Scott Goodwin, the co-founder of Diameter Capital, has identified promising investment opportunities in the securities of the recently troubled Signature Bank (SBNY, Financial). Speaking at the Sohn Conference in New York, Goodwin highlighted the strategic partnerships formed by the FDIC-managed Signature Bank with notable real estate investors, including Blackstone (BX, Financial), as a key factor that could drive significant returns for the bank's securities over the next five years.
One of the pivotal moves by the FDIC was the divestiture of a 20% equity stake in a venture holding a real estate loan portfolio valued at $16.8 billion to various investors, among them Blackstone Real Estate Income Trust (BSTT, Financial). Additionally, in a similar timeframe, Santander acquired a 20% share of Signature's real estate portfolio, amounting to $1.1 billion, further showcasing the bank's asset value.
Diameter Capital has seized this opportunity by acquiring stakes in Signature Bank's securities, with Goodwin projecting a substantial increase in the bank's market capitalization from its current $145 million to over $600 million. He also anticipates a significant rise in the value of Signature's bonds.
Goodwin believes that the strategic joint ventures, particularly the one with Blackstone, will effectively manage assets to ensure returns for Signature's securities investors within five years. This optimistic outlook is held despite the firm's cautious stance on the commercial real estate (CRE) market, where it is net short.
