Colony snaps up FDIC portfolios for $96m

The Los Angeles-based firm has bought two portfolios comprising 1,500 loans and with an unpaid principal balance of $817m for 24 cents on the dollar. The deal marks the firm’s fifth FDIC structured loan acquisition.

Colony Capital has acquired two more loan portfolios from the US banking regulator, investing roughly $96 million of equity for 1,500 mortgages.

The Los Angeles-based firm said it acquired the two portfolios of 1,505 residential and commercial loans for 23.6 cents on the dollar from the Federal Deposit Insurance Corporation. The unpaid principal balance was $817 million.


As with previous structured loan sales, Colony has invested alongside the FDIC in the deal, taking a 50 percent stake in the loan pool. The FDIC retains the remaining 50 percent. Colony will also benefit from 1:1 zero-percent financing from the US government.

Colony represented a consortium of investors, including its own REIT, Colony Financial, which contributed $5 million of equity, according to a statement. Colony is also believed to have invested on behalf of its opportunistic real estate funds. In a later statement, Colony said it had also partnered with Argent Management on the deal.

The transaction deal is the fifth structured loan portfolio Colony has acquired from the FDIC, with the firm's first deal closing in January last year. The portfolio, which comprised 1,184 loans, primarily secured against assets in Georgia, California, Nevada and Florida and with a $1 billion face value, was purchased for $91 million of equity or 44.7 cents on the dollar. Six months later, Colony was back acquiring a portfolio of 1,660 loans with a face value of $1.85 billion. This time working with junior equity partner New York-based The Cogsville Group, Colony paid $218 million for a 40 percent stake in the deal. Colony has also won two portfolio sales from the FDIC.

Competition for FDIC loan pools was initially intense, however the number of players has dramatically declined over the past 18 months, partly owing to the costs of conducting large-scale due diligence during the bidding round. In the July deal last year, Colony faced down competition from just three other bidders, compared to the 20 it faced during its first auction in January 2010.

Colony chairman Thomas Barrack told Bloomberg Television today there was no “quick spin” when it came to FDIC structured loan deals. “You won’t know how you really did until you resolve the last 10 percent of that portfolio and that can either be 18 months or 36 months.”