Banc of California’s move this week to acquire Pacific Western Bank is being viewed as an important step for the stability of the regional banking sector and, more broadly, the commercial real estate market, market participants told Real Estate Capital USA.
The July 25 deal capped off a months-long effort by Beverly Hills, California-based PacWest to avoid a collapse similar to Signature Bank and Silicon Valley Bank, which both failed in March. After seeing substantial volatility in its share price in the spring, PacWest had been selling off sleeves of its commercial real estate loan book, and in July, saw its real estate team depart for Kennedy Wilson Holdings’ debt platform.
The merger is expected to close in late 2023 or early 2024, and the combination will create a bank with $36.1 billion in combined assets under management. As part of the deal, New York-based managers Warburg Pincus and Centerbridge Partners are investing $400 million in the merger of the two regional banks.
Banc of California is an active commercial real estate lender, typically originating loans from $3 million to $35 million for permanent, bridge and structured financings. Per the bank’s first quarter Form 10-Q, Banc of California maintains an estimated $5.1 billion commercial real estate loan portfolio.
PacWest’s loan sales came as the bank was seeking to add liquidity to its balance sheet. Its first sale was to Kennedy Wilson Holdings, which on May 22 acquired a majority stake in a $2.6 billion, 74-asset construction loan portfolio. Kennedy-Wilson then flipped a stake in that portfolio to Toronto-based insurer Fairfax Financial Holdings on June 5.
Cain International and Security Benefit Life Insurance also jumped in on PacWest’s loan sales by picking up a $1.2 billion New York-area portfolio from the bank early in June. Ares Management similarly purchased select commercial real estate loans from PacWest late in June as part of a wider $3.5 billion portfolio consisting of specialty finance loans.
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