(Bloomberg) -- New York City’s $86 billion pension fund for civil employees is investing in a nonprofit-led partnership that took on property loans tied to rent-controlled and rent-stabilized apartment buildings from the failed Signature Bank.

New York City Employees’ Retirement System, or NYCERS, will invest as much as $60 million in a partnership, led by the Community Preservation Corp., that will preserve nearly 35,000 rent-stabilized units affected by the Signature Bank’s sudden collapse last March, city Comptroller Brad Lander said Tuesday. The fund will own a 25% stake in the partnership, which also includes Related Fund Management and Neighborhood Restore HDFC.

“Protecting and expanding our affordable housing supply through sound investment decisions is a major priority of my office,” Lander, who is the investment adviser to the city’s retirement funds, said in a press statement. The comptroller estimated the internal rate of return of the investment to be almost 11% net of fees. 

A majority of the apartments under the deal are in Manhattan and the Bronx, 13,000 and 10,000, respectively, while the balance are in Brooklyn and Queens, according to Lander’s office. 

Signature Bank was one of a handful of regional banks that collapsed in 2023. Its failure sparked anxiety among tenants and elected officials in New York City about how it would impact the bank’s loan portfolio of rent-stabilized buildings. 

“We have to make sure those who are union workers and working class people have an opportunity to stay in the city they helped build,” Mayor Eric Adams said at a news conference announcing the investment. “This is an area we can all agree on. New Yorkers must be housed and they must be housed in an affordable way.” 

New York bank regulators put Signature Bank into receivership last March after they lost faith in management and depositors fled. The Federal Deposit Insurance Corp. set up ventures to offload $33 billion of commercial-property loans held by Signature. In December, the FDIC sold a 5% equity interest in two ventures backing the rent-stabilized and rent-controlled loans to the CPC-led partnership. The $5.8 billion portfolio contains about 35,000 units, 80% of which are rent regulated and represent about 3% of the city’s rent-regulated housing stock. CPC will service the loans held by the ventures.

Rafael Cestero, chief executive officer of CPC, said the nonprofit would work with building owners to restructure or refinance their debt when it comes due and assess needed renovations. He estimated it could take 10 years to work out the loans underlying the 35,000 units.  

Read more: Related-Backed Nonprofit Bid Wins Stake in Signature Debt 

The pension fund’s investment is a boost to a program overseen by Lander’s office that aims to generate risk-adjusted market rate returns through investments in affordable housing and economic development. The city’s five separate pension funds for civil employees, police officers, teachers, firefighters and non-teaching school employees have fallen short of a goal of investing 2% of assets in the so-called Economically Targeted Investment Program.

Less than 1% of the pensions’ $272 billion of assets are currently invested in financing affordable and workforce housing.  

Lander’s office has previously said that the pensions’ share of ETI investments hasn’t grown because most are longer-duration, fixed-income assets which lost value when mortgage rates started rising in 2022. Over four-decades, the city’s civil employees pension has invested almost $700 million in rental apartments. All five pensions have invested $4.5 billion in the ETI program. 

Read more: NYC’s $264 Billion Pensions Fail to Invest More in Cheap Housing

NYCERS’s investment comes amid the city’s worst housing crunch in more than 50 years. 

A city survey in February found the vacancy rate for rentals dropped to 1.4%, the lowest since 1968, down from 4.5% in 2021. Apartments viable for rent to lower-income New Yorkers were even more scarce. The portion of units available for rent for less than $1,100 was a mere 0.4%. 

--With assistance from Natalie Wong.

(Updates with more details in 3rd and 8th paragraphs, adds quote from Mayor Eric Adams in 6th paragraph.)

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