Blackstone JV Takes $1.2B Stake in Signature Loans

Blackstone Real Estate Debt Strategies, Blackstone Real Estate Income Trust, Canada Pension Plan Investment Board and funds affiliated with Rialto Capital have acquired a 20% equity stake for $1.2 billion in joint venture with the Federal Deposit Insurance Corporation that holds a $16.8 billion senior mortgage loan portfolio retained in receivership following the failure of Signature Bank. The FDIC is maintaining an 80% ownership stake in the venture and provided financing equal to 50% of the venture’s value.

The commercial real estate loan portfolio comprises more than 2,600 first mortgage loans on retail, market rate multifamily and office properties primarily located in the New York metropolitan area. The loans are predominantly performing and encompass a wide range of credit profiles. Approximately 90% of the loans are fixed rate with low in-place coupons and strong in-place debt service coverage.

Blackstone underwrote approximately $17 billion of the senior mortgage loans “allowing us to acquire the entire commercial real estate loan portfolio at an attractive basis,” said Jonathan Pollack, Global Head of Blackstone Real Estate Credit.

Blackstone will be the lead asset manager of the portfolio and Rialto Capital will act as the loan servicer and operating partner.

Last month GlobeSt.com reported on media accounts that Blackstone and Rialto Capital were frontrunners to win the portfolio.

The auction has not been without some controversy. Brookfield Property Group told the Financial Times that the FDIC ran a “secret” sales process for the loans of Signature Bank, with the asset manager focusing on two pools of assets containing affordable housing loans and that the winning bidder of those loans came in with a price lower than Brookfield’s.

When GlobeSt.com contacted the FDIC about Brookfield’s claim, the agency made a number of points, including that the auction is for an equity stake, not loans and that 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.”