For months the narrative has been that banks would eventually start feeling the heat from the troubled office and multifamily markets.
That time may have finally arrived.
New York Community Bank said it would chop its dividend by 70 percent to boost capital and has hiked loss reserves, expecting more distress in its sizable multifamily portfolio.
The bank’s stock tumbled more than 40 percent when the market opened Wednesday to $5.96 per share, a 23-year low. Shares regained some of that ground by late morning.
CEO Thomas Cangemi said the move to cut distributable earnings would help it comply with regulatory obligations. Its acquisition of Signature Bank’s commercial loans last year “catapulted” it from a regional lender to a Category IV bank with over $100 billion in assets.
“This [decision] was not made lightly,” Cangemi said of the dividend cut on a Wednesday morning earnings call, but “NYCB remains well capitalized.”
Banks with a high concentration of commercial real estate loans have faced scrutiny from regulators in recent weeks, given the potential that distress in the sector could trigger subsequent failures, the Wall Street Journal reported.
The pinch is being felt all over, most notably in Chicago and its suburbs.
A pair of distressed suburban Chicago office properties that hit the auction block recently received no bidders. Instead, the buildings ended up back in the hands of the lenders who called for the sales.
Prime Finance, the lender for the Schaumburg Towers at 1400 and 1450 American Lane, secured the properties after no one else matched the minimum bid of $75 million.
Meanwhile, lenders are seizing the site of a failed River North high-rise project.
A joint venture of New York-based Madison Realty Capital and Arena Investors will take control of the property at 42 and 44-46 East Superior Street, following a sheriff’s sale in which no bidder met the $7.5 million minimum.
The legal battle dates back to over three years ago, when lenders initiated foreclosure proceedings, alleging that the potential developers — New York attorney Jeffrey Laytin and Chicago investor Jason Wei Ding — defaulted on a $22 million loan.
Laytin and Ding wanted to build a 60-story condominium and hotel tower, but it never got off the ground.
Also in Chicago, Slate Asset Management filed two foreclosure complaints against California-based Shopoff Realty on two office buildings, seeking almost $25 million for alleged missed payments and interest, plus $14 million in damages for breach of contract.
The buildings span a combined 170,000 square feet, at 224 North Des Plaines Street in the Fulton River District, and 900 North Franklin Street in River North.
Shopoff has owned them since 2016 and refinanced with Slate in April 2022.
Office isn’t the only troubled sector in the Windy City. A 200-unit South Loop apartment building is now facing the city’s biggest multifamily foreclosure in years.
Elsewhere in the news…
Debt collector trims lease at Melohn’s distressed Loop tower
Edge Principal Advisors defaults on $39 million loan tied to Culver City office
LA apartment owners feel debt pain