On behalf of two of its real estate opportunity funds, Oaktree Capital Management has purchased a 50 percent equity interest in an entity created by the Federal Deposit Insurance Corporation (FDIC) to hold commercial and residential acquisition, development and construction loans made by various failed lending institutions. The acquisition, the price of which was just north of $30 million, was made through a joint venture with Alaska’s Calista Corporation, a business corporation established on behalf of Alaska's Native residents, and FACP Mortgage Investments – both entities controlled by Oaktree.
According to preliminary marketing data, the loans were to include approximately 197 commercial acquisition, development and construction loans with an aggregate unpaid principal balance of $187 million and about 395 residential acquisition, development and construction loans with an aggregate unpaid principal balance of about $267 million. However, an FDIC spokesman said the portfolio sold is closer to 508 commercial and residential loans, 86 percent of which are nonperforming, with an aggregate unpaid principal balance of $386 million.
This loan pool is the third such purchase from the FDIC that Oaktree has made in the past year, noted Philip Feder, chair of the real estate practice at law firm Paul Hastings, which represented the company in all three deals.
According to Feder, Oaktree’s strategy in acquiring the FDIC loan portfolios is to add value by restructuring the debt. “They want to make the loans either pay on a current basis or make deals with borrowers to refinance or give back the properties,” he said.
In August 2010, Oaktree was the winning bidder in an FDIC auction of a $1.7 billion portfolio of approximately 200 distressed real estate loans originated by Ohio-based Am Trust Bank, as well as 80 properties located in several states throughout the US. Last month, the firm purchased a $158 million portfolio – through an auction under the FDIC’s Small Investor Program pilot sale – that the agency, as receiver for FirsTier Bank, acquired upon the bank’s failure in January 2011.