Big banks want to some of their commercial real estate loans, but buyers are proving scarce as troubles pile up in the sector, according to report out from Bloomberg this week.
JPMorgan, Goldman Sachs, Capital One, and M&T Bank are among firms trying to whittle down their commercial real debt holdings, sources familiar told Bloomberg this week, but have been struggling to find many interested buyers.
Banks could be willing to sell property loans at a discount as troubles mount in the sector, but some are hesitant to sell off commercial real estate debt at too-low of a price, as that could reignite fears of banking troubles, sources added. As a result, many banks are choosing to hold onto the debt while they seek better offers.
JPMorgan, for instance, has been looking to sell a $350 million loan backed by the HSBC Tower in Manhattan, Bloomberg reported, with the bank offering potential buyers ultra-low interest financing, sources said.
Capital One has also been trying to dump its portfolio of office debt based in New York, sources said, with the company’s chief financial officer stating last month that the bank is seeking to sell $900 million of office loans.
Goldman Sachs has been looking to sell its loans on hotel and apartment buildings, sources added, while M&T Bank is looking to shed a hotel loan.
Experts have been warning of trouble for the commercial real estate sector after the slew of banking failures in early 2023 sparked a rapid tightening in credit conditions on top of higher interest rates spurred by the Fed’s rate hike campaign. That poses trouble for the commercial real estate industry in particular, as there’s around $1.5 trillion in CRE debt that’s set to be refinanced over the next three years, much of which could run into trouble as rates stay elevated and property valuations decline.
The risk of foreclosure has also spiked as late payments pile up on commercial real estate builders. That could crescendo into a full-blown commercial real estate crisis, some industry veterans have warned, with around $155 billion of commercial real estate debt at risk of default, according to a recent MSCI report.
