Cain strikes deal to acquire $1.2bn New York-area loan portfolio from PacWest

A partnership between Cain International and Security Benefit Life Insurance struck a deal to acquire a roughly $1.2 billion portfolio of commercial real estate construction loans from Pacific Western Bank. 

The deal, announced on Friday, comes after the Denver-based bank and other regional bank lenders saw extreme volatility in their share prices last month. PacWest has since embarked on asset sales, which include the disposition of a $2.6 billion portfolio of commercial real estate construction loans to Beverly Hills-based manager Kennedy Wilson Holdings.  

The 10-loan portfolio sold to the Cain venture is concentrated in the New York area, with a focus on multifamily and student housing developments. The portfolio has an aggregate principal balance of about $500 million.  

The move represents significant growth for London-based Cain’s US commercial real estate lending platform, said Jonathan Goldstein, chief executive and co-founder. “[It] underpins our belief that high-quality projects, delivered by high-quality developers, will continue to thrive amidst transitory headwinds,” he said. 

Cain, which continues to be confident in the dynamics of urban markets like New York, has originated more than $7 billion of real estate debt since inception in 2014. It is laying the groundwork for further expansion in the US and beyond, Goldstein added. 

The firm’s US lending projects include a $750 million construction loan for the development of the Aman New York in 2019 as well as funding for the development of the Research and Development District, a 1.7 million square foot life sciences campus in San Diego. Additionally, the firm funded a construction loan for LendLease’s development of The Reed, a 415,100-square-foot, 440-unit residential tower in Chicago’s South Loop. 

Looking ahead 

The most recent PacWest loan sale comes as market participants wait for more clarity on the sale of Signature Bank’s $60 billion loan portfolio, which was announced in April. The portfolio comprises mainly commercial real estate loans, with a smaller pool of single-family residential loans, and is concentrated in the New York City area. A sale is expected to be completed this month and will provide substantial clarity to the market on where pricing is, one New York-based lender told Real Estate Capital USA. 

Meanwhile, there is a consensus the market will see more sales of this kind. In a report published earlier this week, New York-based rating agency Standard & Poor’s predicted more regional banks will seek to lower their commercial real estate exposure in the wake of the March failures of Silicon Valley Bank and Signature Bank and the May failure of First Republic Bank. 

“For the US banks we rate, we believe that most have manageable exposures to commercial real estate, meaning they’re not outsized compared to capital. [These banks] have sought to lower their exposure to the most vulnerable segments, such as office,” said Stuart Plesser, an S&P analyst. “For most rated banks, we believe it would take a broader asset class decline, with charge-offs rising well above normal levels, to put pressure on banks’ credit quality.”