More U.S. banks will fail as the commercial real estate crash begins to work its way through to lenders’ balance sheets, according to Joshua Pack, co-chief executive officer at Fortress Investment Group LLC, Bloomberg News reported. Fortress has already acquired about $1.5 billion of performing office loans from financial institutions at prices ranging from 50 cents to 69 cents on the dollar, he said in an interview with Bloomberg’s Credit Edge podcast. Lenders are selling at those levels because they fear values have further to fall and want to take the hit now, he said, adding that regulators will merge some banks as they look for solutions to the problem. Though the stress is not systemic, “you’re going to see more of this consolidation and/or liquidation of US banks,” Pack said. “A lot more eggs are going to get broken.” More than $900 billion of debt on US commercial and multifamily real estate will require refinancing or property sales this year as building values fall and credit costs remain much higher than they were when the loans were taken out, according to the Mortgage Bankers Association. Smaller banks are particularly vulnerable after they increased their CRE lending during the pandemic, boosting their market share, and leaving themselves vulnerable to soaring interest rates. Read more.
ABI will be presenting a program that will address CRE exposure: the 2024 Distressed Real Estate Symposium, to be held April 30-May 2 in Ojai, Calif. Click here to register!