The Federal Deposit Insurance Corp. (FDIC) has released information regarding the planned sale of seized assets from New York's defunct Signature Bank. In an effort to protect depositors and prevent further bank collapses, the FDIC stepped in last March and enlisted the help of Newmark Group to generate interest in the approximately $33 billion pool of commercial real estate loans.
The assets, which consist of multifamily, office, retail, and other commercial properties, will be divided into 14 pools. Six of these pools will include an offer of leverage or financing options, while two pools will only be available to bank bidders, according to the FDIC. This strategy of offering leverage has been employed during previous periods of banking system distress, such as in the 1980s and early 1990s when the FDIC established the Resolution Trust Corporation. The goal is to entice investors to acquire troubled real estate assets from failed banks and savings-and-loan associations, while also preventing fire-sale prices that could further strain banks burdened with commercial-property loans.
The commercial real estate industry is closely monitoring this transaction as property owners grapple with rising interest rates, uncertainty surrounding property valuations, and an impending wave of debt maturities. The benchmark 10-year Treasury yield reached nearly 4.26% on Tuesday, nearing the highs of 2023.
While more multifamily landlords with floating-rate or maturing loans are facing defaults this year, apartment buildings have managed to maintain relatively stable occupancy levels. This can be attributed in large part to the ongoing housing and affordability crises in the United States.
Interested parties will need to submit initial bids for the New York-centric pool of loans from Signature Bank by November 1, 2023, with the closing expected on or before December 14, 2023.
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