New York Community Bancorp Inc. has been looking to shed problem commercial real estate from its books after last week reporting a surprising $185 million loss relating to a pair of loans as part of its fourth-quarter earnings results.
The lender has offered investors a chance to bid on a $22.4 million mortgage backed by three five-story walk-up apartment buildings in Washington Heights, a neighborhood in northern Manhattan, according to details of the offering viewed by MarketWatch.
The debt backs mostly rent-regulated apartments and affiliated mixed-use space. The mortgage matured in early January, with the full amount of the debt now due, plus interest at a 20% default rate, according to the offering.
Other landlords in the neighborhood who are subject to New York City’s rent-regulation laws, which were strengthened in 2019, have seen property values tumble by an estimated 50%, according to Bloomberg News.
New York Community Bancorp
didn’t respond to requests for comment for this article.
Efforts by the bank to tackle its exposure to problem real-estate loans come as its stock has dropped by more than 60% so far this year.
The lender has a large exposure to rent-regulated multifamily properties in New York City, about a $1.8 billion office-building exposure in the city and about $250 million to $300 million in maturities in the next few years, according to Deutsche Bank researchers.
Pressures facing the bank are reigniting fears about regional banks and their commercial real-estate exposure. Treasury Secretary Janet Yellen told lawmakers on Tuesday that she was concerned about U.S. commercial real estate, saying that some institutions could be “quite stressed,” while also saying the challenge looks manageable.
Landlords have been reeling from slumping property prices and higher borrowing costs since the Federal Reserve in 2022 began dramatically raising interest rates to quell high inflation.
Many regional banks have responded by trying to quietly shed exposure to problem commercial real estate. That activity has picked up since the collapse of Silicon Valley Bank and Signature Bank last March and JPMorgan Chase & Co.’s
takeover of First Republic Bank, which deeply unsettled markets.
Late Tuesday, Moody’s Investors Service downgraded New York Community Bancorp’s credit by two notches into speculative-grade or “junk” status.
“We took decisive actions to fortify our balance sheet and strengthen our risk management processes during the fourth quarter,” Thomas Cangemi, New York Community Bancorp’s president and chief executive officer, said in a statement following the downgrade.
Cangemi also said that the bank has ample liquidity and has been growing its deposits and that the downgrade wasn’t expected to have a material impact on the lender’s contractual arrangements.
Sales of assets, even at a discount, can sometimes help banks get ahead of greater problems facing the industry, loan buyers said. But they also expect commercial-real-estate lenders to endure a challenging few years, especially as a wall of old debt comes due at a time of higher interest rates.