Colony Capital has closed its second portfolio of loans from the US banking regulator, the Federal Deposit Insurance Corporation, paying $445 million for 1,660 mortgages.
The Los Angeles-based private equity real estate firm agreed to pay 59 cents on the dollar for the portfolio, which has a face value of $1.85 billion and includes loans from 22 failed banks, according to an FDIC statement.
The FDIC will retain a 60 percent stake in the venture, while Colony – and junior equity partner, New York-based The Cogsville Group – will retain a 40 percent interest. With $563 million of government financing in guaranteed notes, Colony and Cogsville are expected to invest roughly $218 million in equity, people familiar with the matter said.
A total of six bids were made by four investment firms, the FDIC added, with bids being made for a 40 percent leverage stake in the portfolio as well as for a 20 percent unlevered stake. Around half the loans are delinquent, with three-quarters of the mortgages secured against assets in Nevada, California, Colorado, Arizona and Georgia.
In January, Colony successfully bid to take over a portfolio of more than 1,200 loans in an FDIC structured sale. The loans, with a face value of $1.02 billion, were acquired with an equity investment of $90.5 million and government financing of $233 million.
That deal was structured along the same lines as the latest investment, with Colony taking a 40 percent stake in the venture alongside the FDIC’s 60 percent interest. The deal was split across three Colony vehicles, including the $900 million Colony Distressed Credit Fund, the $4 billion Colony Investors VIII and the mortgage REIT, Colony Financial.
Colony is currently targeting between $500 million and $750 million for a follow-on fund to CDCF I, Colony Distressed Credit Fund II, according to people familiar with the matter. Colony declined to comment further, and Cogsville was unavailable for comment at press time.