Investments Lending Real Estate

Colony Starwood Homes sells off massive non-performing loan portfolio

Announces sale of 1,675 non-performing loans for $265 million

Past due foreclosure home

One of the largest owners of single-family rental homes is getting out of the non-performing loan business, as Colony Starwood Homes announced Monday that it is selling off a massive portfolio of non-performing loans, basically closing the book on its NPL business.

Colony Starwood Homes, which formed last year when Starwood Waypoint Residential Trust merged with Colony American Homes, said Monday that it plans to sell 1,675 non-performing loans out of its portfolio for a total sale price of $265 million.

According to a release posted on the company’s website, the company’s book value for the NPLs included in the sale was approximately $259 million as of June 30, 2016.

Per the details of the release, the portfolio of NPLs was sold to an affiliate of Starwood Capital Group after the joint venture between Colony Starwood and Prime Asset Fund VI, through which the company conducts its NPL business, concluded a “comprehensive and broadly marketed” auction process.

According to the company, the sale marks the real estate investment trust’s exit from the NPL business.

“With the sale, the company has substantially completed its exit from the NPL business, consistent with its previously communicated strategic plan to do so,” the company said in a release.

Colony Starwood Homes’ predecessor, Starwood Waypoint, which was spun off from Starwood Property Trust in January 2014, was once a frequent buyer of non-performing loans.

In 2014 for example, Starwood Waypoint purchased two separate pools of non-performing loans for $218.7 million, with that purchase including 1,294 non-performing loans and 146 REO homes.

According to information from the company, the joint venture that handles the REIT’s NPL business generated more than $330 million of loan and REO sales proceeds since June 30, 2016, which resulted in cash proceeds of approximately $140 million after the pay down of associated debts.

After this NPL sale, Colony Starwood indirectly owns approximately $120 million in book value of assets through its joint venture with Prime, substantially all of which is REO, on which the joint venture owes approximately $60 million of indebtedness, the company said.

Additionally, Colony Starwood said that it expects to dispose of the remaining joint venture assets and repay all associated debt by the end of the first half of 2017.

Colony Starwood said that it plans to use the net cash proceeds generated from the wind-down of the NPL business for general corporate purposes, including the acquisition and renovation of single-family rental homes. 

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