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Commercial Real Estate & Bank Decision Making – Why Does it Seem Stuck-Is Private Capital the Answer?   Trends: · More than 280 US banks with nearly $900 billion in total assets are at risk of needing capital because of high levels of commercial real estate and losses attributable to interest rates, according to an analysis by Klaros Group, as reported by Hugh Son of CNBC. · According to Hugh Son of CNBC, Brian Graham, co-founder of Klaros Group, says that behind the scenes, regulators are issuing confidential orders to the banks to improve capital levels and staffing. · The Klaros Group analysis does comment that few banks are insolvent, so a private capital infusion could better address the issue, not an FDIC bailout – exactly what happened at New York Community Bank (NYCB). · Jerome Powell recently told the Senate Banking Committee, “We have identified the banks that have high commercial real estate concentrations, particularly office and retail and other ones that have been affected a lot,” and added, “This is a problem that we’ll be working on for years more, I’m sure. There will be bank failures, but not the big banks.” · Loss rate for apartment loans last year reached 16%, up from around 5% in the prior two years, as noted by MSCI Inc. in their US Capital Trends Report, with continuing upward momentum. Takeaways: · Good news is banks have begun to take provisions; however, the problems aren’t going away and there’s a need for liquidity. · Banks are better capitalized and can withstand this turmoil, but need solutions. · There’s no shortage of liquidity and solutions in the market. · Regulators are quietly instructing them on what to do. · Why are they waiting? · In many instances, extend and pretend won't work – some properties are just worth less than the debt or obsolete, and a couple or three 25 basis point interest rate cuts won’t change the outcome. · Restructuring debt and property needs to account for the fact that these factors have duration.   In navigating through these challenges, it’s important to understand all the complexities of the current capital markets, assets, and loans. EOS Real Estate has the multi-disciplinary expertise to guide you through to resolution.   We can help. #CRE #realestatefinance #assetmanagement #distresseddebt #apartmentbuildings #multifamily #officebuildings #maturitywall

Major European banks have been cutting their lending to commercial property and have half the exposure of their U.S. peers, making U.S. lenders more vulnerable as office prices plunge further, Morgan Stanley said on Tuesday, reported SaltWire Network. "Commercial real estate (CRE) markets are in the grip of the biggest downturn since the 2008-9 financial crisis as higher borrowing costs and a spike in vacancy rates driven by more people working from home hit demand for office space." "Morgan Stanley analysts said in a research note that regional U.S. banks looked most exposed, alongside German regional lenders - which unlike bigger European banks had been increasing their exposure." "Overall, we think CRE-related issues will not translate into a systemic event, but rather a manageable earnings impact localized to a small set of banks," the analysts wrote." https://lnkd.in/gkWMpBRJ #unitedstates #office #european #bankexposure

An increasing number of US banks are finding themselves subject to heightened capital requirements as federal regulators zero in on commercial real estate. Already on high alert following the large bank failures in 2023, recent events such as New York Community Bancorp Inc.'s woes as well as increasing commercial real estate (CRE) credit issues have regulators acting out of an abundance of caution. Banks with high CRE concentrations, and particularly those above the regulatory guidance to not exceed 300% of CRE to total risk-based capital, are being required to hold more capital. #usbanks #CRE #capitalrequirement

Navigating the Storm: US Regional Banks and the Real Estate Dilemma 🔍 Industry Insight: The US regional banking sector is facing mounting challenges due to its exposure to commercial real estate. The aftermath of the Silicon Valley Bank collapse and recent developments at New York Community Bancorp highlight the sector's vulnerability to office and multifamily property loans. At Default Research Inc., we're examining the potential impact of these challenges on the banking industry and the real estate market. Let's discuss strategies for resilience and recovery in these turbulent times. #FinancialSector #RealEstateMarket #EconomicImpact https://reut.rs/3uD1E2P

More than a year out from the regional banking failures of 2023, we expect negative press reports to continue as the true financial impact will likely stretch over a period of years. The silver lining is that banks and other lenders have time to address underlying issues. https://lnkd.in/gXUMaqRr

Are we standing at the precipice of a banking crisis triggered by the commercial real estate downturn? 📉 This question demands urgent, informed insights.💡 Join us for an information-packed webinar led by Neal Bawa as he navigates the intricate interplay between banking and real estate. By tuning in, you’ll also learn valuable information about certain asset classes that shine as beacons of stability and potential growth. 🧐 Are Banks Facing a Crisis from the Commercial Real Estate Downturn? 🤔 Register for this webinar today! 👉https://lnkd.in/gupeZxbR Neal delivers a revealing analysis, shedding light on over 280 banks at risk due to their significant exposure to commercial real estate loans. He pinpoints the most vulnerable institutions and delves into the strategies they're employing to manage and reduce this risk. Neal's presentation will explore: ✅ The FED’s cautious dance with inflation and interest rates and the delicate but hopeful economic outlook 🔮 ✅ The banking sector's balancing act and a precarious situation for the challenging commercial real estate landscape ⚖️ ✅ Why the era of cheap money is officially over 🥲 ✅ Why multifamily remains a shining star despite economic conditions 🌟 Register your spot today! 👉https://lnkd.in/gupeZxbR

Are we standing at the precipice of a banking crisis triggered by the commercial real estate downturn? 📉 This question demands urgent, informed insights.💡 Join us for an information-packed webinar led by Neal Bawa as he navigates the intricate interplay between banking and real estate. By tuning in, you’ll also learn valuable information about certain asset classes that shine as beacons of stability and potential growth. 🧐 Are Banks Facing a Crisis from the Commercial Real Estate Downturn? 🤔 Register for this webinar today! 👉https://lnkd.in/gNydjS72 Neal delivers a revealing analysis, shedding light on over 280 banks at risk due to their significant exposure to commercial real estate loans. He pinpoints the most vulnerable institutions and delves into the strategies they're employing to manage and reduce this risk. Neal's presentation will explore: ✅ The FED’s cautious dance with inflation and interest rates and the delicate but hopeful economic outlook 🔮 ✅ The banking sector's balancing act and a precarious situation for the challenging commercial real estate landscape ⚖️ ✅ Why the era of cheap money is officially over 🥲 ✅ Why multifamily remains a shining star despite economic conditions 🌟 Register your spot today! 👉https://lnkd.in/gNydjS72

Bankers beware - the sector is facing even greater headwinds with large exposure to commercial real estate declines. Balance sheet risk is serious, but it can be managed. Let's dive in. 🚨 Good reporting at Fox Business Network about a recent credit downgrade for New York Community Bank (NYCB). Morningstar DBRS’s latest rating adjustment highlights the bank's "outsized" exposure to commercial real estate (CRE), a sector under significant strain due to rising interest rates and the shift towards remote work (and thus impacting occupancy rates). 📉 Context from Other Ratings Agencies This move follows recent downgrades by Fitch and Moody’s, placing NYCB under heightened scrutiny. Fitch’s rating drop to BBB- and Moody’s adjustment to a non-investment "junk" grade Ba2 raise concerns about the bank's liquidity and the potential for declining customer and depositor confidence. 🏢 Sectoral Risks Last week's surprise loss announcement and dividend cut further exacerbated fears, leading to a dramatic drop in NYCB’s stock to its lowest since 2000. Nonetheless, NYCB's management is actively seeking strategies to reassure investors, including the potential sale of loans or non-core assets to improve financial stability. The broader stress on the banking sector is exacerbated by the CRE market weaknesses. With a history stretching back to 1859 and a recent expansion through acquisitions, NYCB's resilience is being tested as it adapts to new regulatory requirements and market realities. 💡 Risk Modeling Solutions Sadly, many banks have lagged far behind the computational frontier in what is possible in modeling potential credit losses, which is required by the OCC Current and Expected Credit Losses (CECL) guidance. The traditional approach simply looks at historical averages for loan portfolios, but there is so much more that's possible. AI methods are sufficiently sophisticated to digest a vast amount of data and provide reliable predictions. Follow Dainamic for more guidance on how to manage balance sheet risk and optimize for growth. #NYCB #CommercialRealEstate #BankingSector #Regulation https://lnkd.in/g_jKgS2r

More than a year out from the regional banking failures of 2023, we expect negative press reports to continue as the true financial impact will likely stretch over a period of years. The silver lining is that banks and other lenders have time to address underlying issues. https://lnkd.in/ezRyp9km

A recent report from J.P. Morgan shows that 44% of loans held by all banks outside of the top 25 are commercial real estate, while the top 25 banks only have 13% exposure to CRE. Any volatility in the commercial real estate market can send ripples across small and mid-sized banks. With uncertainty in the CRE market, it is crucial banks assess their risks and exposure to better manage their books. #CRE #jpmorgan #banks https://lnkd.in/guGmRSmh