BNKD 6.05 banks losing billions on CRE commercial real estate losses starting to hit some
They lost 552 million dollars in credit losses. On New York City property losses on top of Signature Bank losses
NYCB collapsing this morning …it bought Signature Bank's assets whose failure in 2023 was the fourth-largest in U.S. history
New York Community Bank first Bank to let Commercial Real Estate Crisis cat out of the bag and …..many more Regional Banks will follow there lead with billions more in commercial real estate losses.
New York Community Bank’s stock slide continued Thursday as it faces a potential downgrade from Moody’s after posting a surprise loss and announcing a dividend cut. NYCB is looking to build reserves on its balance sheet after it bought some of Signature Bank’s assets last year after it failed amid the regional banking crisis.
Moody’s said Wednesday it was reviewing NYCB for a downgrade that could put it in "junk" territory after the credit ratings agency raised concerns about the bank’s losses in office and multi-family properties in New York.
Moody’s also raised concerns about weak earnings, a material decline in its capitalization and reliance on wholesale funding.
NYCB’s stock fell by over 11% during Thursday’s trading, bringing its decline in the last five days to more than 43%. Most of the decline occurred on Wednesday and Thursday. Having closed at $5.75 a share at the end of Thursday’s session, NYCB’s stock is trading at its lowest level since 2000.
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New York Community Bank (NYCB) stock fell over 11% Thursday, bringing its decline to more than 43% this week. (Bing Guan/Bloomberg via Getty Images / Getty Images)
NYCB said this week it was cutting its dividend by 70% to bolster its balance sheet with additional capital reserves. This comes after NYCB’s acquisitions last year pushed it above the $100 billion asset threshold that requires banks to follow more stringent capital and liquidity requirements under banking regulations.
NYCB
NEW YORK COMMUNITY BANCORP INC.
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Last year, NYCB acquired $34 billion in deposits, $13 billion in loans and $25 billion in cash from the failed Signature Bank. Those acquisitions left NYCB with $116.3 billion in total assets, $85.8 billion in loans and $81.4 billion in deposits as of Dec. 31.
NYCB CEO Thomas Cangemi said on an analyst call Wednesday the Signature Bank acquisition "allows us to advance our strategy while strengthening and diversifying our balance sheet. However, we will become a $100 billion-plus bank sooner than we had anticipated."
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NYCB cut its dividend and put more capital into rainy day funds to help build cash needed to comply with more stringent regulations. (Lev Radin/Pacific Press/LightRocket via Getty Images / Getty Images)
NYCB set aside more capital to meet regulatory requirements this quarter and also put more funding into its rainy day funds to cover potential losses, which resulted in an adjusted loss of $185 million for the quarter.
NYCB was founded in 1859 and has long served as a small regional bank. Between 2000 and 2023, it completed 13 acquisitions to grow to its current size. It also recently acquired Flagstar Bank, which allowed it to expand its footprint around the country.
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Signature Bank's failure in 2023 was the fourth-largest in U.S. history. (Leonardo Munoz/VIEWpress / Getty Images)
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Last year’s regional banking crisis saw some of the largest bank failures in U.S. history. First Republic Bank’s failure became the second largest, trailing only Washington Mutual’s failure in 2008 and surpassing the 2023 failures of Silicon Valley Bank and Signature Bank.
Reuters contributed to this report.
Regional banks are back in focus after NY Community Bancorp stock drops 38% in one day
By Elisabeth Buchwald, CNN
2 minute read
Updated 6:37 PM EST, Wed January 31, 2024
New York CNN —
Regional bank stocks are back in the hotseat thanks to a truly horrific financial report from New York Community Bancorp.
On Wednesday, the regional lender reported a surprise loss of $252 million last quarter compared to a $172 million profit in the fourth quarter of 2022. The company reported $552 million in loan losses, a steep increase from $62 million the prior quarter.
That caused shares of New York Community Bancorp to drop 38% in one day, and the stock hit a 25-year low.
New York Community Bancorp’s CEO Thomas Cangemi said the company’s poor quarter is a product of acquiring close to $40 billion in assets, including $13 billion worth of loans, from now-failed Signature Bank, one of the regional banks that collapsed during last year’s crisis.
The acquisition brought New York Community Bancorp’s total assets above $100 billion. Crossing that threshold is significant for banks since it means, by law, they have to set aside more capital to protect against future losses. That limits the amount of money banks can loan out, however.
Over time, Cangemi said, he hopes to “rightsize” the business. In the meantime, steps like slashing dividends are necessary to free up funds, he told analysts on a Wednesday morning call.
“There’s no question that this was a difficult decision as a firm, but clearly necessary,” he said.
New York Community Bancorp declined to comment beyond its earnings call.
The bank’s stress brought down other regional bank stocks, with KBW Regional Banking Index closing down by 6% on Wednesday.
That’s nothing compared to the devastating tailspin regional bank stocks encountered last spring. And smaller, regional banks have largely recovered from heightened stress resulting from three bank failures last year.
But New York Community Bancorp’s troubles may open up fresh wounds.
At the same time, there’s reason to believe that the bank simply had a bad quarter and is not on the brink of collapse.
Deposits last quarter were down just 2% and declined by even less excluding the custodial deposits connected to the acquisition of Signature Bank.
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NEW YORK — New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday.
The 40 branches of Signature Bank will become Flagstar Bank, starting Monday. Flagstar is one of New York Community Bank's subsidiaries. The deal will include the purchase of $38.4 billion in Signature Bank's assets, a little more than a third of Signature's total when the bank failed a week ago.
The FDIC said $60 billion in Signature Bank's loans will remain in receivership and are expected to be sold off in time.
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Signature Bank was the second bank to fail in this banking crisis, roughly 48 hours after the collapse of Silicon Valley Bank. Signature, based in New York, was a large commercial lender in the tristate area, but had in recent years gotten into cryptocurrencies as a potential growth business.
After Silicon Valley Bank failed, depositors became nervous about Signature Bank's health due to its high amount of uninsured deposits as well as its exposure to crypto and other tech-focused lending. By the time it was closed by regulators, Signature was the third largest bank failure in U.S. history.
The FDIC says it expects Signature Bank's failure to cost the deposit insurance fund $2.5 billion, but that figure may change as the regulator sells off assets. The deposit insurance fund is paid for by assessments on banks and taxpayers do not bear the direct cost when a bank fails.
Giant loans on 10 major US office towers are due soon, stoking fears of more defaults that could be the next crisis to hit banks
Analysts are watching office-building loans closely for signs of threats to banks and the economy. • About $80 billion in office loans come due this year, threatening defaults. The large loans that landlords use to purchase and operate office buildings were once a topic only niche watchers of the commercial-real-estate industry cared about. Now economists and analysts wonder whether these debts could push
a wobbling economy into a recession when they come due.
owners like Blackstone and Brookfield have walked away from major office loans as high interest rates and tighter lending levels have made refinancing debts costlier. Adding to their reluctance is shrinking tenant demand for office space, which has diminished the once lucrative office business.
While painful for landlords, these defaults also present a serious problem for lenders. Some analysts have even said that commercial-real-estate debt is the next big danger for the stock market.
The leading research firm analyzing commercial-real-estate debt, Trepp, has a front-row seat to the reckoning.
About $270 billion in commercial-real- estate debt is coming due this year, Trepp said, which means that landlords will need to refinance their properties at today's higher interest rates — and face significantly higher monthly payments. Approximately one-third, or $80 billion, of that debt is tied to office buildings, perhaps the most troubled corner of commercial real estate. Office landlords' leasing, and therefore revenue, has fallen significantly due to the rise of remote work. As a result, it's an open question whether every landlord can swing the higher payments.
When their debts come due, landlords can choose to either pay the elevated costs, pouring more money into a property that would likely sell for much less than its paper value, or default on their debt and risk giving the property back to the bank. Either option could have far-reaching negative effects on the broader financial system: Landlords' bottom lines could get squeezed and put their overall finances at risk if they extended at elevated prices, while widespread default could make valuations plummet and stress banks
holding the debt.
These office loans carry weight far beyond the balance sheets of the landlords and the lenders, so Trepp provided Insider with a list of 10 of the largest loans it's watching.
The landlords with properties that might be at risk include national heavyweights like Brookfield and the New York real- estate legend Aby Rosen's RFR Holding. Many are tied to office towers in cities such as Chicago and San Francisco, where tenants have been giving back space and vacancies are rising. All data and leasing information comes from Trepp unless otherwise noted.
Read on for the full list, sorted by loan size.
Willis Tower
City: Chicago
Owner: Blackstone
Balance: $1.32 billion
Loan expiration date: March 9, 2024
Why it's on the list: Chicago's tallest office tower, formerly known as the Sears Tower, is one of the most iconic buildings in America. Blackstone, which owns the building, extended the loan for the fourth time in March, with one extension remaining, according to the loan's terms. United Airlines, headquartered in the building, terminated nearly 20% of its lease at the end of last year.
Blackstone recently wrote down the value of its equity investment in the building by $119 million, or 29%, The New York Times reported.
555 California St.
City: San Francisco
Owner: The Trump Organization and Vornado Realty Trust
Balance: $1.2 billion
Why it's on the list: This loan is for a massive mixed-use building with offices and retail shops, formerly known as the Bank of America Center, that's had success re-signing leases during the pandemic.
Partly owned by Vornado Realty Trust, which just halted dividends and saw its stock tumble, the property doesn't have a vacancy problem. But a big loan is set to mature this month.
According to Trepp, the property has asked for an extension of its loan. Debt payments on the building have already risen 38% since the loan was originated in 2021, squeezing balance sheets.
280 Park Ave.
City: New York
Owner: SL Green and Vornado Realty Trust Balance: $1.07 billion
Why it's on the list: This loan is tied to a massive office building with two towers at the northern end of Grand Central Terminal in midtown Manhattan. It's on the watch list because the loan expires in September, though the borrowers still have one more extension on the loan after exercising four of five extension offers.
The building has 94.6% occupancy, according to Trepp, including the venture- capital firm Antares Capital, which has $50 billion in assets under management.
Old Chicago Post Office
City: Chicago
Owner: 601W, one of Chicago's largest office landlords
Balance: $705 million
Loan expiration date: January 1, 2027
Why it's on the list: The post office was recently converted into offices, attracting Uber and PepsiCo to lease space there earlier in the pandemic. The building also has some retail space.
The loan does not mature until 2027, but the lender has the ability to approve or deny leases, which allows it more control over the building's tenants.
The Seagram Building
City: New York
Owner: RFR Holding
Balance: $573.75 million
Why it's on the list: The Seagram Building at 375 Park Ave. in midtown Manhattan made history when it opened in 1958 as the first NYC skyscraper with an all-glass facade.
The Class A building lost Wells Fargo, its largest tenant, in January 2020, and occupancy dipped to 67% in 2021, according to Trepp. Occupancy has since risen to 80%, with four new leases signed recently.
One and Three Allen Center
City: Houston
Owner: Brookfield
Balance: $470 million
Why it's on the list: These downtown Houston office towers were most recently refinanced by Brookfield in 2021. Formerly the home of the now shuttered energy firm Enron, the buildings' loans came due in early April, though there are multiple extensions remaining.
Trepp doesn't have data on whether the loan was extended. Occupancy was just under 75% as of September.
51 West 52nd St.
City: New York
Owner: Harbor Group International Balance: $420 million
Loan expiration date: October 9, 2024 Why it's on the list: Earlier this year, Paramount Global vacated a full floor of this building, and there are no prospective tenants for that space.
The building's loan doesn't mature until October next year, but it's been under greater scrutiny by its lender.
The building, formerly called the Black Rock building, was purchased by Harbor Group International from ViacomCBS in August 2021, when interest rates were substantially lower.
Wilshire Courtyard
City: Los Angeles
Owner: Onni Group
Balance: About $408 million
Why it's on the list: This property was selected because its rent revenue can barely cover the cost of its debt.
As of November, the building in LA's Miracle Mile neighborhood was only 54% occupied. Leases covering 20% of the Wilshire Courtyard had either expired by the end of 2022 or will expire by the end of 2023. WeWork, for example, exited the property in the fourth quarter of 2021. According to Trepp, its loan matured in July, but it does not have any updates on whether the owners extended the loan.
1440 Broadway
City: New York
Owner: CIM Group
Balance: $399 million
Loan expiration date: March 9, 2024
Why it's on the list: 1440 Broadway is just
south of Manhattan's Times Square.
In January, Amazon laid off 299 employees throughout Manhattan, with most of them at its office at 1440 Broadway, Bisnow reported.
This mixed-use property's loan doesn't expire until March, but Trepp said it'd had trouble keeping enough cash in reserve to keep up with building operating costs.
AMA Plaza
City: Chicago
Owner: Beacon Capital Partners
Balance: $370 million
Why it's on the list: This office loan expires in June, with three one-year-extension options.
The lease of this building's major tenant, the American Medical Association, runs out in 2024. The medical industry's biggest professional organization relocated its headquarters to the property at 330 North Wabash on the Chicago River in 2013, triggering its name change to AMA Plaza.
This lease is of particular interest to the lender, and the American Medical Association will need to give notice of its decision by March 1.
