📊 Investors Hit Pause in 4Q23 per Burns + CRE Daily Fear and Greed Index. See the full report here.

NYCB Snags Signature’s Assets, Minus CRE Loans

New York Community Bank’s agreement with Signature Bank involves the acquisition of loans, but notably excludes the multifamily mortgages and commercial real estate loans of the distressed financial institution.

NYCB Snags Signature's Assets, Minus CRE Loans

New York Community Bank's agreement with Signature Bank involves the acquisition of loans, but notably excludes the multifamily mortgages and commercial real estate loans of the distressed financial institution.

Together with

Good morning. As the banking industry continues to spiral, Signature Bank’s deposits and loans have been assumed by NYCB’s Flagstar bank, but there is a catch. Houston has a problem with zoning (without calling it zoning). Meanwhile, experts at JPMorgan offer multifamily investors ways to prepare for an impending recession.

Today's edition is brought to you by Aura Health, the all-in-one mental wellness marketplace.

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SAYONARA, SIGNATURE

NYCB to Absorb Signature’s Assets, Excluding CRE Loans

In an effort to calm the turmoil facing US regional banks, New York Community Bank (NYCB) has taken over the deposits and some loans of failing Signature Bank (SBNY).

Raise the flag: NYCB subsidiary Flagstar will take over all deposits, a portion of loans, and 40 bank branches of Signature Bank, which was closed by the New York State Department of Financial Services and appointed FDIC as receiver.

Under the hood: Signature Bank had $110B total assets and $89B total deposits, much of it landlords’ money, as of Dec. 31. Its $35.7B real estate loans accounted for nearly half of its total lending. However, not all of Signature's accounts were sold in the deal.

➥ THE TAKEAWAY

Some exclusions may apply: NYCB's recent agreement does not cover Signature's commercial real estate portfolio, which was worth $35B as of the end of 2022, and their multifamily loan book valued at $19.5B. This omission may suggest concerns about the performance of those loans, which mainly cover the distressed rent-stabilized sector, or it could be because NYCB did not want to have an excessive focus in that particular area.

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BUFFER ZONE

Houston: Zoning By Any Other Word is Still Zoning

Houston has long been revered as developer-friendly and pro-business due to few zoning laws. The Houston City Council voted unanimously in January to approve an ordinance amending its residential “buffering” amid concerns over the impact of CRE near homes.

The divisive details: The updated ordinance requires a 15 ft “buffer” for developments taller than 65 ft that are near single-family and small-scale, 3-8 unit multifamily residences. This expanded the previous code to include all single-family home sites regardless of size.

Don’t say the “z” word: This buffering ordinance is the latest edition in the city’s history of enacting land-use regulations without using the “z” word. The lack of zoning has resulted in other legal and governance mechanisms, such as ordinances, a building code, and deed restrictions to impose rules that function as de facto zoning.

Slippery slope: Houstonians have repeatedly rejected every attempt to adopt comprehensive zoning (or naming it out loud). To combat the trend, the Houston City Council continues to add regulations on land use without using the dreaded “z” word.

➥ THE TAKEAWAY

Baby steps: Houston has no plans to introduce traditional zoning, but developers are welcoming new regulations. And despite the taboo “z” word, Houston has been progressing toward comprehensive zoning through ordinances and regulations. The city relies on these unique mechanisms to address flood zone issues rather than calling it zoning.

🌐 Around the Web

📖 Read which cities make the top 10 list for most empty office buildings, why vacancy rates vary by city, and where occupancy rates are on the rise.

🖥️ Watch this video about the pressures facing the CRE market, why many were surprised by the higher rate environment, and more with Scott Rechler, CEO of RXR Realty.

🎧 Listen to Chad Cook, founder of Quadrant Investment Properties, talk about the edge in developing urban office properties, how to create in-demand projects, and what happens to offices that aren't in demand.

BE PREPARED

How Multifamily Investors Can Prepare for a Recession

Experts at JPMorgan (JPM) have doubled down recently on their belief that we’re still heading for a recession in 2023. The good news is they’re looking at a relatively short and mild one.

The place to be: Al Brooks, Head of CRE for JPMorgan, believes investors should be deep in multifamily assets during a recession. Although multifamily may still feel an impact, Brooks believes the sector is in a much better spot to weather the downturn compared to other, riskier property types.

Unintended benefits: A recession could benefit multifamily in a few ways. First, costs may drop as construction slows, allowing developers to build for less. Second, existing home sales should continue to decrease, which would lead to more renters that drive up multifamily demand.

Prepare for the worst: To become recession-ready, CRE investors can start by streamlining operations to identify problemematic parts of their portfolios. They can also save time and money by solving for inefficiencies.

➥ THE TAKEAWAY

Hope for the best: If JPMorgan experts are right about the impending recession, multifamily investors should remain hopeful. As long as investors position themselves wisely, the multifamily sector should be able to weather the storm. Most importantly, investors need to re-position themselves to be buyers in tough times rather than sellers.

📰 Daily Picks
  • Whirlwind week: Global real estate leaders pondered the future of CRE at Mipim ‘23, the world’s largest real estate conference.

  • Canceled conversion: A Midtown Manhattan office building, previously planned for a condo conversion, is on sale for $50M.

  • Special servicing: Blackstone (BX) stopped payments on a $325M loan on its Hughes Center office campus in Las Vegas.

  • Pension pullback: U.S. pension and investment funds are part of a larger wave of institutional investors pulling back on private equity.

  • Talent wars: The pandemic, economic uncertainty, demographic shifts, and the changing nature of work have created a unique situation for CRE employers looking to nab top talent.

  • Deal of the day: UBS Group AG (UBS) has bought Credit Suisse, making it the fourth-largest CRE lender in the world.

  • Layoffs looming: Following November cuts, Amazon (AMZN) plans to lay off another 9,000 workers in the coming weeks—which still looks better than what Meta (META) recently did.

  • Pros and cons: As workers are called back into the office, they are weighing the pros and cons of cheaper housing vs. longer commutes.

🤝 Deals & Dealmakers
  • Dodging another bullet: WeWork (WE) reached a deal with SoftBank and other investors to significantly reduce its debt and secure new financing.

  • Now up for sale: Penn State puts two Philadelphia Navy Yard buildings totalling 65.1 KSF up for sale.

  • Latest Series A: Engrain, a vendor of interactive mapping and data visualizations, closed a $12M Series A funding round.

  • Perfect pairing: A JV between Lingerfelt and Partners Group closed on a four multi-tenant logistics portfolio in the Richmond MSA.

  • Rally for Raleigh: A Dallas real estate company has paid $74M for 488 KSF of industrial space outside Raleigh.

  • Follow the science: Taconic Partners is moving forward with plans to develop a Life Sciences lab on Manhattan’s Upper East Side.

  • Breaking a sweat: A Kansas City-based REIT made a deal to expand its portfolio of fitness and wellness centers into NYC.

📈 Chart of the Day

Source: Rosen Report

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