An investment consortium managed by Starwood Capital Group on Tuesday agreed to acquire a 40% stake in a limited liability company that will hold an estimated $4.5 billion in troubled construction loans and real estate-owned assets the federal government seized last month from Chicago-based Corus Bank.

The LLC is called Northwest Investment, and its investor-partners are Connecticut-based Starwood, TPG Capital Group, Perry Group, and the real estate developer and property management company WLR LeFrak. They are paying $554 million in cash for their equity stake, and borrowing $1.386 billion to finance the rest of their $2.77 billion bid for these assets through interest-free term notes that are being issued and guaranteed by the Federal Deposit Insurance Corporation.

FDIC will initially retain a 60% stake in the LLC valued at $831.6 million. The government agency is also providing the investors with up to $1 billion for working capital and to cover unfunded commitments. By guaranteeing the loans and providing construction financing, the FDIC is hoping to stave off liquidation of the portfolio’s assets and to complete unfinished condo projects that might possibly be converted into money-generating apartments or hotels.

There are 112 construction loans in this portfolio for 102 properties that, according to Starwood, include 79 luxury condominium buildings with over 12,000 units and 15 million square feet of space; 14 multifamily complexes, eight office buildings, and one land development project. All told, these loans cover nearly 23 million square feet of space in various stages of development. (BUILDER could not immediately determine how many of the condo projects are unfinished.)

More than 30% of the loans are for projects in South Florida (primarily Miami). Other markets where properties are located include Los Angeles, Washington, D.C., New York, Las Vegas, Chicago, and Atlanta. The Chicago and Miami markets in particular have been awash in unsold condos.

The Wall Street Journal reports that two-thirds of the portfolio’s loans are either in default or foreclosure. However, Starwood stated on Wednesday morning “a significant number of loans are performing and [are] expected to stay performing.” The second component of the portfolio consists of a group of REO assets that includes multifamily, office, and completed condo projects. A third component consists of loans that aren’t performing but on which the title is recoverable.

The investors haven’t offered details about their plans for these properties, although the deal’s zero-interest financing gives them breathing room to assess what they’ve purchased. “The financial structure of this transaction affords the buyer to be exceedingly patient to protect, maintain, and enhance the assets while maximizing profit potential for the equity participants,” said Barry Sternlicht, Starwood’s chairman and CEO. However, the equity partners don’t receive any return on their investment until all of the LLC’s debt is paid off.

The Starwood-led group was the winner among eight bidders for these loans, which FDIC took over after Corus failed on September 11. To make the sale of the loans more feasible to investors, FDIC sold off Corus’ $6.6 billion in bank deposits and its 11 branches to MB Financial. Closing Corus Bank is expected to cost FDIC $1.7 billion.

The New York Times reported on Wednesday that FDIC’s deal with the Starwood group allows it to sell up to 51% of the debt it issued to finance this deal.

John Caufield is senior editor for BUILDER magazine.