Signature Loans Could Sell for 40% Below Original Face Value

Signature Bank’s $33 billion commercial loan book is on the auction block, and New York property values and transactions may be affected for years to come.

Interested parties are expected to bid 15 percent to 40 percent below the original face value on the loans, the Wall Street Journal reported. Bids are due Thursday.

The bidding process should start to set the barometer for commercial property values in the city, as it will likely be the biggest such sale of the year. Buyers and sellers will be able to determine prices and values based on what unfolds in the loan sale or other means of loan resolution.

Regulators separated the commercial loans into pools that will be bid on individually. The three attracting the most attention are secured by office, retail, hotel and unregulated multifamily properties. The combined face value of those pools represents about half of the loan book.

Blackstone, KKR, TPG and Goldman Sachs are among the firms reviewing the bidding material on the Signature portfolio. The LeFrak Organization is expected to bid on debt pools linked to apartment debt, while Bruce Richards’ Marathon Asset Management also appears to be chasing the portfolio.

While most of Signature’s loans are performing, discounts will likely be rampant because interest rates have risen significantly since the original transactions took place. Newmark’s Doug Harmon and Adam Spies are marketing the debt.

Roughly half of the pools of loans being offered are backed by rent-regulated apartment buildings, which have seen values drop dramatically since state lawmakers passed the Housing Stability and Tenant Protection Act of 2019. The Federal Deposit Insurance Corporation is expected to retain control of the $15 billion rent-stabilized loan book and sell minority stakes in it.

It’s not entirely clear if the FDIC, which shut down Signature Bank eight months ago, will share the sales figures for any of the deals that unfold. History, however, signals that it will, which should reveal just how far valuations across various property sectors have fallen.

— Holden Walter-Warner