- HomeStreet Bank sold a $990M multifamily loan portfolio to Bank of America for $906M, equivalent to 92% of the loans’ principal balance.
- The 8% discount reflects current interest rates and low loan yields, aligning with recent trends in CRE debt sales.
- Proceeds will reduce high-interest debt, fund a new strategic plan, and aim to restore profitability in 2025.
- Market discounts for portfolios are smaller than expected, challenging the narrative of significant distress in CRE.
HomeStreet Bank’s parent company, HomeStreet, Inc. (HMST), agreed to sell a $990M multifamily loan portfolio to Bank of America (BAC) at a discount of approximately 8% off par value, as reported by GlobeSt. HomeStreet Chairman and CEO Mark Mason said the portfolio comprised lower-yielding, long-duration loans. The transaction reflects prevailing interest rate conditions and a strategic shift to bolster the bank’s financial health.
The $906M in proceeds will be used to pay down high-interest debts, including Federal Home Loan Bank advances and brokered deposits, and fund a new strategic plan for profitability in early 2025. Despite the sale, HomeStreet will continue servicing the loans for Bank of America.
Trends in CRE Loan Sales
The HomeStreet transaction mirrors other recent CRE portfolio sales with modest discounts:
- Valley National Bank sold nearly $1B in CRE loans to Brookfield Asset Management (BN) at just a 1% discount, retaining servicing responsibilities.
- These relatively small write-downs suggest that banks are navigating current conditions better than anticipated, avoiding the steep discounts expected by distressed investors.
This trend contrasts predictions of widespread market distress due to higher interest rates and tightening liquidity.
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What It Means for Investors
The lack of significant discounts in CRE loan sales indicates resilience among banks and financial institutions. Despite earlier predictions of massive distressed sales, current transactions show modest write-offs, challenging investors who raised capital anticipating significant opportunities in deeply discounted CRE debt and properties.
Nathan Stovall of S&P Global Market Intelligence observed that institutions that raised funds must deploy capital, even in a less favorable market. This dynamic has kept CRE pricing relatively stable, with few massive write-downs.
Looking Ahead
HomeStreet’s strategic repositioning through the loan portfolio sale is emblematic of broader trends in the financial sector. CRE investors seeking substantial discounts may need to recalibrate expectations as banks continue to manage portfolios more effectively than initially forecasted.
The market’s trajectory in 2025 will depend on interest rate trends, debt refinancing conditions, and broader economic performance.
