The portfolio was broken into several packages. Supposedly, a Related Companies affiliate is going to be awarded the multifamily package at 69 cents per $1 of principal even though there were several bids as high as 80 cents. My guess is that the fact that Related is teaming up with the Community Preservation Corporation and Neighborhood Restore is the reason the FDIC is choosing Related. This is a political consideration instead of a financial one.
Someone commented that banks would now have to mark down their multifamily portfolios to 69 cents. That is not the value of the loans. The FDIC created a distress sale whereby third-party bidders seek to buy the portfolio at a significant discount so that the bidder can make a substantial profit. This was the case in the early 1990s when Freddie Mac (FMCC) sold loan portfolios to bidders at a fraction of the principal amount, and then the bidders arranged to have the borrowers pay off the loans at a smaller discount thereby making a profit.
In the current situation, there are provisions restricting the bidder’s right to sell the loans over a specified period of time. Essentially, the bidder is buying a 5 percent interest in the loans plus receiving servicing fees. There is no incentive to have the loans pay off because the servicing fees are based on the portfolio balance with a substantial monthly cash flow. Where is that money going? Who benefits?
have received over 95 cents. As far as community group concerns, the Signature Bank borrowers were the best multifamily owners. They are highly experienced and kept the properties in excellent condition. Signature Bank never had a bad Community Reinvestment Act (CRA) rating. The same holds true for the other CRE loan packages.
Signature Bank staff could have negotiated the disposition of the loans in an orderly fashion and received the most proceeds without going to a bidding process to sell the loans to third parties that will pay the least amount in order to make a profit on their investment.
Signature Bank employees, creditors, shareholders and taxpayers suffer the consequences of the series of bad decisions made by the FDIC. The negative ramifications throughout banking, real estate and the economy in general are extraordinary. It began with the wrong decision to shut down Signature, the poor communication with employees and borrowers, putting the loan portfolio up for auction, the absurd structure of the auction, and, finally, the acceptance of a bid
Robert Khodadadian has long had a simple philosophy about selling real estate. The way he sees it, there are approximately a million buildings in the city, and the broker that gets to sell any one among the multitude that will hit the auctioning block at a given moment is, sometimes, simply the person who happens to pitch their services to the right seller at the right time.
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Channel, Columnists, Finance, More, George Klett, National, New York City, FDIC, Freddie Mac, New York Real Estate Capital Corporation, Related Companies, Signature Bank Read MoreCommercial ObserverApparently, the FDIC has decided on the “winning bidders” of the Signature Bank commercial real estate and multifamily loan portfolio. The portfolio was broken into several packages. Supposedly, a Related Companies affiliate is going to be awarded the multifamily package at 69 cents per $1 of principal even though there were several bids as high