NYC Pension System Invests $60M to Preserve Affordable Apartments in Signature Portfolio

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Five months after the completion of a controversial Federal Deposit Insurance Corporation auction to service Signature Bank (SBNY) loans connected to New York rent-stabilized apartments, the city’s pension system is investing up to $60 million with the winning bidders to preserve affordable units impacted by the bank’s sudden 2023 collapse.

The New York City Employees’ Retirement System (NYCERS) announced the investment Tuesday in a joint venture led by Community Preservation Corporation (CPC) with Related Fund Management and Neighborhood Restore HDFC, which in December was awarded a 5 percent equity interest in $5.8 billion of rent-regulated Signature loans. The investment from the NYCERS pension fund will preserve 35,000 units in the properties with outstanding Signature loans.

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“We understand the unique role that this portfolio of rent-regulated housing plays in our neighborhoods along with the distinct financial challenges it faces, and we are dedicated to working with all of our partners to ensure that it remains a haven of affordability,” Rafael E. Cestero, CEO of the CPC, said in a statement.

The $60 million NYCERS investment, which was first reported by Bloomberg, makes the entity a 25 percent partner in the CPC-led partnership overseeing the Signature loan portfolio, which comprises roughly 3 percent of New York City’s entire rent-regulated housing stock. The remaining 95 percent of the rent-regulated portfolio is held by the FDIC. 

“Expanding and protecting our affordable housing supply through sound investment decisions is a major priority of my office, in partnership with NYCERS trustees,” New York City Comptroller Brad Lander said in a statement. “Preserving the nearly 35,000 rental units in the Signature portfolio — which could have faced grave risks as a result of the bank’s collapse — is an enormous team effort, and we are proud to be part of it.” 

The FDIC’s awarding of Signature’s rent-regulated pool came with some controversy since its winning bid of 59 cents on the dollar was far less than three competing bids that were north of 80 cents and the highest above 85 cents, according to a source familiar with the auction. 

The substantially higher bids passed over by the FDIC in favor of the CPC-led joint venture included one from Brookfield Asset Management in partnership with Tredway. An additional proposal over 80 cents on the dollar came from multifamily investor Skylight Real Estate Partners in partnership with public real estate investment trust, Rithm Capital while another in this range was pitched by Brooksville Company and Sabal

Andrew Coen can be reached at acoen@commercialobserver.com.