Fairfax Financial Holdings Ltd. (FFH) has agreed to buy the majority of a $2.1 billion loan portfolio that Kennedy-Wilson Holdings Inc. (KW) bought from Pacific Western Bancorp (PACW).
The deal, which is expected to close in the second quarter, will give Fairfax a 63% stake in the portfolio, which consists of commercial real estate construction loans. Kennedy-Wilson will retain a 37% stake.
Fairfax will also acquire a $200 million preferred equity stake in Kennedy-Wilson. The deal values Kennedy-Wilson at $5.3 billion.
"We are pleased to partner with Fairfax, a leading global insurance and investment company, on this transaction," said Kennedy-Wilson CEO Jeff Wilson. "This partnership will provide us with significant capital and expertise to continue to grow our real estate investment business."
Fairfax CEO Prem Watsa said the deal is a "good strategic fit" for his company. "We are excited to partner with Kennedy-Wilson to invest in this high-quality loan portfolio," Watsa said. "We believe this transaction will create value for both our companies."
The deal comes as the commercial real estate market is recovering from the COVID-19 pandemic. Commercial real estate loans have become more attractive to investors as interest rates have fallen.
The deal is also a sign that Fairfax is looking to expand its real estate investment business. Fairfax has a history of investing in real estate, including office buildings, hotels, and shopping centers.
The deal is expected to close in the second quarter.
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