PacWest Sells Construction Loan Portfolio to Kennedy Wilson for $2.6B
Both the regional bank and the real estate investment firm are headquartered in L.A.
By Brian Pascus May 22, 2023 3:02 pmreprints
The beleaguered PacWest Bancorp of Los Angeles has agreed to sell a $2.6 billion construction loan portfolio of 74 loans to Kennedy Wilson Holdings, a Beverly Hills-based real estate investment firm, according to public filings.
The sale comes as PacWest faces deposit outflows and financial pressures brought on by its tanking stock price, which has declined by 71 percent since the start of the year. Pacific Western Bank reported in early May that its deposit base had shrunk by nearly 10 percent the week ending May 5. Reuters reported May 3 that PacWest executives were exploring “strategic options” that included a potential sale or capital raise.
The stock price of PacWest rose 15 percent Monday morning, following news of the announcement.
Kennedy Wilson Holdings acquired PacWest’s 74-project construction loan portfolio — which holds an aggregate principal outstanding balance of $2.6 billion — on May 19, according to public filings. PacWest also agreed to sell Kennedy Wilson six additional construction loans with an aggregate principal balance of roughly $363 million as part of the deal.
“Kennedy Wilson or its designees will also assume all remaining future funding obligations under the acquired loans of approximately $2.7 billion,” according to a PacWest quarterly investor filing. “The transaction is currently expected to close in multiple tranches during the second and early part of the third quarter of 2023.”
It is not clear which geographic region the construction loans are tied to or which properties are backing the loans. However, 38 percent of Pacific West’s real estate mortgage and real estate construction and land loans in 2022 were secured by real estate collateral located in California, according to the firm’s annual financial statement from December 2022.
The deal with Kennedy Wilson came only five days before PacWest agreed to sell its entire property lending division to Roc360, a real estate financing firm. Previously originated loans and loan servicing operations will not be part of the deal, according to Reuters.
Kennedy Wilson Holdings has $23 billion under management across 12 global offices. The firm’s U.S. investment portfolio — comprising 33,900 multifamily units and 9.6 million commercial/hotel square feet — is exclusively in California, the Pacific Northwest and the Mountain West.
PacWest held assets of $41.2 billion at the end of 2022, according to the firm’s financial statement. Total loans held for investment were 28.6 billion, including $19.8 billion in total real estate, of which $4.6 billion were for real estate construction and land investments.
PacWest’s commercial real estate mortgage loans took up 13 percent of the bank’s total loans and leases in 2022, and increased 2 percent from 2021 to 2022 to $3.85 billion, according to the annual financial statement. Commercial real estate land and construction loans increased by 8 percent in 2022 to $898.6 million, roughly 3 percent of the bank’s loan book.
Neither PacWest nor Kennedy Wilson responded to requests for comment.
Brian Pascus can be reached at email@example.com