The Federal Deposit Insurance Corporation (FDIC) appears to have found a way forward for the portfolio of affordable housing assets it took over from failed lender Signature Bank.
In announcing that it has begun the process of selling $33 billion of commercial real estate loans from Signature, the FDIC said it would enter into joint ventures with potential buyers of rent-stabilized or rent-stabilized multifamily loans to buy about $15 billion of the loans. controlled.
The regulator said the move was part of its obligation to ensure it helped preserve affordable housing “for low- and moderate-income individuals”. Most of these loans are for properties in New York City.
The FDIC said it would retain a “majority stake” in the joint venture, while the winning bidder would be responsible for “the administration, servicing and final disposition of the loan.”
“The operating agreement will provide for certain requirements to facilitate the financial and physical preservation of these loans and related collateral,” it said.
An FDIC spokesperson said Weekly newspaper “The joint venture transaction enables the FDIC to retain a majority stake while transferring day-to-day management responsibilities to private sector professionals who also have an economic interest in the asset and are obligated to share the costs and risks associated with ownership.”
The FDIC’s decision to reserve affordable housing for low-income residents comes at a time when New York City rents are soaring. The median rent in New York was just over $3,700 in September, 77% higher than the national median and up more than $200 from a year earlier, according to real estate website Zillow.
As New York City reported earlier this year, some New Yorkers are concerned that the assets could be sold to new owners who are more interested in squeezing profits out of the properties than in maintaining rent control or rent stabilization.
In March, New York’s Department of Financial Services shut down Signature Bank after it collapsed in one of the largest bank failures in U.S. history, and appointed the FDIC as receiver for the failed bank’s assets. Flagstar Bank, a subsidiary of New York Community Bank, took over deposits and some assets of the former Signature Bank in a deal struck by regulators in March.
According to real estate-focused news outlet The Real Deal, the shift could help the FDIC find buyers who might be reluctant because of rent stabilization or rent control.
But some analysts say the properties remain attractive despite high interest rates.
“Even in this environment, there are buyers and lenders of rent-stabilized buildings making loans to them because if the underlying property is valued at anything close to today’s interest rates, then they are very safe investments that can be taken as a loan or as a Matt Pestronk, president and co-founder of Philadelphia, Pennsylvania-based real estate developer Post Brothers, told Reuters.
Marketing of Signature Bank’s portfolio will take place over the next three months and the transaction is expected to close by the end of the year, the FDIC said. New York City-based Newmark & Company Real Estate is advising on the sale.