PacWest Bancorp has found some critically timed liquidity with the discounted sale of an estimated $2.6 billion of its real estate construction loan portfolio.
The Beverly Hills, California-based regional bank sold 74 loans to a unit of Kennedy-Wilson Holdings for $2.4 billion, the latter confirmed in a May 22 filing. Six more loans valued at an estimated $363 million could also be passed to Kennedy-Wilson pending certain approvals.
PacWest’s construction loan portfolio sale arrived weeks after it started exploring strategic options to save the bank from a collapse similar to other US regional banks before, including Silicon Valley Bank and Signature Bank. The Beverly Hills bank’s share price had been tumbling in weeks past as stock market and shareholder sentiment soured.
Kennedy-Wilson will take on all future funding obligations – totaling about $2.7 billion – for the construction loans. The floating rate loan portfolio carries an average interest rate of 8.4 percent, filings show.
PacWest’s first quarter earnings report and Form 10-Q showed the bank maintained $4.6 billion in construction loans across commercial and residential assets as of March 31. Following the Kennedy-Wilson deal, PacWest is left with an estimated $1.9 billion of construction loans in its portfolio and could sell more of the book if necessary.
The bulk of PacWest’s outstanding real estate debt is linked to $15.4 billion of active residential mortgages while commercial loans account for $3.8 billion and multifamily loans account for $5.5 billion as of March’s end.
As select PacWest construction loans find a new home, Signature Bank is still out to market its roughly $33.1 commercial real estate loan book with Newmark leading the charge on finding a buyer.