Highlight of the Week
PacWest Sells Real Estate at a Discount
- PacWest Bancorp agreed to a deal with Kennedy-Wilson Holdings to sell a construction loan portfolio valued at $2.6 billion for a cost of $2.4 billion. An approximate 8% discount.
- PacWest stock jumped 12% on the news. Investors welcomed the transaction as the bank now has over $15 billion in liquidity, up from $12.4 billion in Q1 2023 and $6 billion in Q4 2022. The transaction provides an additional cash stimulus to help replenish liquidity as uninsured deposits have decreased by 45% since Q4 2022.
- We expect to see similar deals in the coming months as banks will continue to shore up cash positions. This is the first significant real estate deal by a regional bank selling a discounted real estate portfolio to provide additional cash stimulus to the balance sheet. In the case of devalued CRE portfolios, expect haircuts on transactions to be more severe than the one PacWest received.
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