$33B in Signature Bank Property Loans Up for Sale
The bulk of the portfolio is on multifamily properties, with $15 billion rent stabilized and rent controlled.
The Federal Deposit Insurance Corporation announced that the $33 billion CRE loan portfolio that came out of Signature Bank’s failure early this year is now for sale.
The majority of the CRE loan portfolio being marketed is comprised of multifamily properties, primarily located in New York City, according to FDIC. It added that approximately $15 billion of the CRE loans secured by multifamily residences are rent stabilized or rent controlled.
That raises a complication. One of the FDIC’s statutory obligations is “to maximize the preservation of the availability and affordability of residential real property for low- and moderate-income individuals.” To that end, those buildings will go into “one or more joint ventures” in which the FDIC will hold a majority equity interest. “In addition, the JV operating agreement will provide certain requirements that facilitate the financial and physical preservation of these loans and underlying collateral.”
While the FDIC will remain the majority equity owners, the winning bidders will be responsible for “management, servicing and ultimate disposition of the loans.” They will have to manage the portfolio as directed by the JV operating agreement under “stringent monitoring.”
The FDIC is working with New York City and State housing authorities, government agencies, and community-based organizations “to obtain their input and provide information on the FDIC’s efforts as the FDIC developed its marketing and disposition strategy.”
The marketing process will happen over three months with Newmark & Company Real Estate to act as an advisor and transactions are expected to be completed by year’s end.
The FDIC has been looking to sell off parts of Signature since the bank closed, as Reuters reported. New York Community Bancorp had bought most deposits, some loan portfolios, and all of 40 Signature’s branches.
“The FDIC sale is somewhat unique as it has a large concentration of rent stabilized properties as collateral for the loans,” Matt Pestronk, president and co-founder of Post Brothers, a real estate developer based in Philadelphia, told Reuters. “Even in this environment there are buyers of rent-stabilized buildings and lenders who make loans on them, because if the underlying properties are valued at cap rates near today’s interest rates, they would be very safe investments to own as a loan or as real estate in the case the loans are not performing.”