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Kennedy Wilson paying $2.4B for PacWest CRE loans

Kennedy-Wilson picking up 74 loans at a discount

From left: Pacific Western Bank CEO Paul Taylor and Kennedy Wilson CEO William McMorrow (Getty, Pacific Western Bank, Kennedy Wilson)

From left: Pacific Western Bank CEO Paul Taylor and Kennedy Wilson CEO William McMorrow (Getty, Pacific Western Bank, Kennedy Wilson)

Pacific Western Bank, a troubled commercial real estate lender roiled by recent bank failures, is easing its burden with an agreement to sell billions of construction loans.

The Beverly Hills-based bank is selling $2.6 billion in construction loans to Kennedy-Wilson Holdings, Bloomberg reported. The real estate investment firm is picking up the 74 loans at a discounted price of $2.4 billion.

The bank may be able to unload even more of its loans on Kennedy-Wilson, also based in Beverly Hills. If PacWest is able to secure certain approvals, it will be able to sell six more loans for roughly $363 million, according to a filing.

As for the vast majority of the loans, Kennedy-Wilson will also be assuming the future funding obligations, a total of $2.7 billion. The loans have floating rates, averaging 8.4 percent.

The deal is expected to close in tranches beginning during this quarter and rolling into the next.

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The Kennedy-Wilson deal makes a dent in PacWest’s loan book. The company held $4.6 billion in construction loans across residential and commercial properties in the first quarter, according to an earnings report. It also had $3.8 billion in commercial loans, $5.5 billion in multifamily loans and $15.4 billion in residential mortgages.

At the start of the month, Bloomberg reported PacWest was exploring strategic options for its future, including a potential sale. The regional lender had reportedly been working with a financial adviser and was said to be considering a breakup or capital raise.

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PacWest is attempting to avoid a similar fate to other failed regional lenders of late, including Silicon Valley Bank, Signature Bank and First Republic Bank. With $41 billion in assets, PacWest is smaller than First Republic, but carries a loan book with 80 percent of its obligations tied to commercial real estate-backed loans and residential mortgages.

The bank previously revealed its intention to sell off assets to boost liquidity, with CEO Paul Taylor saying PacWest has been exploring a sale of its $2.7 billion lender finance division.

— Holden Walter-Warner

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Bank FailuresKennedy WilsonPacific Western BancorpReal Estate Finance