The Federal Deposit Insurance Corporation (FDIC) has initiated the marketing process for the $33 billion commercial real estate (CRE) loan portfolio it acquired from the failed Signature Bank (OTC:SBNY). The marketing process was announced on Tuesday, with plans to finalize transactions by the end of the year.
The majority of the CRE loan portfolio comprises multifamily properties, primarily located in New York City. Approximately $15 billion of these loans are secured by rent-stabilized or rent-controlled multifamily residences. The FDIC has a statutory obligation to safeguard the affordability and availability of residential real estate for low- and moderate-income individuals, as stipulated under the Federal Deposit Insurance Act.
In line with this obligation, the FDIC will place these rent-stabilized or rent-controlled loans into one or more joint ventures, retaining a majority equity interest. The winning bidders, or partners, will act as managing members of these joint ventures and will be responsible for management, servicing, and ultimate disposition of the loans. They will be required to manage the portfolio in accordance with the joint venture operating agreement and will be subject to stringent monitoring.
Newmark & Company Real Estate, Inc. has been enlisted by the FDIC to assist in advising on the sale. The FDIC is accepting bids for these former Signature Bank commercial real estate loans over the next three months.
Signature Bank was closed by New York State regulators earlier this year due to increasing withdrawal requests that depleted the bank's available funds. Following its failure, most of Signature's deposits and some of its loans were sold to Flagstar Bank. However, $4 billion of deposits related to Signature Bank's digital banking business and a $60 billion loan portfolio were excluded from this deal.
The marketing strategy adopted by FDIC was informed by inputs from relevant New York city and state agencies as well as community groups. Commercial real estate loans have been viewed with increasing anxiety by banks and regulators due to growing concerns about potential disastrous effects that delinquencies on such loans could have on the economy.
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