Bank of Boston this week closed the largest private real estate deal in its history, enabling a Florida developer to acquire the residential real estate unit of Westinghouse Electric Co. for $556 million.
Bank of Boston is syndicating a $150 revolving bank loan for the acquirer, WCI Communities, a limited partnership controlled by longtime bank customers Al Hoffman and Don E. Ackerman.
Typifying the bank's approach to real estate finance since property values plummeted in the late 1980s, the bank's real estate unit worked closely on the deal with its corporate finance division.
In addition to the secured loan, the bank is providing $155 million of mezzanine financing, placing the debt with a handful of entrepreneurial and institutional investors. In exchange for a higher return, mezzanine investors assume less risk of default than the equity investors, but more risk than the secured bank lenders.
"This is a watershed deal," said Matthew E. Galligan, the bank's director of real estate finance. He said that the opportunity to restructure problem loans as part of the Resolution Trust Corp.'s efforts to clean up the thrift industry's problems has mostly dried up. Now, he said, "the return has to come from companies with viable assets."
Bank officials said the Westinghouse deal stemmed from a relationship with the borrowers that the bank nurtured over the years, as Mr. Hoffman and Mr. Ackerman's firm, now known as Florida Design Community, grew from owner of two projects to become Florida's largest land developer.
Vice president Paul DiVito of Bank of Boston's Atlanta office, who has served as relationship manager between the bank and the developers, said they got Westinghouse's attention last March by sending a check for $250,000 along with a letter asking to meet about the proposed sale.
The decision by Westinghouse to shed the unit has been described as part of its effort to clear the decks of debt as it prepares a $5 billion bid to acquire CBS. Westinghouse is said to have commitments for $2 billion from Chemical Banking Corp. and J.P. Morgan & Co. for that deal.
The Westinghouse real estate unit, which will now be known as WCI, is the developer of numerous upscale residential tracts in Florida, Arizona, and California.
Bank of Boston has underwritten the entire $150 million bank loan, but intends to syndicate all but $35 million of it. It holds $15 million of the mezzanine loan.
Bank officials also noted that the deal will create the opportunity for three construction loans for a total of about $75 million, on fully presold high-rise apartment buildings.