EverBank Financial to Buy GE’s Business Property Lending Unit for $2.51B
- Jul 03, 2012
A subsidiary of EverBank Financial Corp., of Jacksonville, Fla., and General Electric Capital Corp. have executed a definitive agreement under which EverBank will acquire Business Property Lending, a business unit of GE Capital Real Estate, North America, for $2.51 billion, the companies announced Monday.
No debt will be assumed as part of the transaction, which includes approximately $2.44 billion of commercial loans, the origination and servicing platforms, 108 employees, and servicing rights on $3.1 billion of loans securitized by GE Capital. The transaction is expected to close in the fourth quarter.
BPL originates and services commercial real estate loans for essential-use properties owned or leased by small and mid-size businesses nationwide. The average loan size is about $2.6 million.
During a conference call on Monday morning, Blake Wilson, president and COO of EverBank Financial, provided examples of typical loans in the BPL portfolio. An owner-occupied example was an $8.2 million loan on a downtown Los Angeles office building leased to two well-known law firms. The property is a four-story, 32,000-square-foot building built in 1912; the loan has a 73 percent LTV and is personally guaranteed by the partners of each firm.
The credit tenant example cited by Wilson was a $4.6 million fully amortizing loan on a single-tenant property in Northern California leased to a large public drug store chain with a 75-year lease.
Overall, the BPL portfolio is significantly diverse both as to asset types and geography. The product type breakdown is 30 percent office, 17 percent warehouse, 19 percent other industrial, 15 percent retail, 6 percent medical facility and 13 percent other. Thirteen percent of the portfolio is in California, with a further 30 percent in New York, Florida, Texas and North Carolina.
EverBank had been in the CRE lending business, but exited it several years ago, before the financial crisis, an EverBank spokesperson told Commercial Property Executive. “Consistent with its strategic growth initiatives, the bank has decided to re-enter the market with this deal.”
The acquisition decreases the residential portion of EverBank’s real estate loan portfolio from 79 percent to 63 percent. Going into the near-term future, EverBank anticipates making $500 million to $1 billion of CRE originations annually through the former BPL.
BPL’s loan originations peaked at $4.1 billion in 2007, but plummeted to $1.48 billion in 2008 and stayed well under $150 million annually through 2011. They total $317 million so far this year,
The buyer emphasized that the $2.44 billion of loans in the transaction are all performing. “Everbank performed a rigorous due diligence process resulting in the hand selection of a 100 percent performing portfolio,” the spokesperson said.
In addition, the acquisition is strategic for EverBank because it enables expansion into key markets where the company already has a strong business in deposit origination and banking services, the spokesperson said.
Business Property has 14 offices, in Redmond, Wash.; San Francisco; Pleasanton and Irvine, Calif.; Chicago; St. Louis; Austin; Houston; Alpharetta, Ga.; Shelton and Norwalk, Conn.; Fort Washington, Pa.; Orlando; and Jupiter, Fla.
For GE’s part, said Alec Burger, president of GE Capital Real Estate, North America, the sale “is consistent with our stated strategy to reduce the overall size of our real estate portfolio.”
A GE spokesperson noted, however, that Capital Real Estate has more than $59 billion in assets and that the BPL sale will reduce the size of that portfolio by only $5.5 billion. “It’s important to note that GE Capital Real Estate is actively lending in the market and focused on growing our core debt business throughout North America.”
EverBank has stated that it intends to retain BPL’s senior management team, which averages more than 25 years of experience.
BofA Merrill Lynch acted as EverBank’s financial advisor, and Sullivan & Cromwell LLP acted as its legal advisor. Goldman Sachs also acted as an advisor to EverBank, and Gateway Asset Management LLC provided loan diligence. Deutsche Bank Securities acted as financial advisor to GE Capital, and Weil, Gotshal & Manges LLP acted as its legal advisor.