Joint venture acquires 20 percent stake in portfolio previously ran by failed US bank
Canada Pension Plan Investment Board (CPP Investments), through its subsidiary CPPIB Credit Investments III Inc., Blackstone Real Estate Debt Strategies (BREDS), Blackstone Real Estate Income Trust, Inc. (BREIT), and Rialto Capital have joined forces to acquire a 20 percent equity stake in a venture holding a $16.8 billion senior mortgage loan portfolio.
The commercial real estate loan portfolio includes over 2,600 first mortgage loans on retail, market-rate multifamily, and office properties, primarily situated in the New York metropolitan area. Notably, approximately 90 percent of the loans are fixed-rate, with low in-place coupons and robust in-place debt service coverage, with the majority performing across various credit profiles.
The portfolio was previously retained in receivership following the failure of Signature Bank.
“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,” says Geoffrey Souter, managing director, head of real assets credit at CPP Investments.
Blackstone will lead as the asset manager of the portfolio, while Rialto Capital will serve as the loan servicer and operating partner.
“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 $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,” says Jonathan Pollack, global head of Blackstone Real Estate Credit.
“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,” says Jay Mantz, president of Rialto Capital.
The joint venture, formed in partnership with the Federal Deposit Insurance Corporation (FDIC), saw CPP Investments and its peers investing $1.2 billion for the 20 percent equity stake. The FDIC maintains majority ownership with its 80 percent stake and has provided financing equal to half of the venture's overall value.
“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,” Souter says.
As of September 30, 2023, CPP Investments manages a credit portfolio totaling C$75 billion.
