PacWest to sell real estate loans to Kennedy-Wilson unit; shares jump
2023.05.22 10:19
© Reuters. FILE PHOTO: A general view of Pacific Western Bank in Huntington Beach, California, U.S., March 22, 2023. REUTERS/Mike Blake/
By Jaiveer Shekhawat
(Reuters) -Regional lender PacWest Bancorp said on Monday it had agreed to sell a portfolio of 74 real estate construction loans with an aggregate principal outstanding balance of around $2.6 billion to a unit of Kennedy-Wilson (NYSE:) Holdings Inc.
Shares of PacWest jumped nearly 8% to $6.16 in early trading.
Bank stocks have stabilized recently on hopes the worst is over for the regional banking crisis. But deteriorating loans in the commercial real estate may pose a fresh risk with regulators stepping in to instruct banks to reduce exposure.
PacWest said in a filing it will also sell an additional six real estate construction loans with an aggregate principal balance of around $363 million to Kennedy-Wilson.
“It takes pressure off the bank from the funding side as they dispose off these loans – they won’t have to use either extensive deposits or borrowings to fund that part of the portfolio,” said Gary Tenner, managing director at D.A. Davidson & Co.
The Los Angeles-based lender had indicated in May it was in talks with potential partners and investors about strategic options. PacWest had, earlier this month, said its deposits declined and it had posted more collateral to the U.S. Federal Reserve to boost the bank’s liquidity.
Established in 1999, PacWest is one of several U.S. regional lenders whose shares have been hit by investor concerns over the health of the banking sector following the collapse of three banks since March, the latest being the San Francisco-based First Republic Bank (OTC:), the assets of which were sold to JPMorgan Chase & Co. (NYSE:)
PacWest had said in February it was restructuring its lending unit Civic to improve profitability.
Kennedy-Wilson, a global real estate investment firm, focuses on acquiring undervalued commercial and residential assets in select high-growth markets.
The construction loans transaction is expected to close in multiple tranches during the second quarter and early part of the third quarter of 2023.
