On Tuesday, the Federal Deposit Insurance Corporation (FDIC) announced it would start marketing the approximately $33 billion Commercial Real Estate (CRE) loan portfolio for the former Signature Bank, New York.
The loan portfolio is retained in receivership following the failure of the bank in March of this year. Signature was shut down after depositors withdrew large sums of money from the bank fearing a collapse. Regulators shut Signature bank down in hopes of containing a panic in the wake of Silicon Valley Bank’s collapse. Silicon Valley Bank and Signature Bank’s failures were the two of the three biggest bank failures since the closure of Washington Mutual in 2008. First Republic Bank’s failure in April 2023 is the biggest.
FDIC officials said the majority of Signature’s CRE loan portfolio is multifamily properties, primarily located in New York City. Approximately $15 billion of the CRE loans secured by multifamily residence are rent stabilized or rent controlled. The FDIC said it has a statutory obligation to maximize the preservation of the availability and affordability of residential real property for low- and moderate-income individuals. To support the obligation, the agency said, it will place the rent stabilized or rent controlled loans in one or more joint ventures (JV) with the FDIC retaining a majority equity interest in the JV. Additionally, the JV operating agreement will provide requirements facilitating the financial and physical preservation of the loans and their underlying collateral.
The winning bidders will act as the managing member of the joint venture, the FDIC said, and will be responsible for the management, servicing and ultimate disposition of the loans. The partner will be required to not only manage the portfolio in accordance with the JV operating agreement, but also be subject to stringent monitoring.
The FDIC said it had already engaged with community-based organizations, government agencies and housing authorities in New York City and New York State, to get input and give information on its efforts as it develops its marketing and disposition strategy. The marketing will take place through the end of the year. Newmark & Company Real Estate, Inc. will act as an advisor, the agency said.