The Federal Deposit Insurance Corp. (FDIC) is in the final stages of selling the commercial real estate assets it seized from Signature Bank (OTC:SBNY), with bids due on November 1. The FDIC took control of approximately $33.2 billion in assets from the bank after its failure in March, including about $15 billion in loans mainly linked to rent-stabilized or rent-controlled buildings in New York City.
The sale of these assets could provide insights into property values and regulatory strategies for managing problem assets without exacerbating the U.S. housing affordability crisis. Signature Bank had a significant lending presence in New York City's contentious rent-stabilized and rent-controlled market, influencing nearly 3,000 buildings or approximately 80,000 homes.
After the bank's failure, New York City Comptroller Brad Lander urged regulators to ensure any buyer adheres to New York’s strengthened rent-stabilization laws and anti-predatory lending rules. The FDIC has a history of selling assets from failed banks to private investors, a practice that has led to several real estate fortunes.
The Signature Bank portfolio includes multifamily loans and debt on office, retail, and other commercial properties and is the largest known sale of its kind by the FDIC. The assets have been divided into 14 pools, with six offering leverage or financing. Firms like Marathon Asset Management and Greystone are expected to bid, potentially in consortiums with other deep-pocketed private-equity firms.
Flagstar Bank had previously purchased only some of Signature Bank loans, while New York Community Bancorp (NYSE:NYCB) declined to buy the same pool in March. The FDIC aims to maximize recovery on Signature Bank’s assets amidst significant unrealized losses across the banking sector due to low-yield securities purchases and low-rate property loans.
Property values have been impacted by Federal Reserve’s rate hikes and the persistence of remote office work. Goldman Sachs (NYSE:GS), for instance, marked down or impaired the office portion of its commercial real-estate investments by about 50% this year. If bids are too low, as indicated by the RCA CPPI National all-property index, the FDIC may delay or withdraw assets from the market.
Real-estate brokerage firm Newmark is overseeing the Signature Bank portfolio sales.
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