It’s bidding day! The FDIC is selling Silicon Valley Bank and Signature Bank, and the bids are due today. Only bidders with existing bank charters (and a little luck o’ the Irish) will be given access to the bank’s financials, when deciding whether to make an offer. This gives existing lenders the upper hand on private equity firms. If whole sales do not materialize, the banks will be sold in parts.
SVB and Signature were first to be run under water. Other banks, including First Republic and Credit Suisse, were headed for the same fate before being tossed an expensive lifeline. First Republic will receive a $70 billion rescue package pooled together by 11 other banks and the Federal Reserve. Republic’s share price dropped more than 60%, before receiving additional funding. Credit Suisse received a similar $54 billion lifeline on Thursday from Switzerland’s Central Bank, after its stock dropped 24% on Wednesday. Moody’s rating agency is currently reviewing Zions Bancorporation, Western Alliance, Comerica, UMB and Intrust, as well.
How might credit doubt and bank runs affect commercial real estate investors? Up until last week, our biggest challenge had been navigating the complications of increasing interest rates. Now there is new uncertainty in real estate finance as lenders are likely to tighten their underwriting. Debt will get more expensive and harder to come by. The entire situation is reminiscent of the Great Recession and guaranteed to constrain credit. Luckily, the panic is not as bad as that moment in history and the Federal Reserve’s response was swift and organized. Also, the Fed will likely cease rate hikes for the time being.
If we can help you navigate these challenging times, please don’t hesitate to reach out.
Richter, Joseph, et al. “Daily Beat – Commercial Real Estate News.” Daily Beat, 25 Sept. 2019, www.dailybeatny.com.
Young, Celia. “First Republic Scores $30 Billion Rescue Deal from Lending Rivals.” Commercial Observer, Commercial Observer, 16 Mar. 2023, https://commercialobserver.com/2023/03/first-republic-30-billion-rescue-deal/.
Schenke, Jarred, et al. “National Commercial Real Estate News & Trends.” Bisnow, https://www.bisnow.com/national.