PMO Loan Acquisition Venture, a joint venture between Toll Brothers, Milestone Merchant Partners, Milestone Asset Resolution and certain funds managed by Oaktree Capital Management, has closed a structured transaction with the Federal Deposit Insurance Corporation.

The transaction involves the purchase of an approximately USD1.7bn portfolio consisting of loans with a combined unpaid balance of approximately USD1.32bn and real estate properties with a book value of approximately USD382m, all from the former Amtrust Bank, which was taken into receivership by the FDIC in December 2009.

The portfolio includes approximately 200 loans and 80 REO properties.

The assets, which are primarily residential, are located in 17 states. The average loan/asset size is approximately USD6.1m. A significant majority of the loans in the portfolio are non-performing. The portfolio consists primarily of acquisition, development and construction loans and REO relating to land, lots, condominiums and single family and multi-family residential communities at varying stages of completion.

The venture acquired a 40 per cent managing member interest in Amtrust CADC Venture, the limited liability company created by the FDIC to hold the loans and REO assets. The FDIC is retaining the remaining 60 per cent equity interest and providing approximately USD303m of non-recourse financing at zero per cent interest for seven years as well as a non-recourse advance facility of approximately USD40m for additional working capital needs which is priced at Libor +300 basis points.

Oaktree contributed approximately 79 per cent of the private partner capital, Toll Brothers contributed approximately 20 per cent, and Milestone contributed approximately one per cent.

John Brady, managing director at Oaktree Capital Management, says: "We are excited to be teaming with Toll Brothers, Milestone and the FDIC to acquire what we believe is a very attractive portfolio of real estate loans and properties. 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."

Douglas C. Yearley, Jr., Toll Brothers' chief executive officer, adds: "We are pleased to join with the Oaktree entities and Milestone and honored to partner with the FDIC on this important transaction. We believe Oaktree's vast experience in real estate and distressed opportunities, MARC's solid servicing capabilities and Gibraltar's and MARC's strong asset management capabilities will bring unique and added value to the investment. During the early 1990's, we at Toll Brothers spent considerable time acquiring and working out distressed real estate assets, which was, and remains, an important part of our business expertise. In establishing Gibraltar we are building upon that experience and expertise as well as Toll Brothers' relationships, well-known brand name, nationwide presence and capital access to undertake complex transactions such as this one and to pursue a wider array of opportunities."