(Bloomberg Opinion) — The Federal Deposit Insurance Corporation has begun seeking buyers for Signature Bank’s $33 billion worth of commercial real estate loans, the latest step in a massive debt dump from the bank that collapsed earlier this year. .
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Most of the loans are backed by multi-family properties, primarily in New York City, the FDIC said Tuesday in a statement. A portion of the loans, about $15 billion, are tied to properties that are rent stabilized or controlled.
“The FDIC has a legal obligation, among other factors, to maximize the preservation of the availability and affordability of residential real property for persons of low and moderate income,” according to the statement. “To support this obligation, the FDIC will place the rent stabilized or rent controlled loans in one or more joint ventures and the FDIC will retain a majority equity interest in the joint venture.”
The winning bidders will pay the debt. The joint venture agreements will have certain requirements that “facilitate the financial and physical preservation of these loans and the underlying collateral,” the FDIC said.
Debt is divided into 14 groups. The FDIC is offering financing for part of the debt, according to a notice. The deadline for submitting bids is set for November 1.
Investors have been closely watching the sale process, which will be an indicator of values for a dry market that has seen little trading so far. The commercial real estate market slowed sharply last year as borrowing costs rose and values fell.
The transactions are expected to be completed by the end of 2023. Newmark Group Inc. is the brokerage managing the sale.
The debt trading is the latest phase of the FDIC’s offloading of approximately $60 billion in Signature Bank loans. In July, the FDIC said it was seeking buyers for an $18.5 billion Signature loan portfolio linked to major private equity and investment firms. The deadline to submit offers for that sale is September 12, according to the FDIC.
–With the help of Gillian Tan.
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