Flagstar Finds Buyer for $343M Worth of Troubled Loans

Flagstar Financial found a buyer for its portfolio of eight sub-performing loans in no time.

Lone Star Funds swooped in to purchase the $343 million loan portfolio, Bloomberg reported. The company acquired the loan portfolio at a small discount to par, sources told the publication; Lone Star declined to comment.

A Newmark team led by Adam Spies and Josh King arranged the sale.

Flagstar, formerly known as New York Community Bank, put the portfolio of loans up for sale in December, The Real Deal reported.

The portfolio includes an $80 million loan NYCB provided to Stellar Management in 2022 to refinance its leasehold on the Flatiron District office building at 220 Fifth Avenue. There’s also a $77 million loan obtained by the Olnick Organization the same year to refinance its office building at 130 Fifth Avenue, and a $66 million loan for RXR’s Standard Motors Building at 37-18 Northern Boulevard in Long Island City, originated in 2014.

There were also loans on two other office buildings and a pair of retail condos in Manhattan, according to a marketing memo from Newmark. The memo also referenced “challenging capital stacks” for the buildings in the portfolio.

A month ago, the badgered Flagstar offloaded $142 million of debt backed by rent-stabilized buildings to Cantor Fitzgerald. The loans were backed by 27 assets, which were 86 percent rent-stabilized on a weighted average, according to an analysis by The Real Deal.

For the fourth quarter, Flagstar reported $749 million in multifamily loans marked 30-to-89 days past due. That was six times the volume of the third quarter as the bank continues to struggle to shed the bad debt that nearly brought down the company a year ago.

Lone Star has positioned itself to take advantage of opportunities across the real estate market. Over the summer, the Dallas-based private equity giant closed a $2.7 billion fund dedicated to “deep-value and special situation investment opportunities across Europe, North America and Japan.”

Earlier in the year, the company closed a $5.3 billion fund focused on distressed assets.

— Holden Walter-Warner