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One of the world’s largest investment groups has complained to the Federal Deposit Insurance Corporation over the way it handled the auction of $33.2bn in loans the US bank regulator absorbed from Signature Bank after the lender collapsed in March.
Brookfield Property Group said the FDIC was running a “secret” process to sell Signature Bank loans. It accused the regulator, which has a mandate to minimise losses to its insurance fund, of picking some winning bidders for assets at prices substantially below the highest offer.
“[We] have heard from numerous sources, including from your adviser (Newmark) and from media reports, that a winning bidder has been selected and that this bidder’s price is lower than ours,” Brookfield said in a letter addressed on December 7 to the FDIC seen by the Financial Times.
The Canadian investment group, which manages about $850bn across real estate and other assets, has threatened to file a formal protest of the auction, which is expected to be completed this month.
“If the winning bidder’s price is in fact lower than ours, as it appears to be, we intend to launch a formal protest, as we believe that this would be in violation of law,” said Brookfield Property Group chief investment officer Lowell Baron, in the letter.
Brookfield has bid on $4.4bn in affordable housing loans to apartment buildings in New York City that the FDIC is selling as part of the auction of New York-based Signature’s assets, which mostly comprise multifamily real estate loans.
Brookfield bid more than 80 cents on the dollar for the assets, according to two sources briefed on the matter. A group led by Related Fund Management won the auction for those assets at below 70 cents on the dollar, the sources said, confirming an earlier report from The Wall Street Journal.
Brookfield, the FDIC and Newmark declined to comment. Related did not respond to requests seeking comment.
Signature Bank failed in March shortly after the collapse of Silicon Valley Bank spurred a run on deposits at midsized US regional banks.
The FDIC, a banking regulator that insures depositors, is also responsible for resolving failed banks. In the collapses of SVB, First Republic and Signature Bank, it absorbed each bank’s assets and held auctions to sell the banks and their loans to minimise losses to its insurance pool.
In September, the FDIC began its auction of Signature Bank’s assets and hired adviser Newmark to oversee the process.
The auction, which divided assets into four pools structured as joint ventures in which the FDIC will own a majority of the assets, has drawn interest from more than a dozen large private capital groups, including Brookfield, Blackstone, Oaktree, Fortress and Related Group, according to sources familiar with the matter.
Brookfield focused on two pools of assets containing affordable housing loans. These tranches were considered the most politically sensitive because they involved buildings in low-income neighbourhoods, according to a source familiar with the matter.
The FDIC aimed to preserve “the availability and affordability of residential real property for low- and moderate-income individuals”, according to a September press release.
This caused large investors to partner with specialists in affordable housing and non-profits.
Brookfield bid alongside Tredway, a niche affordable housing lender based in New York. Related Fund Management, an investment arm of Related Group, the owner of New York’s Hudson Yards, partnered with two non-profits — Community Preservation Corp. and Neighborhood Restore.
Related’s bid won the backing of the administration of New York City Mayor Eric Adams, The Real Deal website reported last month. People involved in the process praised CPC’s record.
Brookfield said in its complaint that the FDIC had signalled it would assign no preference to bidders with political support or for working with non-profits.
“[Once] a bidder had been qualified and cleared to bid (as we were), all such bidders would be on equal footing and price would be the only determining factor at that point,” it said in the letter.
The investment group’s criticism comes after similar complaints in the FDIC’s handling of the sale of some SVB assets.
additional reporting by Eric Platt