FDIC Markets $33B of Signature Bank CRE Loans

The Federal Deposit Insurance Corporation (FDIC) has made a significant move in the financial markets by initiating the sale of a substantial CRE loan portfolio. This action comes in the wake of the failure of Signature Bank in New York earlier this year. Acting as a receiver, the FDIC has recently begun marketing for approximately $33 billion worth of CRE loans retained following the bank’s collapse. Most of this portfolio consists of multifamily properties, primarily located in New York City, with approximately $15 billion of these loans tied to rent-stabilized or rent-controlled residences.

In its endeavor to navigate this complex transaction, the FDIC has enlisted the expertise of Newmark as its advisor on the sale. This move reflects the agency’s commitment to managing the sale effectively, given the scale and complexity of the loan portfolio.

The FDIC operates under a statutory obligation that goes beyond financial considerations. Among its responsibilities is preserving the availability and affordability of residential real property for low- and moderate-income individuals. In line with this commitment, the FDIC has outlined a unique strategy. To uphold this obligation, the FDIC intends to place the rent-stabilized or rent-controlled loans into one or more joint ventures (JVs). Crucially, the FDIC will retain a majority equity interest in these JVs.

While the FDIC will maintain a controlling stake in these joint ventures, the winning bidders or partners selected for this endeavor will assume the role of managing members. This means they will be entrusted with the day-to-day management, servicing, and eventual disposition of the loans. However, they must adhere to stringent guidelines outlined in the JV operating agreement and will be subject to rigorous oversight by the FDIC.

The marketing of the former Signature Bank’s CRE portfolio is expected to unfold over the next three months. The transactions related to this significant financial undertaking are anticipated to be completed by the end of the year 2023, as per the FDIC’s timeline.