Three investment firms announced on Tuesday a joint venture with the Federal Deposit Insurance Corp. to acquire $1.7 billion in loans and properties from the former AmTrust Bank.
The transaction involved Oaktree Capital Management of Los Angeles; Milestone Merchant Partners in Washington; and Gibraltar Capital and Asset Management, the real estate investment arm of the home builder Toll Brothers Inc.
Like in other FDIC deals to unload failed-bank assets, the three buyers will own 40% of a limited-liability company, with the FDIC owning the rest. The agency provided $343 million in financing to increase the purchasing power of the new venture.
The transaction returns more of AmTrust's assets to the private sector after the FDIC seized the $12 billion-asset Cleveland thrift in December. Upon its closure, the agency had sold $9 billion of AmTrust's assets to New York Community Bank in Westbury, while keeping the rest for later disposal.
Tuesday's transaction involves 200 primarily residential construction loans, with unpaid balances totaling $1.3 billion, as well as $382 million in foreclosed properties that, the firms said in a press release, were "at varying stages of completion."
In the release, the firms said a Milestone affiliate and Toll Brothers "will conduct the day-to-day management and workout of the portfolio." Oaktree contributed 79% of the private capital for the acquisition. "We believe our team brings a unique range of asset management and development skills to this portfolio and we will strive to maximize its value on behalf of the U.S. government and our respective investors," said John Brady, a managing director at Oaktree.