Blackstone, CPPIB, Rialto Funds Acquire NY RE Stake

Posted on 12/15/2023

In a US$ 1.2 billion deal, Blackstone Real Estate Debt Strategies, Blackstone Real Estate Income Trust, Inc., Canada Pension Plan Investment Board (through its subsidiary CPPIB Credit Investments III Inc.), and funds affiliated with Rialto Capital have announced that they have entered into a newly formed joint venture. The venture will work with the Federal Deposit Insurance Corporation to acquire a 20% equity stake in a US$ 16.8 billion senior mortgage loan portfolio retained in receivership following the failure of Signature Bank. The FDIC is maintaining an 80% ownership stake in the venture and provided financing equal to 50% of the venture’s value.

Hancock JV Bidco L.L.C. is the name of the bidding group for the 20% equity stake in SIG CRE 2023 Venture LLC (Venture), a newly formed entity wholly owned by the FDIC–Receiver. Hancock will be responsible for the management, servicing and liquidation of the venture’s assets. Hancock will also be required to manage the portfolio in accordance with the terms of the transaction, subject to comprehensive monitoring and oversight by the FDIC–Receiver.

The commercial real estate loan portfolio comprises more than 2,600 first mortgage loans on retail, multifamily, and office properties primarily located in the New York metropolitan area. The loans are predominantly performing and encompass a wide range of credit profiles. Approximately 90% of the loans are fixed rate with low in-place coupons and strong in-place debt service coverage.

Jonathan Pollack, Global Head of Blackstone Real Estate Credit, said in a press release: “We are excited to invest in this compelling, large-scale opportunity on behalf of our BREDS and BREIT investors. Blackstone’s extraordinary real estate insights and credit expertise positioned us to underwrite approximately US$ 17 billion of senior mortgage loans, allowing us to acquire the entire commercial real estate loan portfolio at an attractive basis. We look forward to working with our borrowers and our partners to maximize the potential of these assets.”

Geoffrey Souter, Managing Director, Head of Real Assets Credit at CPP Investments, said: “The current real estate credit market is a promising source of long-term returns for the CPP Fund and we look forward to exploring further opportunities to invest in this and other capital-constrained sectors. This opportunity builds on our longstanding partnership with Blackstone and is a testament to CPP Investments’ expertise in real estate credit, demonstrating our ability to transact quickly and at scale.”

Jay Mantz, President of Rialto Capital, added, “We are incredibly excited to invest in this historic opportunity with two of the most preeminent global investors, Blackstone and CPP Investments. The Rialto team has managed loans through multiple CRE market cycles, and we look forward to working with our partners to maximize value for all stakeholders.”

Blackstone will be the lead asset manager of the portfolio and Rialto Capital will act as the loan servicer and operating partner. Blackstone is the largest owner of commercial real estate globally and has originated or acquired more than US$ 170 billion of real estate loans and securities since the inception of its real estate credit business. Rialto Capital has oversight of over US$ 100 billion of commercial real estate loans and has experience managing public private partnerships.

CPP Investments’ credit portfolio totals C$ 75 billion, including investments across corporate, consumer and real assets credit along the rating spectrum.

Jones Lang LaSalle served as real estate advisor to Blackstone, CPP Investments, and Rialto Capital. Simpson Thacher & Bartlett LLP; Gibson, Dunn & Crutcher LLP; Ropes & Gray LLP; Davis Polk & Wardwell LLP and Bilzin Sumberg Baena Price & Axelrod LLP served as legal advisors.

Keywords: Blackstone Group LP.

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