NYC Pension Fund Invests $60M in Signature Venture

The city’s employees’ pension fund now has a seat at the table in overseeing and working out troubled loans in Signature Bank’s loan portfolio.

The New York City Employees’ Retirement System invested $60 million to become a 25 percent partner in Community Stabilization Partners, a venture made up of the Community Preservation Corporation, Related Fund Management and Neighborhood Restore. The venture bought a 5 percent stake in Signature Bank’s $5.8 billion rent-stabilized loan portfolio after the bank collapsed last year. The Federal Deposit Insurance Corp. retained 95 percent.

Mayor Eric Adams, Comptroller Brad Lander and Public Advocate Jumaane Williams held a joint press conference on Tuesday to announce the investment. They framed the deal as a lifeline to preserve nearly 35,000 apartments tied to the loans, though Community Stabilization Partners does not own the buildings, and the $60 million is not going directly to repairing these properties.

A spokesperson for City Hall said that the joint venture has leverage over the borrowers, given that it is servicing the loans and controls the terms of refinancing.

Lander, a trustee of the fund, clarified on Wednesday that the partnership itself, not the pension fund’s investment on its own, would aid in the preservation of the apartments because it is “attentive to the balance” between ensuring a healthy financial return and keeping the units rent stabilized — two ideas that many property owners would find incongruent.

The question of preserving these units will come into play when an owner defaults on the loan, needs to refinance or when the partnership needs to transfer ownership of the building. Lander expects such transfers to be rare, however.

He said the investment has a target net internal rate of return of 10.8 percent, and that most of the 868 loans backed by 35,000 residential units (80 percent of which are rent stabilized) are performing, so the partnership will receive servicing fees from those loans.

He noted that the risk is low, given that the joint venture is only handling a fraction of Signature’s stabilized loan book.

“The FDIC’s role here, the fact that they are financing 95 percent of the partnership is a very substantial de-risking element,” he said.

CPC and the Federal Deposit Insurance Corp. have a $580 million fund set aside to finance repairs as part of loan workouts (owners can have portions of debt forgiven if they agree to make repairs). The pension fund’s investment is not part of that fund.

The Adams administration showed support for Community Stabilization Partners’ bid, citing the team’s “decades of deep experience in multifamily, rent regulated, and affordable housing finance in the city of New York.”