Discounted bank loans, Signature bank sale, next gen bank crisis
Welcome to issue?#13?Xchange.Loans bi-weekly distressed debt newsletter!
Banks seem to have hit quite the stroke of bad luck as of late. The good news is our featured article will help any bank with a tough credit on their books maximize the recoverable value of their loans with minimum effort. Which we're sharing at quite the opportune time as banks (((should))) start to move their less desirable assets off their books to backfill potential losses in core deposits, prevent further losses, and to get ready for the next CRE crash.
Because treasuries are ALWAYS current on payments and are paid in full at maturity, CRE NPLs will be the next assets banks will look quickly move off their balance sheets prior to said CRE crash. Especially in California where they are bit more accustom to clearing and burning away underbrush as seasonal wildfires spread.
While distressed debt and special asset management veterans are talking about whether this CRE & bank crisis will be worse than 08', the younger generation of professionals are getting ready for their first downcycle. This time it is a bit different, and not just because resi value are still holding somewhat strong, but because of the way technology will influence this correction and the future of the market. Very interesting times indeed.
Regardless of what may happen next, the question bankers, CRE professionals, and private lenders need to ask themselves is: How am I utilizing technology to achieve a better outcome for my CRE portfolio?
The commercial real estate (CRE) industry was late to the technology game—but it’s been catching up quickly.
As a trailblazer and thought leader of online CRE transactions,?Andre Cuadrado,?Xchange.Loans' very own CEO, was excited about participating in a technology-focused panel discussion at the 11th Annual IMN Bank Special Assets & Credit Officer’s Forum in Miami as a panelist.
Andre had an intriguing discussion about the role of technology in loan sales and distressed asset dispositions, along with?Jeff Azuse, senior vice president, Hilco Real Estate;?Cliff Bargeron, managing director, Garnet Capital Advisors; and?Buddy Lee, CEO, Seven Hills Auctions. The panel was moderated by Christopher Swieca, senior vice president, Wintrust Financial Corporation.
Here are some key take-aways from the conversation.
?Read Full Article on?Knowledge.Xchange
Top 5 Distressed Stories:
PILES OF COMMERCIAL REAL ESTATE LOANS AT BANKS MAY BE WORTH ONLY 77 CENTS ON THE DOLLAR OR LESS
The COVID-19 pandemic has led to significant changes in the commercial real estate market, and the value of commercial real estate loans held by banks has decreased accordingly. According to a report by Trepp LLC, the value of commercial real estate loans in the US is now worth only 77 cents on the dollar or less, indicating that banks could be at risk of significant losses.
Many of the loans were made in the years leading up to the pandemic, when commercial real estate values were high, and may now be worth significantly less due to changing trends in the market. This has raised concerns about the stability of the banking sector, particularly for smaller banks that may not have the resources to absorb large losses.
However, larger banks are also at risk, as they hold a significant portion of the total commercial real estate loans in the US.
?Read Full Article on?MarketWatch
BILLIONS IN SIGNATURE BANK DEBT TO BE SOLD BY NEWMARK GROUP
FDIC to tap real-estate firm to market about $60 billion in failed Signature Bank loans. Newmark Group Inc. The real-estate service firm, Newmark Group, plans to sell billions of dollars of debt from Signature Bank in the latest sign that banks' troubles may be spreading beyond risky loans.
The firm is starting to solicit buyers for the securities, backed by mostly commercial real estate loans, from the New York-based lender, according to people with knowledge of the matter. This marks the latest example of financial assets which have been bundled together, re-packaged and sold to investors who are now increasingly reluctant to buy securities that they do not fully understand.
With much of the economy having slowed, investors may be more skittish about buying assets that are tied to the commercial real estate market, which is vulnerable to downturns in the business cycle. In this regard, investors may be especially wary of lending to the restaurant industry, which has struggled during the pandemic.
?Read Full Article on?The Wall Street Journal
HOW RISING INTEREST RATES ARE EXPOSING BANK WEAKNESSES
Banks are struggling with declining interest rates that reduce the profit they can make from loans. They have been forced to cut their workforces and branch networks to try and increase their profitability. Banks are closing branches, shedding staff, and finding new sources of income such as fees for advice or asset management. Some banks are cutting salaries, reducing bonuses and capping the amounts they pay out to shareholders. This is all part of a wider trend in the financial sector of institutions looking to cut costs in response to the pressure on margins.
In addition to this, regulatory requirements and compliance costs have also been a significant challenge for banks in recent years, with increasing numbers of rules and regulations. Commercial real estate loans are under scrutiny as the cost of debt has doubled in a year, causing refinancing challenges. Pandemic-related changes have also caused lower valuations for property investors, adding to the turmoil.
Over 40% of US commercial real estate loans are held by banks, and lending standards are expected to be tightened in the future. There have not been many forced sales, but some assets are in trouble, according to real estate analyst Zachary Gauge at UBS. The Fed is aware of the concentration of CRE lending, but its Chair Jay Powell does not consider the issue comparable to other strains on banks.
?Read Full Article on?Financial Times
'THE FIRST BANK CRISIS OF THE TWITTER GENERATION': THE PRESSURE ON BANKS IS VERY DIFFERENT FROM 2008
The banking industry is under greater pressure today than it was during the 2008 financial crisis. Banks are facing a different set of challenges, with the rise of digital banking, the increasing competition from fintech companies, and the rise of social media.
The impact of these factors is being felt throughout the industry, with banks having to adapt to new technologies and new ways of doing business. They are also having to compete with new players in the market, such as PayPal, Square, and other fintech startups.
In addition, the rise of social media means that banks are more vulnerable to negative publicity, with customers able to voice their concerns and criticisms on Twitter and other platforms.
?Read Full Article on?CNBC
"BADWILL" HUNTING: THE DIFFERENCE BETWEEN THE BANK FAILURES OF 2008 AND TODAY
The current crisis in the banking sector is different from the financial crisis of 2008. One of the main differences is that banks today are better capitalized, meaning they have more equity to absorb losses. However, there are other differences that make the current situation more challenging.
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For example, banks are now dealing with negative interest rates, which put pressure on their profits. In addition, banks are now operating in a more complex regulatory environment, with new rules and regulations being introduced all the time.
Furthermore, the rise of fintech companies is changing the landscape of the banking industry, with traditional banks having to compete with new players that are often more nimble and innovative.
?Read Full Article on?Axios
Top 6 Distressed CRE Stories:
SAN JOSE HOTEL PROJECT SITE NEARS REAL ESTATE AUCTION AND FORECLOSURE
A hotel project in San Jose, California, is facing foreclosure due to the impact of the COVID-19 pandemic on the real estate market. The project has been in development since 2015 and includes a 174-room hotel and a 12-story office tower.
The project's developer, KT Urban, has been unable to secure financing due to the slowing real estate market. As a result, the project's lender, Presidio Property Trust, has initiated foreclosure proceedings on the property's $59 million loan.
?Read Full Article on?SiliconValley.com
BANYAN CAY RESORT FILES FOR SECOND BANKRUPTCY, COULD HEAD TO AUCTION
Court motion seeks to hire Keen-Summit Capital Partners to market the still-under-construction golf resort and adjacent dev sites. The Banyan Cay Resort, a luxury golf resort located in West Palm Beach, Florida, has filed for its second bankruptcy in less than two years. The resort, which includes a 130-room hotel, 18-hole golf course, and residential properties, has struggled to make payments on its $285 million mortgage.
The bankruptcy filing lists between $100 million and $500 million in both assets and liabilities. The resort has previously been sold for $26.7 million in a foreclosure auction and was subsequently purchased by a group of investors. However, the resort's financial struggles have continued, and it could now head to auction again.
?Read Full Article on?TheRealDeal
TOBY MOSKOVITS' BUSHWICK GENERATOR HEADS TO FORECLOSURE AUCTION
The Bushwick Generator, a mixed-use building in Brooklyn owned by real estate developer Toby Moskovits, is headed to a foreclosure auction. The building was completed in 2019 and includes residential, commercial, and industrial space.
Moskovits has been unable to make payments on a $41.5 million loan that was used to finance the project. As a result, the building is now set to be sold at a foreclosure auction with a minimum bid of $25.5 million.
?Read Full Article on?TheRealDeal
NORWALK HOTEL HITS AUCTION BLOCK FOUR YEARS AFTER FORECLOSURE; MINIMUM BID SET AT $4 MILLION
The DoubleTree Hilton hotel in Norwalk, Connecticut, is set to be sold at a foreclosure auction. The hotel, which has 265 rooms and 6,000 square feet of meeting space, has struggled in recent years due to competition from other hotels in the area.
The property's owner, Norwalk Hotel Owner LLC, has been unable to make payments on its $34 million mortgage. The hotel will be sold at a foreclosure auction.
?Read Full Article on?CT Insider
PARK PLAZA MALL FINDS NEW OWNER IN FLORIDA REAL ESTATE
Park Plaza Mall in Little Rock, Arkansas, has been sold to Florida-based real estate company Second Horizon Capital for $25 million. The mall, which opened in 1960, has struggled in recent years with high vacancy rates and competition from online retailers.
The new owners plan to revitalize the mall and the surrounding Midtown neighborhood. The sale includes the mall's land and buildings, as well as its parking garage.
?Read Full Article on?abc7
DESPITE MASSIVE FORECLOSURE SUIT, FINANCIAL SERVICES FIRM RECOMMITS TO LOOP OFFICE BUILDING
A Loop office building in Chicago has signed a lease extension with a major tenant, despite being in foreclosure. The 40-story tower is owned by New York-based real estate firm Savanna and has been struggling to make payments on its $182 million mortgage.
However, there is some good news for the building's owner. The building's largest tenant, accounting firm Deloitte, has extended its lease for an additional 15 years. This is a significant commitment from Deloitte, which could help to stabilize the building's finances in the long term.
The lease extension is expected to help Savanna with its financial difficulties and could make the property more attractive to potential buyers.
?Read Full Article on?Chicago Business
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Michael Jimenez?is a CRE Finance and NPL expert with 15+ years of experience, as well as the Founder and CXO of?Xchange.Loans.
Xchange.Loans?is a secure loan sale marketplace where CRE lenders can Buy. Sell. Value. commercial loans and NPLs with NO seller and NO broker fees.