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A strip mall mogul accused of running a botched scheme to manipulate the price of WeWork Inc. shares was arrested on fraud charges over what prosecutors called a phony $77 million tender offer, Bloomberg News reported. Jonathan M. Larmore, of Punta Gorda, Flo., was taken into custody yesterday and was scheduled to appear before a magistrate judge in Fort Myers in the afternoon. He announced the fake offer late last year, shortly before the co-working company filed for bankruptcy, to manipulate its stock price, according to a statement by Manhattan U.S. Attorney Damian Williams. News of the offer led investors to buy WeWork stock at inflated prices during after-hours trading, as Larmore tried to drive up the value of his WeWork call options and shares, according to the U.S. But he mistimed his announcement of the false offer, prosecutors say, and his options were worthless. The case is the latest example of criminal charges over alleged attempts to manipulate stock through fake tender offers, which can spike the shares and bring traders a fast profit. In 2018 a Virginia man was sentenced to two years in prison for a scheme to manipulate securities of Fitbit Inc. In 2016 a Bulgarian man was arrested and charged on US claims that he used fake tender offers to rig the market for Rocky Mountain Chocolate Factory Inc. and Avon Products Inc.

Treasury Secretary Janet Yellen said she expects that a moderation in the rise of housing costs will help deliver lower inflation in 2024, Bloomberg News reported. Shelter costs carry the biggest weighting in the consumer price index, accounting for about a third. They made an outsized contribution to overall inflation in 2023, and that’s continued this year despite reports that new lease agreements have increased at a much slower pace or in some cases even declined. “It takes a while for that to filter into the CPI,” Yellen said Wednesday in an interview with Fox Business. “And so I have every expectation that the single largest contributor to inflation is going to be moving down over this year.” Government data released Tuesday showed that a key measure of inflation topped economists’ expectations for a second straight month in February. Though many goods continued to show price declines, a jump in gasoline helped drive the overall consumer price index 3.2% higher than a year ago. The core measure, which excludes food and energy and is viewed as a better guide to underlying price trends, rose 3.8%.

New York Community Bancorp Inc. completed a deal to raise more than $1 billion of capital through an equity investment by backers led by former U.S. Treasury Secretary Steven Mnuchin, Bloomberg News reported. The troubled commercial real estate lender, which announced the agreement last week, said in a statement late Monday that the transaction has closed and that Mnuchin was appointed lead independent director. The investment was anchored by his Liberty Strategic Capital, as well as Hudson Bay Capital and Reverence Capital Partners. “We believe that this transaction has strengthened the company’s balance sheet and liquidity position and look forward to working with management and the dedicated workforce of NYCB to deliver shareholder value,” Mnuchin said in the statement. The transaction included an issuance of common stock at $2 per share to the investors, as well as some convertible preferred stock. The cohort will own about 40% of the firm on a fully diluted basis, according to the statement, and the investors will also get warrants. The company also plans to ask shareholders to amend its certificate of incorporation to call for a minimum reverse stock split of three for one, in part to “make the bid price more attractive to a broader group of institutional and retail investors.” The stock closed at $3.25 on Monday. Joseph Otting, a former comptroller of the currency, will be NYCB’s chief executive officer, the firm had announced last week, replacing Alessandro DiNello, who will return to his role as non-executive chairman. Along with Mnuchin, Otting and two other investors will join the company’s board.

Deutsche Bank's chief executive officer said on Tuesday that he expects the current crisis in commercial real estate to continue in 2024 and that provisions for loan losses will be at the upper end of its projected range, Reuters reported. There won't be "overall big relief" to the challenges facing commercial real estate in 2024, CEO Christian Sewing said. Deutsche Bank is Germany's largest lender and also has the most in outstanding loans to the commercial real-state sector among its domestic competitors, data show. In the United States, where Deutsche Bank is also active, commercial property has been under particular pressure due to high interest rates and office vacancies. "There is no deterioration but there is also no ... signs of improvements," Sewing said of the sector. He said that the bank was working on early extensions and restructurings with borrowers. Deutsche Bank has forecast that provisions for credit losses in 2024 would be 25 to 30 basis points of loans. Read more.

ABI will present a program April 30-May 2 that will address CRE exposure: the 2024 Distressed Real Estate Symposium, to be held in Ojai, Calif. Click here to register!

New York Community Bancorp's turnaround will likely take a long time as analysts expect profits to remain under pressure from the lender's efforts to boost reserves for potential bad loans in its commercial real estate portfolio, Reuters reported. This week's $1.05 billion capital raise has helped stem the rout in its stock and assuage near-term worries, but exposure to New York's rent-controlled multi-family properties — apartment buildings with more than four units — remains an overhang. Loans tied to multi-family properties, NYCB's primary focus for five decades, made up 44% of its $84.6 billion portfolio as of Dec. 31. Nearly 8.3% of such loans were "criticized", meaning at higher risk of default, the bank disclosed in January. "We are somewhat encouraged that overall credit quality trends could remain manageable in the near-term, though we would expect the company to seriously examine reserve levels for adequacy," analysts at RBC Capital Markets said in a note. The multi-family portfolio includes properties subject to rent control regulations, which limit landlords' freedom to increase rents at a time when borrowing rates remain high. Office loans accounted for 4% of the total portfolio, NYCB said. More than half of the office portfolio is in Manhattan, where the vacancy rate is 15%, according to Moody's.

Commercial real estate lender New York Community Bancorp received an equity investment of more than $1 billion, gaining a vote of confidence in the struggling lender from investors including former US Treasury Secretary Steven Mnuchin, Bloomberg News reported. The capital injection was led by Mnuchin’s Liberty Strategic Capital, Hudson Bay Capital and Reverence Capital Partners, NYCB said in a statement Wednesday, confirming an earlier Bloomberg News report. The shares erased an earlier plunge after the announcement. “In evaluating this investment, we were mindful of the bank’s credit risk profile,” Mnuchin said in the statement. “With the over $1 billion of capital invested in the bank, we believe we now have sufficient capital should reserves need to be increased in the future to be consistent with or above the coverage ratio of NYCB’s large bank peers.” NYCB also named Joseph Otting, the former comptroller of the currency, as its new chief executive officer. Otting replaces Alessandro DiNello, who became CEO on Feb. 29. DiNello will stay on as non-executive chairman. Liberty, which counts Saudi Arabia’s Public Investment Fund among its backers, will invest $450 million. Other investors include Hudson Bay at $250 million and Reverence at $200 million, according to the statement. In connection with the deal, NYCB will add four new directors to its board, including Mnuchin and Otting.

The U.S. Treasury Department on Tuesday announced new steps to boost the supply of affordable housing by unlocking billions of dollars in unspent COVID-19 aid funding to state and local governments to support a wider array of housing projects, Reuters reported. In the biggest of the moves, the Treasury said it would allow state and local governments to use unspent funds from the $350 billion State and Local Fiscal Recovery Fund to support housing projects serving families earning up to 120% of the area's median income, a big jump from 65% previously. These funds can also now be spent on projects that meet the terms of one of a dozen or more federal housing programs as well as those supported by government mortgage enterprises Fannie Mae and Freddie Mac to house essential workers such as teachers, firefighters and nurses. This will open up a significantly wider array of housing projects eligible for support.

Bond investors have punished banks with heavy exposure to commercial real estate, potentially adding even more pressure to the lenders’ profits as Wall Street scrambles to assess how widely pain in property debt will spread through the financial system, Bloomberg News reported. Banks with high levels of commercial real estate exposure tend to have bonds that trade at relatively wider spreads, according to an analysis by Barclays Plc credit strategists led by Dominique Toublan. In some cases, spreads on those bonds have been widening, even as investors have broadly piled into financial industry bonds in pursuit of higher-yielding securities. Barclays’ Toublan wrote in an email that commercial real estate-related angst explains about 80% of issuer-level spreads in the U.S. investment-grade debt market, with lenders with lower exposure generally trading tighter. The differentiation in pricing underscores how investors are being selective as they snatch up bonds, a factor that could lift funding costs for banks already under pressure from setting aside money for potential real estate losses. Some of the regional lenders with portfolios weighted toward underperforming commercial real estate markets include Bank OZK, Valley National Bancorp and Webster Financial Corp., according to Morgan Stanley. Barclays says that Webster has commercial real estate exposure equal to more than 250% of its capital. The Stamford, Connecticut-based bank has bonds due 2029 that traded at spreads of nearly 200 basis points, or 2 percentage points. Those spreads have been widening since late January. Read more.

ABI will present a program April 30-May 2 that will address CRE exposure: the 2024 Distressed Real Estate Symposium, to be held in Ojai, Calif. Click here to register!