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Starwood, TPG make good on $4.5bn Corus portfolio

Last major asset is sold after buying a landmark portfolio in 2009 from the Federal Deposit Insurance Corp (FDIC)

The consortium behind one of the signature distressed deals of the global financial crisis has now exited the last major asset, it revealed yesterday.

Starwood Capital Group, TPG Capital, Perry Capital and WLR LeFrak, who in 2009 clubbed together to acquire a stake in the Corus Bank loan portfolio from the Federal Deposit Insurance Corp (FDIC) with a face value of $4.7 billion, said they had sold Laketown Wharf, a residential property with a retail element in Panama City, Florida. 

“The sale of Laketown Wharf represents the conclusion of a highly successful five-year partnership on the Corus portfolio,” said Marcos Alvarado, managing director at Greenwich, Connecticut-based Starwood. The partners did not reveal the final return from the deal, though Alvarado added: “We believe that this collaboration has produced a very favorable outcome for our investors, partners and the FDIC.”

 Following the turmoil of the global financial crisis, the investor group purchased a 40 percent stake in the Corus Bank loan portfolio in a transaction valued at $2.7 billion, with the newly-created FDIC retaining a 60 percent ownership position. The portfolio initially comprised 101 assets including 40 performing loans, 42 foreclosure assets and 19 real estate owned (REO) assets primarily linked to condominiums and multifamily housing units across the US.

Corus was one of the leading Chicago-based banks and built up a large exposure to condo construction lending in southern Florida but it became the 91st failure in 2009 when federal regulators seized control of it. More than half the bank’s $3.9 billion construction loans went into nonaccrual or foreclosure. On September 11, the FDIC was named receiver and one month later the transaction with the Starwood-led consortium was announced. 

Having made the investment, the new investor group in the portfolio created a management entity, ST Residential. In addition, it renovated more than 40 projects to reposition them for sale, supervised more than $400 million of construction, sold more than 3,100 multifamily units across 13 assets in eight markets nationwide, and top of that, 6,000 condos were sold nationwide including approximately 2,000 in south Florida, 800 in Southern California and 1,000 in Atlanta. Further, they completed 46 loan payoffs and pending payoffs, 26 asset sales and 29 condo sellouts.

Barry Sternlicht, chairman and chief executive officer of Starwood, said: “We pride ourselves on the ability to act in a contrarian fashion and find value for our investors in times of economic turmoil. The Corus portfolio acquisition was a prime example of this skill. 

“This has been an extremely successful outcome for both our investors and the FDIC,” said Kelvin Davis, partner and co-head of TPG Real Estate. “We were convinced that this portfolio had attractive risk-reward characteristics, and were confident that as the housing market improved after the recession, we would be able to maximize the value of these assets.”

Richard Perry, president and co-Founder of Perry Capital added: “The success of this investment required incredible teamwork among the Starwood Capital, TPG, Perry Capital and WLR LeFrak consortium, and the FDIC, and is a testament to the FDIC utilizing public-private partnerships to create and maximize value for all stakeholders involved. The public-private partnership on the Corus portfolio will serve as an effective role model for working out future distressed situations.”