PacWest Bancorp, one of the US lenders engulfed in the regional banking turmoil, agreed to sell a $2.6 billion portfolio of real estate construction loans amid efforts to shore up liquidity.
Kennedy-Wilson Holdings Inc. will purchase the group of 74 loans at discounted price of about $2.4 billion, it said in a statement Monday. The buyer will also assume all future funding obligations under the loans of about $2.7 billion, it said.
PacWest has taken steps to bolster its finances after runs on deposits struck several regional lenders, ultimately leading to the collapse of three California-based banks and one in New York. PacWest has been weighing strategic options, Bloomberg News reported earlier this month, and already lined up $1.4 billion from a financing facility provided by Atlas SP Partners as it leaned on various federal programs for cash.
The portfolio of loans PacWest is selling accounts for more than half of its real estate construction and land loans, its filings show. PacWest will sell six more loans to Kennedy-Wilson for about $363 million if it wins certain approvals, the Beverly Hills-based lender said in a separate statement.
Shares of the bank were up 12.5% in early in New York trading.
Kennedy-Wilson expects to complete the purchase in multiple tranches this quarter and early in the third quarter, making a total investment of 2.5% to 5% of the purchase price and future funding obligations, it said. The loans carry floating rates, with an average of 8.4%.
The collapse of Silicon Valley Bank and several other regional lenders roiled similar firms across the US, causing shares of PacWest to plunge almost 80% since March 7. Investors were concerned about big unrealized losses on bond investments at some firms, along with high exposure to real estate lending and sinking deposits as customers sought out higher-yielding alternatives.
Real estate investment company Kennedy-Wilson, which like PacWest is based in Beverly Hills, focuses primarily on multifamily and office properties as well as industrial and debt through its investment-management business. The firm, which operates in the western US, the UK and Ireland, had $23 billion in assets under management — real estate it owns and through its investment-management platform — as of March 31, up $5 billion from the end of 2020.
In December, the firm announced that its real estate debt investment platform surpassed $3 billion in originations in just more than two years, ahead of schedule. The platform had about $3 billion in remaining lending capacity, Kennedy-Wilson said earlier this month.