(WASHINGTON, DC) -- Barry Sternlicht wins again.
Barry Sternlicht
The bid was 20 percent higher than competing offers, The Wall Street Journal reports.
Starwood's upfront stake was only $554 million.
The deal hands Starwood and its investor partners 112 construction loans, more than two-thirds of which are in default or are in foreclosure.
Starwood Capital could quickly emerge as the condo king of South Florida, according to industry insiders. Corus has 16 bad condo loans in that market.
The fate of Corus's borrowers remains to be determined in the coming months, as Starwood decides which loans it may extend, and where it will pursue foreclosure.
Empty or unfinished developments, for example, might be converted to rental buildings until the market recovers, the WSJ speculates.
To sweeten the acquisition deal, The Federal Deposit Insurance Corp. is providing financing and taking a 60% equity stake in the Starwood partnership.
The FDIC is also offering up to $1 billion over the next five years for any unfunded commitments, construction overruns, and carrying costs for bank-owned inventory.
The investors would have to pay off any of that debt, plus $1.38 billion in debt issued by the FDIC, before they can begin collecting on their investment, according to the WSJ.
Wilbur Ross
The FDIC structured the deal to discourage the winning bidder from "flipping" individual commercial real-estate loans and assets to vulture investors or individual borrowers, according to the WSJ. Instead, the deal gives added incentives for the winning bidder to manage assets and reduce debt.
Sternlicht told the WSJ the Corus deal will give him supply in once-hot and now-beaten markets like Las Vegas.
The FDIC's offer of zero-percent financing means that "you can afford to hold these properties and sell them at the right pace in difficult markets," Sternlicht told the WSJ.
Harrison LeFrak
Corus assets include luxury-condo projects in the hardest-hit housing markets in California, South Florida and Las Vegas.
"In years three, four and five, there won't be any more new condos being built in these markets and you'll be one of the few guys with new inventory," Sternlicht said.
Founded by Sternlicht in 1991, Starwood Capital Group is positioning itself to emerge as a major force in the world of distressed real estate, the WSJ reports.
It has closed a $2 billion private-equity fund to buy distressed hotel assets and recently took a real-estate investment trust public, raising an additional $950 million that will be investing in distressed commercial real-estate loans and securities.
Corus Bancorp was seized by federal regulators last month and another Chicago bank, MB Financial Inc., agreed to assume $6.6 billion in deposits from Corus Bank.
At that time, the FDIC estimated the Corus failure will cost its insurance fund about $1.7 billion.
Please see related postings:
"FDIC Getting Ready to Unload Balance of Corus Bank's Condo Assets in October; Sept. 17, 2009;"
"FDIC Seizes Big Condo Lender Corus Bank; Sells Assets to Another Chicago Bank, Sept. 14, 2009,"
"Miami Dolphins Owner Wins Preliminary OK to Charter New Bank, Sept. 11, 2009;"
"Corus Bank Trophy Caribbean Miami Beach Condo Sold After Owner Returns Key to Lender, Sept. 7, 2009;"
"Big-Name Condo Investors Await Corus Bank's Pending Seizure by FDIC, Sept. 4, 2009."
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