Inside the bidding war for Signature’s loans

Related has inside track, but much drama has yet to unfold

Inside the Bidding War for Failed Bank’s Real Estate Loans

From left: Related Companies’ Jeff Blau and Community Preservation Corporation’s Rafael Cestero (Getty, The Real Deal)

The competition to buy Signature Bank’s $15 billion rent-stabilized loan portfolio is far from over, despite reports that Related Fund Management and two partners are the frontrunner.

The portfolio drew higher bids, sources close to the process say, and those competitors could still be in the running. The FDIC, which is handling the sale, has yet to notify any firm that it came out on top.

Also, Related bid on just over a third of the failed bank’s rent-stabilized debt. Other groups could snag separate slices of the pie. If they are rejected, some of the nine rent-regulated pools figure to be remarketed at a later date.

Should the FDIC select the Related team, it would be accepting less than 70 cents on the dollar, according to the Wall Street Journal. But other bidders offered more. A decision could come as early as this week.

With one month to go before the FDIC aims to close the sale, here’s what to watch for:

Conflicting directives

The FDIC’s sole aim in most sales is to get the highest price. But a secondary goal complicates that one: The agency has cited its statutory obligation to preserve affordable housing for low-income tenants.

Translation: It wants a firm to work with rent-stabilized building owners, not play hardball, in servicing the debt.

Distress is expected because after the 2019 rent law capped revenues in rent-stabilized apartments, owners were slammed by pandemic arrears, inflation and rising mortgage rates. Many struggled to maintain their buildings. Tenant groups have pushed for Signature’s loans to go to a firm that will hold owners responsible for maintenance and not rush to foreclose.

Foreclosures in New York state can take years to resolve. In the interim, buildings can deteriorate, even if a receiver is appointed.

To the casual observer, Related might seem an odd choice for the FDIC. Its Hudson Yards megadevelopment was dubbed a playground for the rich, and its chairman, Stephen Ross, is a billionaire who was protested by left-wing activists for fundraising for Donald Trump.

But the company has decades of experience in affordable housing. Moreover, Related bolstered its bid for Signature’s rent-stabilized debt by pairing with nonprofits Community Preservation Corporation and Neighborhood Restore. That should appeal to the FDIC.

CPC services over $3.7 billion in affordable and rent-regulated properties, according to a spokesperson for the nonprofit, and is often more willing to work with borrowers than banks or government agencies are. Neighborhood Restore collaborates with the city to transition mismanaged properties to “responsible third party ownership,” according to its website.

CPC declined to comment on the bidding process. Related and Neighborhood Restore did not respond to requests for comment.

Best and final

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Still, the FDIC needs to weigh that commitment to affordable housing against higher bids submitted by at least three groups.

Brookfield Asset Management and Tredway, a firm that specializes in affordable housing, bid above 80 cents on the dollar on the rent-regulated loans, as did multifamily owner the Brooksville Company in partnership with Sabal Investment Holdings, according to the Commercial Observer.

Multifamily investor Skylight Real Estate Partners and public REIT Rithm Capital also bid over 80 percent of the loans’ nominal value.

When the FDIC receives multiple competitive offers, it often holds a second round of bidding in which contenders submit their best and final offers.

“What could be going on, and likely is going on, is that the FDIC is in best-and-final rounds,” said Thomas Galli, a partner at Duane Morris who is representing some bidders.

It’s even more likely that bidding on Signature’s $17 billion in commercial debt backed by market-rate assets — offices, retail spaces, hotels and apartments — will go into additional rounds.

Sources said those loans, which are likely in better shape than the regulated portfolio, drew much more interest. Plus, the FDIC does not have the same statutory obligation in selling those debt pools.

That means the highest offers figure to win, and the agency has reason to extend the bidding.


Even if Related’s group is selected, its bid is for 5 percent of a $5.5 billion pool of rent-regulated loans, Commercial Observer reported. Nearly $10 billion more of rent-regulated debt is up for grabs.

The FDIC marketed the rent-stabilized loans in nine pools. Six offer a 5 percent stake, and on the other three, bidders can win a 20 percent stake and tap low-interest financing provided by the FDIC, a source said.

Read more

Signatures Rent-Stabilized Loans Draw Few Bidders
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Signature’s rent-stabilized loans draw anemic interest
Blackstone, Related Lead Bidding for Signature Bank CRE Loans
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Blackstone, Related lead bidding for Signature’s $32B loan portfolio 

The FDIC separated the rent-stabilized loans by performance, with the shakiest loans grouped together. Some of the pools may have attracted low-ball bids that the FDIC deems too meager to accept. The agency could re-list them next quarter in the hopes of drawing better bids, Galli said.

Once the FDIC picks winners, losers won’t be alerted until the chosen teams submit a deposit. The agency won’t formally name winners in this round until it closes the sale on Dec. 21.

Correction: Sabal Investment Holdings bid on Signature Bank’s rent-stabilized loans. An earlier version of the article stated that Sabal, a lender acquired by Regions Bank, had bid. Region’s acquisition of Sabal Capital Partners did not include Sabal’s investment management business.

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