Atlantic Union sells $2B CRE portfolio to Blackstone unit

UPDATE: This article includes a new comment by Atlantic Union.

In a deal that closes the loop on its transformative acquisition of Sandy Spring Bank, Atlantic Union Bankshares said it sold $2 billion in performing commercial real estate loans to Blackstone Real Estate Debt Strategies. 

The $38 billion-asset Atlantic Union announced its intent to sell a CRE portfolio in October, when it struck its $1.3 billion deal for Sandy Spring. The subsequent loan sale, announced late Thursday, reduces Atlantic Union’s CRE exposure while providing the means to pay down high-cost funding and add to the securities book. 

American Bankers Association

The episode “is another proof point of Atlantic Union’s ability to execute and deliver on transactions that create long-term value for our shareholders,” President and CEO John Asbury said in a press release. “[It] reduces our CRE concentration and frees up capacity for potential future growth.” 

The Richmond, Virginia, bank will continue servicing the CRE loans it sold to Blackstone. Retaining servicing rights is crucial because it provides an opportunity to preserve the banking relationships with borrowers and, potentially, make new loans when the existing credits mature, Hovde analyst David Bishop wrote Friday in a research note. 

Atlantic Union had already marked the CRE portfolio to market, so there was no loss associated with the sale, even though the loans were sold at a discount, according to Bishop. Indeed, the deal might yield a small gain, he wrote. 

“We view this sale as a major first-step positive,” Bishop wrote.

Atlantic Union Spokesman Bill Cimino said the sale terms Atlantic Union received were better than it anticipated when it discounted the loans in April. “It shows there’s an appetite for these loans among investors,” Cimino told American Banker Friday. 

Banks selling off commercial real estate loans has become a recurrent theme as financial institutions look to limit downside vulnerability to a sector marked  by concerns about retail, multifamily and office vacancy rates. In December, the $62 billion-asset Valley National Bancorp in New York sold a $1 billion CRE portfolio to Brookfield Asset Management. The same month, HomeStreet in Seattle agreed to sell a $990 million CRE portfolio to Bank of America. 

HomeStreet, the holding company for HomeStreet Bank, later agreed to sell itself to the $16 billion-asset Mechanics Bank in Walnut Creek, California. 

Blackstone Real Estate Debt Advisors, which originates loans and invests in real estate-related debt for institutional and private investors, has completed several recent transactions involving bank CRE portfolios. In May 2024, Blackstone acquired $1 billion of loans originated by a German bank backed by multifamily, office and hospitality properties in the U.S. and the United Kingdom. Five months earlier, in December 2023, Blackstone acquired a 20% stake in a joint venture holding $17 billion of CRE loans originated by the failed Signature Bank.  

The Atlantic Union loan sale “demonstrates the breadth of our market-leading platform and deep expertise providing solutions to financial institutions for their commercial real estate portfolios,” Tim Johnson, global head of Blackstone Real Estate Debt Strategies, said in a press release. 

Atlantic Union closed its acquisition of the Olney, Maryland-based Sandy Spring ahead of schedule in April. The deal established the company as the largest regional bank in Maryland and Virginia. With Sandy Spring under its belt, Asbury said the company plans to pivot south and seek growth opportunities in North and South Carolina. 

“We push south and make the investment in the Carolinas over time. That will be the next big thing,” Asbury said in a recent interview with American Banker.