{"id":44544,"date":"2023-08-04T14:54:16","date_gmt":"2023-08-04T18:54:16","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/dont-wait-for-fed-rate-cuts-says-debt-buyer-to-banks-holding-distressed-commercial-real-estate\/"},"modified":"2023-08-04T14:54:18","modified_gmt":"2023-08-04T18:54:18","slug":"dont-wait-for-fed-rate-cuts-says-debt-buyer-to-banks-holding-distressed-commercial-real-estate","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44544","title":{"rendered":"Don\u2019t wait for Fed rate cuts, says debt buyer to banks holding distressed commercial real estate"},"content":{"rendered":"
\n

One person\u2019s trash is another\u2019s treasure, especially when it comes to piles of underwater commercial real-estate loans parked at small and medium-size banks.<\/p>\n

The regional banking crisis got its spark in March with the shocking collapse of Silicon Valley Bank and Signature Bank, expanding in May with First Republic\u2019s takeover by JPMorgan Chase. <\/p>\n

\n

Their demise gave regulators a black eye for not noticing \u201cred flags\u201d or acting sooner on growing risks at lenders as the Federal Reserve jacked up interest rates.<\/p>\n

Pat Jackson, founder and chief investment officer at Sabal Investment Holdings in Irvine, Calif., thinks community and regional banks piled up with underwater commercial real-estate loans should get ahead of their problems before they risk getting worse.<\/p>\n

\u201cWe can take it in one fell swoop,\u201d Jackson said of Sabal\u2019s ability to buy bulk loan pools from distressed banks, including as one of the biggest buyers of assets seized by the Federal Deposit Insurance Company in the past decade.<\/p>\n

\u201cOur message to investment banks being hired by bank boards, whether it\u2019s to raise capital or find a merger candidate, is that you need a third-party capital source that\u2019s part of the solution,\u201d he said. \u201cWe can take the assets off your books that you don\u2019t want,\u201d he said. \u201cWe are those guys.\u201d<\/p>\n

Sales of loan portfolios from banks already have been happening quietly outside of FDIC takeovers. Several took place ahead of the sale of PacWest Bancorp
\n PACW,
\n +1.39%<\/bg-quote>
\n of Los Angeles to Banc of California
\n BANC,
\n +1.78%<\/bg-quote>,<\/span>
\n including a deal in early June for Kennedy-Wilson
\n KW,
\n -0.09%<\/bg-quote>
\n to buy $5.7 billion of floating-rate construction loans from PacWest.<\/p>\n

\u201cBanks are starting to feel the pressure,\u201d Jackson said of increased regulatory scrutiny since Silicon Valley Bank\u2019s collapse. \u201cThey don\u2019t want to be called onto the carpet again.\u201d<\/p>\n

Related<\/strong>: FDIC approves proposed capital requirements for U.S. banks<\/p>\n

JPMorgan Chase & Co.\u2019s
\n JPM,
\n -0.24%<\/bg-quote>
\n CEO Jamie Dimon this week criticized proposed stricter capital requirements for banks in a CNBC interview, while calling the U.S. credit-rating downgrade to below AAA \u201cridiculous.\u201d <\/p>\n

The Fed\u2019s July Senior Loan Officer Opinion Survey showed tighter lending standards across the board since 2022, given recent bank failures, recession fears and the central bank\u2019s short-term rate at its highest level in 22 years.<\/p>\n

\u201cTightening\u00a0standards has often preceded a rise in delinquency rates, although with several quarters\u2019 delay, and we expect CMBS and CRE delinquencies to continue to\u00a0rise,\u201d a Barclay\u2019s credit team led by Lea Overby wrote in a midweek client note.<\/p>\n

The team was referring to rising delinquencies in loans for bond deals known as commercial mortgage-backed securities, but also other commercial real-estate loans. There also are worries around the $1 trillion wall of commercial real-estate loans set to mature through the end of 2024.<\/p>\n

Fed Chairman Jerome Powell frequently has said the central bank likely needs to keep rates high for some time to ensure high inflation keeps heading down to the central bank\u2019s 2% annual target, and doesn\u2019t rear back up.<\/p>\n

An elevated 10-year Treasury yield,
\n BX:TMUBMUSD10Y
\n which briefly jumped to almost 4.2% this week after Fitch\u2019s downgrade of the U.S. and a fresh $1 trillion Treasury borrowing estimate for the third quarter, could spell even costlier borrowing conditions in the commercial real-estate industry. Stocks
\n SPX<\/p>\n

DJIA
\n were headed for weekly losses.<\/p>\n

Jackson estimates that Sabal snapped up $6 billion to $8 billion of distressed commercial real-estate loans between 2009 and 2015, sometimes at prices for portfolios as low as 40 cents on the dollar. Much of that came from FDIC sales after banks failed. <\/p>\n

\u201cDon\u2019t wait around with the hope that things get better,\u201d Jackson said, who raised an opportunity fund during COVID and continues to raise funds to buy distressed commercial real estate. <\/p>\n

Read:<\/strong> SVB and First Republic failures are just the start of a lengthy banking crisis \u2014 if you believe 800 years of history<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

One person\u2019s trash is another\u2019s treasure, especially when it comes to piles of underwater commercial real-estate loans parked at small and medium-size banks. The regional banking crisis got its spark in March with the shocking collapse of Silicon Valley Bank and Signature Bank, expanding in May with First Republic\u2019s takeover by JPMorgan Chase. Their demise […]<\/p>\n","protected":false},"author":1,"featured_media":44545,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-44544","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nDon\u2019t wait for Fed rate cuts, says debt buyer to banks holding distressed commercial real estate | iFintechWorld<\/title>\n<meta name=\"description\" content=\"One person\u2019s trash is another\u2019s treasure, especially when it comes to piles of underwater commercial real-estate loans parked at small and medium-size\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=44544\" \/>\n<meta property=\"og:locale\" content=\"en_US\" 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