunity as part of our broader real estate interests."
The FDIC said in a statement that it chose the Starwood-led group out of a field of eight candidates because it was "determined to be the offer that would result in the greatest return for the receivership of all competing bids." At press time, the deal was expected to close by the middle of October. According to reports, Barclays Capital acted as advisor to the FDIC on this transaction. Corus Bank was seized by the FDIC on Sept. 11, at the time holding $7 billion in assets and $7 billion in deposits. MB Financial Bank agreed to purchase the majority of the deposits as well as roughly $3 billion of assets in late September. Prior to this deal, MB owned $8 billion in assets. Corus Bank was the largest bank failure so far this year.
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