NYC Pension Fund Invests $60 Million into Stabilizing Signature Bank Loans

In a significant move to support rent-stabilized housing, the New York City Employees’ Retirement System (NYCERS) has invested $60 million to become a 25 percent partner in Community Stabilization Partners. This venture includes the Community Preservation Corporation (CPC), Related Fund Management, and Neighborhood Restore, targeting Signature Bank’s troubled loan portfolio following the bank’s collapse last year. The Federal Deposit Insurance Corporation (FDIC) retains a 95 percent stake in the $5.8 billion rent-stabilized loan portfolio.

Ensuring Stability in Rent-Stabilized Housing

Mayor Eric Adams, Comptroller Brad Lander, and Public Advocate Jumaane Williams announced the investment, emphasizing the importance of preserving nearly 35,000 apartments linked to the loans. Although Community Stabilization Partners doesn’t own the buildings, the $60 million investment empowers the venture to oversee and work out troubled loans, thus playing a crucial role in the stability of rent-stabilized housing.

Comptroller Brad Lander highlighted that the partnership aims to balance financial returns with maintaining rent stabilization, a concept often seen as conflicting by property owners. “The investment’s target net internal rate of return is 10.8 percent,” Lander explained, “with most of the 868 loans, backing 35,000 residential units, performing well. This ensures the partnership will receive servicing fees.”

Low-Risk Investment with High Potential Returns

The investment is considered low risk due to the FDIC’s substantial role in financing 95 percent of the partnership, significantly de-risking the venture. The FDIC’s involvement provides a safety net, allowing Community Stabilization Partners to focus on stabilizing the housing market without undue financial strain.

Community Stabilization Partners will handle a fraction of Signature Bank’s stabilized loan book, with the FDIC providing a $580 million fund to finance necessary repairs. This fund allows for loan workouts where owners can have portions of their debt forgiven if they agree to make repairs, further ensuring the longevity and stability of the housing units.

Leveraging Expertise for Community Benefit

The Adams administration supports Community Stabilization Partners, citing the team’s extensive experience in multifamily, rent-regulated, and affordable housing finance in New York City. This expertise is crucial in managing and servicing the loans, giving the partnership leverage over borrowers and control over refinancing terms.

A City Hall spokesperson explained that the venture’s leverage is significant, as it services the loans and can influence the terms of refinancing. This control is vital in ensuring that the units remain rent-stabilized, balancing financial returns with community stability.

Addressing Potential Challenges

The partnership’s role will be particularly important when an owner defaults on a loan, needs refinancing, or when the partnership has to transfer building ownership. Lander anticipates that such transfers will be rare, focusing instead on maintaining stability and financial health for the properties involved.

The investment is seen as a proactive measure to ensure that rent-stabilized units remain available and well-maintained. With the partnership’s focus on balancing financial returns with community benefits, it represents a thoughtful approach to addressing New York City’s housing challenges.

Impact on New York City’s Housing Market

The investment by NYCERS reflects a broader commitment to preserving affordable housing in New York City. By partnering with experienced organizations and leveraging substantial financial backing from the FDIC, the venture aims to provide stability and support for thousands of residents in rent-stabilized apartments.

Mayor Eric Adams emphasized the importance of this initiative, stating, “This partnership is a lifeline for thousands of families in rent-stabilized housing. It ensures that these homes remain affordable and well-maintained, providing much-needed stability for our communities.”

The $60 million investment by NYCERS into Signature Bank’s loan portfolio marks a significant step in supporting New York City’s rent-stabilized housing. By partnering with experienced entities and leveraging FDIC support, the initiative aims to balance financial returns with community stability, ensuring the long-term availability and quality of affordable housing. This proactive approach addresses the immediate needs of the housing market while setting a precedent for future investments in community stability.

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