Oct. 7 (Bloomberg) -- A group led by Starwood Capital LLC and TPG beat out seven other bidders to buy the assets of failed lender Corus Bankshares Inc. as investors vie to acquire commercial real estate loans at a fraction of their face value.

The winning consortium, which also includes Perry Capital and WLR Lefrak, paid 60 cents on the dollar, the Federal Deposit Insurance Corp. said yesterday. The group will spend $554.4 million for a 40 percent managing stake in a company set up by the FDIC to hold $4.5 billion in mostly condominium loans, while the regulator will keep a 60 percent holding.

The Starwood group offered a fifth more for the assets than the nearest competitor, said people familiar with the matter. Corus last month became the 90th bank to be seized this year as lenders fail at the fastest pace in almost two decades. The FDIC is seeking to lure non-bank investors including private-equity firms to bid on assets of collapsed banks after the failures depleted its insurance fund.

“We got a good price on it,” FDIC Chairman Sheila Bair said in an interview in New York. “I think we will use this structure again, absolutely. We’re pleased with the results.”

The regulator is providing zero-coupon debt of about $1.39 billion, equal to the amount of equity in the deal, valuing the assets at $2.77 billion. The FDIC will also provide up to $1 billion in financing for working capital, since a number of the loans are related to projects still to be built.

Winning Offer

The winning offer valued the Corus assets at about $500 million more than the next highest bids, according to people familiar with the deal. Other bidders, which included New York developer Related Cos. and private-equity firm Colony Capital LLC, put the portfolio at about $2.25 billion, the people said.

Representatives for Starwood, TPG, Colony and Related and the FDIC declined to comment on the other bids.

“It’s a healthier sale than some people thought it would be,” said Steve Coyle, chief investment officer of Global Realty Partners, the unit of Cohen & Steers Inc. that invests in private equity real estate funds. “My initial thought was it would trade at 30 to 40 cents” per dollar of face value.

Starwood is managed by Barry Sternlicht, the chairman of Starwood Hotels from 1997 to 2005. He’s been Chief Executive Officer of closely held investment firm Starwood Capital Group LLC since its founding in 1991. Starwood has raised funds to buy real-estate debt and Sternlicht in August sold shares in a vehicle called Starwood Property Trust Inc. through an initial public offering.

FDIC Stake

Private-equity firm TPG has targeted real estate-related concerns before, including Harrahs Entertainment Inc. Starwood, which will manage the loans and properties day-to-day, according to a statement today. Starwood and TPG, who provided equal amounts of equity, will each have two board seats, while Perry Capital will have one.

The transaction has a provision for the FDIC to increase its equity stake to 70 percent once the Starwood-led group has received distributions equal to twice its investment, or roughly $1.1 billion dollars and achieved an average annual return of 25 percent.

Corus was seized by the Office of the Comptroller of the Currency on Sept. 11 and the FDIC was named receiver. As part of the transaction, MB Financial Bank, which has more than 80 branches in the Chicago area, agreed to acquire Corus’s $7 billion deposits and take over its 11 branches.

The bank, incorporated in 1958, held $3.9 billion in condominium loans as of March 31, including $997 million tied to properties in Miami and southeast Florida, according to filings.

“There is some great stuff in there and to get access to it at a bargain basement price level will be a boon for Starwood,” said Dan Fasulo, managing director at New York-based research Real Capital Analytics Inc. “They’ll be able to pick and choose which asset they want to hold.”

The Corus transaction is expected to close Oct. 15. Barclays Capital advised the FDIC on the deal.

To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

Last Updated: October 7, 2009 11:11 EDT