Union Bank in Calif. to Buy $3.7B CRE Portfolio

Union Bank in San Francisco has forged a deal that will give the company a further foothold on the East Coast.

The $97 billion-asset unit of UnionBanCal said Sunday it is buying a $3.7 billion portfolio of loans secured by office buildings, hotels and other real estate from PB Capital, a unit of Deutsche Bank, for an undisclosed amount of cash.

The deal, which also includes PB Capital's origination and service platform, would expand Union Bank's current commercial real estate portfolio by roughly 37%.

In all, 51% of the portfolio is secured by real estate in the northeastern U.S., according to the company.

The deal comes amid steps by Union Bank, which is owned by the Bank of Tokyo-Mitsubishi UFJ, to expand beyond the West Coast. In October, Union Bank bought Smartstreet, an Atlanta-based firm that provides banking services to homeowners' associations, and it recently announced plans to open offices in several new markets.

Union Bank says the deal for PB Capital represents an opportunity to broaden its loan book in a business the bank knows well. "It starts with the fact that this asset class is an asset class we're very comfortable with and that we feel like we understand and we execute very well," John Woods, Union Bank's chief financial officer, told American Banker. "As with all businesses we are putting capital towards, whenever there's an opportunity to create a little more scale and diversify our exposure, we want to be opportunistic."

"This was an opportunity to solidify [commercial real estate lending] in a very powerful way on both coasts," Woods added.

Though out-of-market lending can carry risks, Union Banks says PB Capital brings strong relationships with borrowers and a prudent approach to credit decisions. "Strategically, we couldn't be more excited about the ability to accelerate the expansion that we already started in this space and to have a management team that shares the same underwriting culture, which is very important to us," Woods said.

Union Bank says it intends to absorb PB Capital's personnel as part of the deal, which is expected to close in the second quarter.