The prospective sale of Signature Bank’s $33.2 billion commercial real estate loan portfolio is being watched closely as a potential indicator of where values are.
The Federal Deposit Insurance Corporation kicked off the bidding process for the New York-based institution’s loan book September 5, setting in motion what is considered to be the most anticipated commercial real estate debt portfolio sale of the year. New York advisory Newmark, led by veteran brokers Doug Harmon, Adam Spies, John Howley and Robert Griffin, is overseeing the sale.
An offering teaser from Newmark noted the SIGCRE-23 portfolio will be divided into 14 pools. Twelve of those pools, ranging in size from $268 million to $5.9 billion, will be offered on a joint venture basis with the FDIC. The remaining pools, at $309 million and $899 million, will be offered on an all-cash basis. The sale comes after Signature Bank was taken over by the FDIC in May.
Additionally, six of the 12 joint venture pools are being offered with optional leverage and three of the joint venture pools will have a cash-purchase option. The 2 all-cash pools will be limited to bids from FDIC-insured banks and feature loans with interest rate swaps and loan participations.
While there is speculation that the portfolio could see steep discounts, market participants who spoke with Real Estate Capital USA said they believed the FDIC’s involvement and support means the amount of the discounts will be limited. There is an expectation the entire portfolio will clear, with discounts of at least 5-10 percent.
Until now, Beverly Hills-based Pacific Western Bank has so far been the most sizable seller of commercial real estate loans this year, prior to being acquired by Banc of California in July. A notable difference between PacWest and Signature, however, is the FDIC’s involvement. PacWest sold its loans close to their full value across separate transactions involving Kennedy Wilson Holdings, Cain International and Ares Management.
The FDIC noted that all transactions linked to the Signature loan book are expected to be completed by December 14, though getting in on such a deal will require certain parameters to be met with the agency.
The $33.2 billion loan book includes about $15 billion of commercial real estate loans secured by multifamily assets that are either rent stabilized or rent controlled, with the remainder of the loans scattered across sectors. The majority of the 5,137 loans in the portfolio are located in New York City.
As part of the agency’s obligation to preserve affordable units, the FDIC will be placing the rent stabilized or rent controlled loans in one or more joint ventures and retaining a majority equity interest in any resulting JVs.
Winning bidders will work as the managing member of the joint venture and maintain servicing and disposition responsibilities of the loans, the FDIC noted.
Beyond New York multifamily loans, Signature’s real estate debt portfolio also includes loans linked to acquisition, construction and development financings as well as other commercial asset classes according to the bank’s 2022 annual report.