FDIC Selects Newmark to Sell $60 Billion in Signature Bank Loans
The process will involve the bank’s entire real estate holdings, including $15 billion in multifamily.
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The Federal Deposit Insurance Corporation has hired Newmark to sell $60 billion in loans originated by Signature Bank, following the financial institution’s collapse earlier this month, Multi-Housing News has confirmed. The financial institution’s implosion marked the third-largest bank failure in U.S. history.
Signature Bank has more than $110 billion in asset holdings, $88 billion in deposits and $74.2 billion in total loans, according to a January 2023 earnings report.
Newmark’s responsibilities entail selling the entirety of the bank’s real estate loan book, which includes $15 billion in multifamily property loans, as well as an additional $20 billion in commercial real estate loans, the bulk of which are based in New York City, according to a report in the Wall Street Journal.
The team leading the sale process is led by Co-Heads of U.S. Capital Markets Adam Spies and Doug Harmon, Co-Presidents of Debt & Structured Finance Dustin Stolly and Jordan Roeschlaub and Executive Managing Director John Howley, according to individuals with knowledge of the sale process.
Representatives of Signature Bank, Newmark and the FDIC either did not respond to inquiries or declined to comment.
Sector-specific consequences
With the meltdown of Signature Bank taking place as the real estate sector faces economic headwinds, including the Federal Reserve’s most recent slew of interest rates, many in the sector anticipate continued challenges in the months to come, especially within the New York City multifamily space.
At the same time, one common sentiment is a sense of anticipation as the real estate world waits to see how the sale process for Signature Bank’s debt will proceed, which could in turn impact the fundamentals of specific property classes.
One immediate prediction has been, in the near term, of further deflation within the market. Elie Rieder, founder & CEO of Castle Lanterra sees this as the case, particularly as other banks and lenders assess their own vulnerabilities. “In the short term, it will keep volume down as the market waits for results. If pricing is well below par, that will further chill the lending market as banks digest mark-to-market decreases in on-book loans. I don’t see an outcome that improves liquidity and reduces volatility,” he said. As a result, the ability to actually qualify for loans themselves may be made more difficult. “The immediate result in the financing market at least for regional banks in the Northeast as well as nationally, borrowers will likely find more stringent loan qualifications,” predicted Henry Manoucheri, CEO of multifamily investment at Universe Holdings.
Vicky Schiff, CEO of Avrio Real Estate is one of those waiting to see what the impact will be. Schiff sees the effects of the sale process as dependent on the quality of the real estate the back. “The market will price these loans, perhaps in pools, based on the quality of the underlying real estate, market interest rates, the loan-to-value ratio and loan to cost ratios,” she told MHN.
Aaron Jodka, director of national capital markets research at Colliers, anticipates the effects as being dependent on the method of the loans’ sales themselves. How they are sold could have bearing on other related decisions in the multifamily financing sector.
“The sale of the portfolio will provide more pricing clarity in the marketplace, and whether the loans are sold in bulk, by asset class or piecemeal will dictate proceeds,” Jodka said.
Concrete predictions
Alongside the wait-and-see attitude, others offered more concrete predictions for the sales, as well as their effects on the market. Anticipating highly discounted loans, Marcus Duley, managing director and chief investment officer of Walker & Dunlop Investment Partners told MHN, ” (The loans) will definitely be sold at a discount as buyers will want higher yields than the existing coupon based on current market pricing along with an additional risk premium.” Consequently, he anticipates a net positive effect for owners in particular, especially following the passage of the Housing Stability & Tenant Protection Act of 2019. “This could bode well for owners of such properties because a new lender may be able to restructure, write down the principal, or allow for a discounted payoff while still making a meaningful profit,” he said.
