Home industry real-estate investors claim US regional banks are experiencing increasing real estate pain
Real Estate
CIO Bulletin
2024-02-13
Due to New York Community Bancorp's involvement in commercial real estate, investors are paying closer attention to regional banks, and some are predicting greater hardship for borrowers holding loans for office and multifamily real estate.
A year after a regional banking crisis was set off by Silicon Valley Bank's collapse in the spring of 2023, concerns regarding the health of the smaller banks have grown once more.
Given that small banks hold approximately 70% of all outstanding commercial real estate (CRE) loans, investors are paying close attention to the portfolios of regional banks in light of NYCB's recent earnings release, which precipitated a roughly 60% decline in the company's shares. This information was obtained by Apollo.
Short-seller William C. Martin of Raging Capital Ventures said that the banks found it difficult to avoid issues with CRE loans as long as interest rates remained high. Martin made the decision to bet against NYCB following the bank's disastrous Jan. 30 earnings release, which detailed real estate pain and gave him reason to believe that shares could fall further on more real estate losses.
Martin said he shorted NYCB because he believed the company's earnings power would be reduced and that it could need to raise cash. Martin was a short seller at Silicon Valley Bank prior to the bank's collapse last year. Although a capital increase is a possibility, NYCB stated that it is not currently planning to do so.
The COVID-19 pandemic's effects have been felt in the CRE market. According to Fitch, delinquency rates on commercial mortgage-backed securities (CMBS) will increase to 8.1% in 2024 as more businesses struggle to transition their workforces to remote and hybrid work arrangements. In the meantime, it is anticipated that CMBS loan delinquencies in commercial multifamily — that is, properties with more than five units — will reach 1.3% in 2024 as opposed to 0.62% in 2023.
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