Related Slated to Win Signature’s Rent-Regulated Loan Pool, Despite Being Outbid
Lower price point creates further issues for NYC CRE market, with banks likely being forced to mark-to-market, sources say.
By Andrew Coen November 20, 2023 4:32 pm
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A Related Companies affiliate is poised to win a pool of Signature Bank (SBNY) loans tied to New York rent-regulated apartments, despite getting outbid by more than 10 cents on the dollar from rival firms, Commercial Observer has learned.
Related Fund Management is expected to win the rights to a 5 percent stake in $6 billion of Signature loans securing rent-regulated multifamily properties in the New York City metropolitan region, with a bid of less than 69 cents on the dollar, the Wall Street Journal first reported.
However, Related Fund Management was far from the highest bidder for the loans, sources familiar with the bidding told CO. Brookfield Asset Management partnered with Tredway to bid more than 80 cents on the dollar, while Brooksville in partnership with Sabal put in a similarly priced bid, sources said. Multifamily investor Skylight Real Estate Partners also bid more than 80 cents with Rithm Capital, a public real estate investment trust, according to sources.
Some bidders were alerted late yesterday that they were not selected and Related was, sources said.
It wasn’t immediately clear why Related was the expected winning bid despite having a lower offer.
The development marks a possibly unhappy ending for those who were relying on the Signature portfolio sale as a pricing indicator for their own portfolios.
“This is not good for New York City because other banks are now going to have to mark their books to market,” a source with knowledge of the Signature bids said.
The winning bidder will be able to purchase their own Signature debt at their bid price, according to sources.
The Federal Deposit Insurance Corporation retained Newmark (NMRK) in late March to sell off the Signature debt in seven pools shortly after the bank’s collapse, part of the fallout from a wider regional banking crisis that hit earlier this year.
The majority of Signature’s $33 billion portfolio included as part of the first pool has roughly $15 billion tied to rent-stabilized or rent-controlled assets, according to the FDIC. A roughly 95 percent stake in the rent-regulated portfolio will be maintained by the FDIC, according to sources.
Related is teaming up with nonprofit housing groups Community Preservation Corporation and Neighborhood Restore, both of which would help oversee the loans and potentially manage the affected properties if owners default, according to WSJ.
While the sales aren’t officially closed, one source expressed confusion at the decision.
“Everyone is going to value the banks based on the winning bid of 69 cents versus what it good could have been in the mid 80s,” the source said.
Blackstone (BX) is also considered the frontrunner for around $17 billion of Signature’s loans, partnering with Rialto Capital to service some of the debt, Bloomberg reported.
An FDIC spokesman said “We are not commenting on the sale until it closes.”
Officials for the FDIC, Brookfield, Tredway, Brooksville, Sabal, Related, Blackstone, Skylight and Rithm did not immediately return requests for comment. Newmark officials declined to comment.
Andrew Coen can be reached at acoen@commercialobserver.com
