Brookfield: Picking Related’s bid for Signature loans is illegal

Brookfield Property Group called foul on the FDIC’s handling of the Signature loan sale, asserting that choosing something other than the highest qualified bid could be illegal.

The global investment giant and contending bidder accused the government agency late last week of running a “secret” auction and awarding the loans to a group with a bid lower than its own, according to the Financial Times.

“If the winning bidder’s price is in fact lower than ours, as it appears to be, we intend to launch a formal protest, as we believe that this would be in violation of law,” Lowell Baron, the firm’s chief investment officer wrote in a letter.

Brookfield’s fear is likely that Related Fund Management will take the cake.

Related, alongside two nonprofits, bid 69 cents on the dollar for a stake in $6 billion of Signature’s $15 billion rent-stabilized loan book. As of late November the firm was reportedly in position to win the award.

Brookfield, in partnership with Tredway, bid more than 80 cents on the dollar on a $4.4 billion pile of rent-stabilized loans, according to the Financial Times. It’s unclear if the firms bid on the same pools.

Typically, the FDIC’s sole goal in any sale is to minimize losses for its insurance fund. That means awarding the loans to the highest bidder.

This sale is unique in that the FDIC has also expressed its statutory obligation to preserve affordable housing. In part because of New York’s 2019 rent law, industry observers believe a good chunk of Signature’s rent-stabilized loan book is underwater.

Sources say Related’s bid is favored to win because the firm partnered with two nonprofits — Community Preservation Corporation and Neighborhood Restore — with decades of experience working with owners to restructure debt and manage troubled properties.

The Adams administration backed Related’s bid in a letter to the FDIC late last month.

Brookfield, in its letter, said the FDIC had signaled it would not be swayed by bidders that had garnered political support or partnered with nonprofits.

Still, Brookfield partnered with Tredway, an affordable housing developer founded in 2021 by Will Blodgett. Blodgett co-founded affordable housing owner Fairstead in 2014.

It’s unclear if the FDIC could face legal ramifications should it not award Signature loans to the highest bidder. Losses shouldered on the loans must be made up by the big banks required to fund the agency.

The FDIC has not announced winners for any portions of the rent-stabilized or other remaining commercial loan pools.

CORRECTION: This article previously characterized Tredway as an affordable housing lender. Tredway is an affordable housing development firm.

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