Kennedy-Wilson Holdings (NYSE:KW) said Monday it has entered an agreement with Canadian investment firm Fairfax Financial Holdings (OTCPK:FRFHF), under which the companies will acquire for ~$2.1B sixty-three of the loans that Kennedy-Wilson had agreed to acquire from Pacwest Bancorp (NASDAQ:PACW).
Recall that in May, Kennedy-Wilson (KW) had agreed to acquire 74 loans from PacWest. KW has now waived its due diligence conditions on 73 of the loans.
The 63 loans under the pact with Fairfax (OTCPK:FRFHF) have an outstanding principal balance of ~$2.3B. The aggregate principal balance of the KW/FF loans, which have floating rate interest, currently carry an average interest rate of ~8.6% and more than 70% of the collection of loans are secured by multifamily or student housing development projects. The rest are a a mix of industrial, hotel, and life science office proprties.
The Kennedy-Wilson/Fairfax (OTCPK:FRFHF) purchasers will also be assuming all remaining future fuinding obligations under the KW/FF loans, subject to customary conditions to disbursement of ~$1.8B. Kennedy-Wilsons’s investment in the acquisition of the KW/FF loans will be 5% of the purchase price and future funding obligations. the company will also earn asset management fees from Fairfax.
Kennedy-Wilson (KW) has also entered an agreement with an institutional investor that will assign KW’s right and obligations to buy 10 of the initial 74 loans to the assignee. Those 10 loans have an aggregate principal balance of $500M. KW won’t hold an investment in the assigned loans, but will earn a management fee from the investor to manage the assigned loans for up to nine months.
Additionally, upon PacWest (PACW) receiving certain consents and waivers under the underlying loans and related agreements, KW/FF will buy from PacWest two additional real estate construction loans with an aggregate principal balance of $144M.
The $20M deposit, with $800K being KW’s share, is now non-refundable.
The purchase of the loans are expected to close in multiple parts, with the first part expected to close in early June and the rest to occur through June 2023 and early Q3 2023.
PacWest (PACW) stock dropped 1.7% in Monday premarket trading.