One of New York's Most Prominent Commercial Real Estate Lenders Closed Down By Regulators
The second bank closure in three days.
Signature Bank a major lender of multifamily assets was shut down Sunday night in an attempt to stabilise as Federal Deposit Insurance Corp took over its operations. The shutdown also saw the bank's leadership disbanded.
In a joint statement, the Department of the Treasury, the Federal Reserve, and the FDIC reported a “systemic risk exception” for Signature Bank. This is following the closure of SVB on Friday morning by California regulators.
Signature Bank made its name as one of the largest lenders to the cryptocurrency industry, meaning digital currency was accepted as deposits, This made it vulnerable to a similar type of run-on deposits which led to the collapse of SVB. However, unlike SVB, which had $2.6B of CRE loans, Signature Bank, at the end of 2022, had $17.8B in digital asset deposits, accounting for 20% of its total deposits.
According to PincusCo analysis, Signature Bank was one of the largest commercial real estate lenders in New York City. In fact, in 2022, real estate accounted for 48% of its funded loans, which represented approximately $35.6B. PincusCo analysis also shows that Signature Bank has issued $13.3B across more than 800 loans since January 2020. This is only second to Wells Fargo and JPMorgan Chase in relation to dollar volume.
The FDIC announced Signature Bank would reopen as Signature Bridge Bank Monday morning and its official cheques would still clear, meaning borrowers "should continue making loan payments as usual."
Eli Weiss, Joy Construction Principal, said the impacts of the closure will continue to have lasting effects, stating "Signature was a major lender and depository for the New York real estate industry [and] while deposit concerns have been addressed, it is hard not to view this adversely for New York real estate. What the world is waking up to after this weekend is what we in real estate have been feeling so acutely for the last year."
Commercial real estate, particularly in New York has already seen some signs that not all is well as landlords like Blackstone, Related and Columbia Property Trust have defaulted on building loans in the last few months, and it is expected that the worst is yet to come.
