California lender to acquire 280-employee Tampa real estate financing firm

A California real estate finance company has agreed to acquire Tampa-based Toorak Capital’s lending operation as part of a series of deals valued at roughly $3.2 billion.

Velocity Financial announced Thursday it will purchase Toorak’s operating platform in cash, while an unnamed investment firm will separately acquire approximately $3 billion in business-purpose loans held by Toorak.

Financial terms for Velocity’s acquisition were not disclosed. The $3.2 billion estimate reflects the combined value of the platform and loan-portfolio transactions based on Toorak’s consolidated balance sheet as of June 30, according to the companies.

The acquisition is expected to close during the fourth quarter, subject to customary conditions.

Toorak will retain its Tampa headquarters, brands and current management team after the sale. Founder and CEO John Beacham will continue to lead the company while becoming an executive vice president at Velocity Commercial Capital, a Velocity subsidiary.

Toorak employs about 280 people worldwide, including roughly 120 employees at Merchants Mortgage & Trust Corp., its direct-lending business. The announcement did not specify whether the transaction would affect staffing.

Founded in 2016 with backing from investment firm KKR, Toorak supplies financing to residential real estate investors seeking to purchase, renovate, build or rent properties. The company says it has funded more than $20 billion across nearly 43,000 loans in the United States and United Kingdom.

Its products include short-term loans for single-family and multifamily renovation projects, construction financing and longer-term loans secured by rental properties.

“When we founded Toorak in 2016, our thesis was that residential real estate investors were underserved by institutional capital,” Beacham says in the release. “Over $20 billion in loans later, that thesis has been proven.”

Velocity, headquartered in Westlake Village, California, originates and manages loans secured primarily by residential rental properties with one to four units and small commercial properties. The publicly traded company operates through a nationwide network of independent mortgage brokers.

The deal would expand Velocity’s loan-origination operation by 76% and its servicing platform by 39%, the company says. It would also give Velocity a larger presence in renovation and rental-property lending, add a direct-to-borrower sales channel and extend its business into the United Kingdom.

As part of the transactions, Velocity plans to manage the Toorak loan portfolio acquired by the third-party investment firm. It also expects to sell future loans generated by Toorak to that firm and other buyers, allowing Velocity to collect origination, servicing and asset-management fees without keeping as many loans on its own balance sheet.

Velocity CEO Chris Farrar says the acquisition would allow the company to reach more borrowers and institutional investors.

“Toorak’s exceptional team and platform are highly complementary to what we’ve built,” Farrar says in the release.

After the acquisition closes, Toorak will become a subsidiary of Velocity Commercial Capital and its financial results will be included in Velocity’s consolidated statements. Toorak’s existing lending brands, including Merchants, are expected to continue operating under its current names.