Blackstone, Rialto, and CPP Acquire $1.2bn Stake in Signature Bank’s CRE Debt

The Federal Deposit Insurance Corp. sold a 20% equity stake in the failed Signature Bank’s commercial real estate loan pool to a joint venture led by Blackstone.

Blackstone Real Estate Debt Strategies and Blackstone Real Estate Income Trust partnered with Miami, Florida-based Rialto Capital and the Canada Pension Plan Investment Board to make the successful $1.2bn bid for the 20% interest in a joint venture set up by the FDIC to hold the failed bank’s $16.8bn in commercial real estate debt.

The loan portfolio includes over 2,600 first mortgage loans on retail, market-rate apartments and office properties, mainly across greater New York City, held by Signature before New York state regulators closed down the lender in March.

In October, the FDIC completed the sale to Goldman Sachs and PNC Bank of $18.5bn in more than 200 funded loans paid out to borrowers from Signature Bank. The moves bolstered the banking industry’s support for the private equity sector, a major source of financing for private companies and property transactions.

The failures of Signature Bank and Silicon Valley Bank this year strained financial markets and had an immediate chilling effect on obtaining loans for acquiring and developing commercial property.

The FDIC in September began looking for buyers for Signature Bank’s $33bn commercial property loan portfolio, a process that has been closely watched by the real estate industry and financial markets.

The federal agency said it is keeping an 80% stake in the joint venture it created after putting the lender in receivership. The mortgages acquired by the Blackstone-led venture are predominantly performing loans, with 90% having a fixed rate, according to Blackstone and its partners.

Geoffrey Souter, managing director at the Canadian fund’s manager, CPP Investments, said “the current real estate credit market is a promising source of long-term returns for the [Canada Pension Plan Investment Board] fund and we look forward to exploring further opportunities to invest in this and other capital-constrained sectors.”

A survey last fall conducted by the National Multifamily Housing Council found that 88% of developers reported experiencing construction delays last summer, mainly due to the lack of available credit.

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The Blackstone group remained the front runner to win the loan portfolio, despite bids from several other large finance companies, including Starwood Capital Group and Brookfield Asset Management, Bloomberg News reported last month.

Blackstone, which said it is the largest owner of commercial real estate globally and has originated or acquired more than $170bn of real estate loans, said it will be the lead asset manager of the portfolio. Rialto Capital will act as the loan servicer and operating partner.

The FDIC, as Signature Bank’s receiver, said in a statement that it expects to soon announce results for the transactions involving the failed bank’s rent-stabilized or rent-controlled multifamily loan portfolio.

Tom Galli, a partner in the law firm Duane Morris who represents clients in real estate transactions including bidders on loans sold by the FDIC, estimates that the value of the portfolio to be about 29% less than its unpaid principal balance after the FDIC put in about $6bn in purchase money financing. Without “the low rate purchase financing provided, the value would have been less,” he said in an email.

The limited information on the loans in the portfolio make it hard to determine what the deal says about the value of the properties involved, Galli said. That’s because the loan portfolio is secured by a variety of properties most of which are office, retail and multifamily properties. Determining those values must take into account what the joint venture projections are for the return on investment, he said.

Source: CoStar

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