Colony wins second FDIC portfolio with $445m bid

The Los Angeles-based firm teamed up with the Cogsville Group to beat three rivals for the portfolio of 1,660 loans.

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.