Velocity to Acquire Toorak Platform in $3.2B Deal
Velocity Financial Inc. has agreed to acquire Toorak Capital’s operating platform in an all-cash transaction that will expand the commercial lender’s business-purpose loan offerings, origination capacity and geographic reach.
Toorak, which is majority owned by funds advised by KKR affiliates, separately agreed to sell approximately $3 billion in business-purpose loans to an undisclosed third-party investment firm. The portfolio includes whole loans and assets held through Toorak Mortgage Trust and TRK Trust securitizations.
The platform acquisition and portfolio sale have a combined estimated value of $3.2 billion, based on Toorak’s consolidated balance sheet as of June 30.
After closing, Velocity will manage the portfolio purchased by the third-party investor and sell future Toorak loan production to that firm and other counterparties. Those arrangements are intended to move Toorak toward a capital-light model that generates more fee-based revenue.
Velocity said the acquisition would increase its origination platform by 76% and servicing operations by 39%. It will also expand the company’s residential transition and debt-service-coverage-ratio loan businesses, add a direct retail origination channel and establish a presence in the United Kingdom.
Founded in 2016, Toorak provides financing to investors acquiring, renovating, constructing or renting residential properties. The company has funded more than $20 billion across nearly 43,000 loans since its inception.
“This acquisition reflects our commitment to scaling responsibly and deepening our presence in segments where we see durable, long-term demand,” Velocity CEO Chris Farrar said.
Velocity will acquire Toorak’s U.S. and U.K. lending operations, including direct originator Merchants Mortgage & Trust Corp. Toorak and Merchants will retain their brands, while Toorak will remain headquartered in Tampa, Florida.
Founder and CEO John Beacham will continue leading Toorak and become an executive vice president of Velocity Commercial Capital. Toorak will operate as a Velocity subsidiary.
The transaction is expected to close in the fourth quarter, subject to customary conditions.
Barclays Capital Inc. served as exclusive financial advisor to Velocity and Piper Sandler & Co. served as exclusive financial advisor to Toorak and KKR. Simpson Thacher & Bartlett LLP and Morgan, Lewis & Bockius LLP served as legal counsel to Velocity and Dechert LLP served as legal counsel to Toorak and KKR.
