Blackstone, the Canada Pension Plan Investment Board and Rialto Capital bought a 20% equity stake in a venture holding a roughly 20% stake of a $17 billion commercial real estate loan portfolio of the former Signature Bank for $1.2 billion.
The groups — Blackstone Real Estate Debt Strategies (BREDS), Blackstone Real Estate Income Trust (BREIT), CPPIB Credit Investments III and funds affiliated with Rialto — formed a joint venture with the Federal Deposit Insurance Corporation (FDIC) that holds the senior mortgage loan portfolio that was placed in receivership following the failure of Signature Bank earlier this year.
The FDIC is maintaining an 80% ownership stake in the venture and providing financing equal to 50% of the venture’s value, officials announced late yesterday.
The CRE loan portfolio is comprised of more than 2,600 first mortgage loans on retail, market rate multifamily and office properties primarily located in the New York metropolitan area. The loans are predominantly performing and roughly 90% are fixed rate with low in-place coupons and strong in-place debt service coverage.
The deal follows BREIT liquidity problems that dogged the firm going into early 2023.
“Blackstone’s extraordinary real estate insights and credit expertise positioned us to underwrite approximately $17 billion of senior mortgage loans, allowing us to acquire the entire commercial real estate loan portfolio at an attractive basis,” said Jonathan Pollack, global head of Blackstone Real Estate Credit. Blackstone is the largest owner of commercial real estate globally with its $332 billion portfolio and has originated or bought more than $170 billion of real estate loans and securities since inception of its real estate credit program.
For CPP, the deal builds on its longstanding partnership with Blackstone, said Geoffrey Souter, managing director and head of real assets credit at CPP Investments, which boasts expertise in real estate credit within its C$75 billion credit portfolio.
At Rialto, the firm has managed loans through multiple CRE market cycles and will act as the loan servicer and operating partner. Rialto has oversight currently of over $100 billion of CRE loans.
Jones Lang LaSalle served as real estate advisor to Blackstone, CPP Investments and Rialto Capital. Simpson Thacher & Bartlett, Gibson, Dunn & Crutcher, Ropes & Gray, Davis Polk & Wardwell and Bilzin Sumberg Baena Price & Axelrod served as legal advisors.