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With billions of Signature Bank’s rent-regulated commercial real estate loans on New York properties now up for grabs — and hitting headlines— one multifamily lender is looking to play a central role in finding a new home for this challenged debt.
Greystone, the largest agency small-balance lender in the nation, is launching an initiative that will facilitate the sale of those loans, Commercial Observer can first report.
The program, which Greystone founder Steve Rosenberg is calling a “Center of Excellence,” will also target loans with large concentrations of workforce housing at other regional banks that may need to be unloaded in the near future in concert with the Federal Deposit Insurance Corporation (FDIC).
In response to a Bloomberg story Tuesday in which a source referred to Signature’s loans as “toxic waste,” Rosenberg said, “It’s only toxic at a certain price. At another price it is gold.”
“The Center of Excellence is our knowledge and our ability to process a lot of data and be very comfortable on where exactly the senior loans are going to end up,” Rosenberg said. “The way the FDIC is going to get as much money as possible on these loans is if people feel confident that they know exactly what the execution will be on the senior portion of the loan, which is very likely to be the agencies.”
Manhattan-based Greystone’s focus on Signature comes in the wake of New York Community Bank acquiring a big portion of the failed bank’s assets, via its subsidiary Flagstar Bank, last Monday in a $2.7 billion deal that did not include its CRE loan portfolio. With Signature’s CRE loans now in receivership to be sold off by the FDIC, it presents a unique opportunity for borrowers who acquired rental properties with intention to raise rents but who have been hamstrung by government regulations limiting their abilities to increase revenues, according to Rosenberg.
“There are borrowers out there now that for the first time ever see a ray of light,” said Rosenberg, noting that sponsors who had made deals with Signature were facing major challenges with refinancing their properties. “Now those loans are going to get sold at a price that really reflects the value of the loan relative to the value of real estate.”
Since the Signature debt will be sold at a “severe discount,” Rosenberg stressed that the borrowers will be in a strong position with the new owners since they will not want to go through an expensive foreclosure process in New York. He said buyers of the loans will likely be receptive to writing the loans down to whatever they were acquired in order to avoid foreclosure proceedings, which will enable the borrowers to make debt service payments.
Signature was the third-largest CRE lender in New York City with about $20 billion in loans, including roughly $15 billion in multifamily properties, according to data from Maverick Real Estate Partners.The bank had 46 percent of its CRE loans in the New York City market in the rent-stabilized multifamily space, according to Maverick.
Rosenberg said in addition to the attractiveness of these loans given their issuance in a lower interest rate environment, this also presents an opportunity for government-sponsored enterprises like Fannie Mae and Freddie Mac to fulfill their missions of providing more debt for workforce housing projects.
“Greystone is well positioned to be in the center of the action for both the buyers of the loans as well as the current owners of the properties,” Rosenberg said. “With the banks making fewer real estate loans, that’s more opportunity for the agency loans to be more important”
The timing of Greystone launching its Center of Excellence targeting Signature’s CRE loan hinges on how the FDIC wants to approach selling off the debt, according to Rosenberg, who is looking to hire staff soon to facilitate deals. He noted that NYCB, which has a rent-stabilized portfolio 40 percent bigger than Signature’s, also may need assistance soon with selling off over-leveraged loans.
Andrew Coen can be reached at acoen@commercialobserver.com
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