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BlackRock acquires stake in Alliance Partners

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By Danielle Douglas
Monday, February 28, 2011

Colossal money manager BlackRock has acquired a minority interest in Alliance Partners, the Chevy Chase management company founded by John Delaney of CapitalSource and Lee Sachs, a former adviser to Treasury Secretary Timothy F. Geithner.

The deal gives New York City-based BlackRock, with $3.45 trillion in assets under management, a 25 percent stake in the company for an undisclosed amount. This investment is part of a broader interest in BancAlliance, a cooperative Delaney and Sachs launched in January for community banks seeking larger lending opportunities.

Alliance Partners assists members of the cooperative in diversifying their loan portfolios, accessing a wider range of asset opportunities and managing their commercial real estate concentrations. The new investor may up the offering ante with additional products and services.

"BlackRock has a very large portfolio of liability managed products that we think could be useful for the banks in BancAlliance," Delaney said. "They are truly the largest asset management firm in the world, so this is just a great validation of our concept."

Delaney noted that several other firms have expressed interest in partnerships, though he would not disclose names.

As the executive chairman of CapitalSource in Chevy Chase, Delaney has been leading the transformation of the commercial lender into an independent regional bank. The company narrowed its losses in 2010, posting a net loss of $109 million, or 34 cents per share, compared to a net loss of $869 million ($2.84) the prior year. Observers questioned whether CapitalSource was considering a sale, when J.P Morgan Chase was hired in January to advise on offers.

Meanwhile, Delaney and Sachs are hitting the road in March to get the word out about BancAlliance. They are hoping to sign up 100 healthy institutions with less than $10 billion in assets. Member banks will use their combined financing capabilities to compete for consumer and business loans that otherwise might be too large for them to handle. Delaney said there are a number of banks that are in various stages of joining the cooperative.

Unable to compete at the level of their larger counterparts, a number of community banks became overly reliant on real estate to build their portfolio in the run up to the credit crisis. With the financial wherewithal of Alliance Partners, which has former vice chairman of the Federal Reserve Donald L. Kohn on its board, and BlackRock, member banks will have the guidance to avoid the pitfalls of the previous cycle.

"We see the BancAlliance program as a constructive opportunity for community banks across the country to diversify their asset portfolio," said Laurence D. Fink, chairman and chief executive of BlackRock, in a statement announcing the investment. The company could not be reached for further comment.

BlackRock has entered into a number of high profile joint ventures in recent years. The company, for instance, teamed with Highfields Capital Management and former Countrywide Financial Corp. president Stanford Kurland in 2008 to form Private National Mortgage Acceptance Co., or PennyMac, to acquire delinquent residential mortgages.


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