PacWest has agreed to sell a roughly $2.6 billion portfolio of construction loans to real estate investment firm Kennedy-Wilson to bolster liquidity, the bank said in a filing Monday.
The deal is “consistent with [PacWest’s] previously announced strategy ... to pursue strategic assets sales and focus on our core community banking business.”
The bank earlier this month spotlighted, among its options, moving a “$2.7 billion Lender Finance loan portfolio to held for sale in 1Q23.”
Under the deal, Kennedy-Wilson will buy the portfolio of 74 loans at a discounted price of nearly $2.4 billion with an aggregate principal balance of $2.6 billion. The firm also agreed to assume all of the loans’ future funding obligations.
The transaction also includes the selling of additional six real estate construction loans with an aggregate principal balance of nearly $363 million.
The deal is expected to close in multiple tranches during this year’s second and third quarters. Kennedy-Wilson will see a total investment between 2.5% and 5.0% of the purchase price and future funding obligations.
Beverly Hills, California-based PacWest has been under pressure following the collapse of Silicon Valley Bank and Signature Bank in mid-March, which prompted depositors to pull money from other midsize regional banks. PacWest stocks have seen sharp declines and have shed around three-quarters of their value since Dec. 31. Monday’s announcement pushed PacWest’s share price up 14%, the Financial Times reported.
The lender lost around $5 billion in deposits in the first quarter amid market turmoil, but it said it did not see any extraordinary deposit flows in late April, when another bank, First Republic, failed and was acquired by JPMorgan Chase.
As part of the deal, Kennedy-Wilson will deposit $20 million into a third-party escrow account that will be refunded fully to the company until it completes due diligence and plans to hire PacWest employees managing the loan portfolio.
Kennedy-Wilson focuses on multifamily and office properties and has $23 billion in assets under management from real estate it owns and through its investment management platform as of March 31 — up $5 billion from the end of 2020, according to Bloomberg.
Kennedy-Wilson announced in December that its real estate debt investment surpassed $3 billion in originations in just more than two years, the wire service reported.
PacWest reported a net loss of $1.21 billion in the first quarter, with $860 million in unrealized losses in its securities portfolio. The lender also designated investment bank Piper Sandler to help it explore strategic options, the Financial Times reported this month.
It also lined up $1.4 billion from a financing facility provided by Atlas SP Partners in April.
