Donald Glascoff’s (left) Park Avenue Bank has been shut down with its deposits sold to Valley National Bank, headed by Gerald Lipkin (right)

Federal and state regulators have shut down the Park Avenue Bank and sold its deposits to Valley National Bank, marking the second seizure and asset sale of a New York City bank in two days. The State Banking Department closed the bank citing ineffective management and inadequate capital as well as a high volume of non-performing loans. “We determined that the management team’s inability to address the
problems in the consent order led to the bank being critically
undercapitalized,” said Richard Neiman, supervisor of the state Banking
Department. “This issue coupled with the high volume of non-performing
loans held by Park Avenue meant that the bank could no longer operate
in a safe and sound manner.” The FDIC entered into a loss-share transaction on $379.8 million of Park Avenue Bank’s assets. Park Avenue Bank reported assets of $520.1 million and deposits of $494.5 million, according to the FDIC. The bank’s four branches will reopen as branches of Valley National Bank. Last night, state regulators shut down and sold the assets of LibertyPointe Bank, the struggling lender owned by Brooklyn-based developer Shaya Boymelgreen. Asked whether the collapse of two small New York banks was a start of a new trend, FDIC officials acknowledged that commercial real estate lending is playing a larger role in bank failures. [more]

Developer Shaya Boymelgreen

The New York State Department of Banking shut down developer Shaya Boymelgreen’s struggling LibertyPointe Bank, and the Federal Deposit Insurance Corporation sold its assets to Wayne, N.J.-based Valley National Bank, marking the first New York state bank seizure this year. The shut down — which will cost the FDIC $24.8 million — comes nine months after federal and state regulators issued a cease and desist order against the lender for using unsound banking practices, including operating with an excessive amount of commercial real estate loans. “It is a top priority of the New York State Banking Department to
protect the deposits of consumers of New York State banks and ensure
the safety and soundness of the banking system in the state,” said
Richard Nieman, state superintendent of banks, in a statement. Valley National Bank officials said the bank assumed about $200 million
in deposits and received about $180 million in loans, which are subject
to a loss-share agreement with the FDIC. The bank also received $20
million in cash and other assets. [more]

When you travel to Las Vegas you can make a bet on nearly every sporting event. Perhaps in 2010, the odds makers in Sin City will allow people to wager on the number of failed banks nationwide. Few would have expected a total of 140 United States banks to fail in 2009, up from 25 in 2008 and a mere three in 2007, according to Zacks Investment Research. The Federal Deposit Insurance Corporation Chairman Shelia Bair stated that the worst of the bank failures are not over yet and bank failures will accelerate this year. During the first 15 days of the year alone, four banks — in Utah, Minnesota, Illinois and the State of Washington — were closed by the FDIC. Last year, some of the biggest failures were banks which were involved extensively in providing real estate financing — Corus Bank, BankUnited, AmTrust Bank to just name a few. And today, many of the banks under review are financial institutions which were intimately involved in commercial real estate financing. Locally, a number of New York and New Jersey financial institutions are under cease-and-desist or formal agreement with the government to raise capital and discontinue commercial real estate lending. [more]

As the fall of 2009 comes to a close, many of the commercial real estate lenders continue to limit their exposure to financing for real estate. The buzzword for 2009 is “extend and pretend,” whereby a bank extends the term of a loan to a later date. The legendary Samuel Zell, chairman of Equity Group Investments, the keynote speaker at the NYU Capital Markets conference Nov. 19, stated that “our government has become the bailout city. If a loan is kept current, banks will ‘pretend and extend.’” No one is surprised by the “pretend and extend concept,” especially if you had the opportunity to gain insight from the Federal Reserve’s October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices and hear the comments made by Ben Bernanke, chairman of the Federal Reserve, in a speech at the Economic Club of New York Nov. 16. The Fed’s Opinion Survey addresses changes in the supply and demand of loans to businesses and households over the past three months. The results were based upon responses from 57 domestic banks and 23 U.S. branches and agencies of foreign banks. [more]

From the South Florida Web site: Simply put, values of real estate, stocks, companies, individuals, and
most everything were artificially increased by 100 percent or more the
first half of this decade primarily due to increases in real estate
values from speculation fueled by leverage and debt. The painful result
of deleveraging is well underway, as the process of devaluation and
riddance of debt continues. Seventy percent of the U.S. gross domestic
product is generated by American consumers. I’ve recently heard some
pundits say that a “consumer-less recovery” was underway. There is no
such thing. Jack McCabe is CEO of McCabe Research & Consulting in Deerfield Beach, Fla. He is an independent real estate analyst and consultant to major developers, lenders, and investors.
[more]

In hindsight, an early nickname for the Empire State Building seems more like an omen. The building earned the moniker “Empty State Building” in the 1930s, when the city’s real estate market crashed after a boom decade. Built in 1931, it was one of several newer buildings that contributed to the city’s 92 percent increase in inventory during the Great Depression. Though the market cycled through ups and downs after that, the “empty” epithet has continued to haunt the Empire State Building. Even amid the boom, in 2006, the landmarked building’s vacancy rate reportedly stood at 18 percent. Today, the building, at 350 Fifth Avenue at 34th Street, has a vacancy rate of 22 percent, according to Fred Posniak, senior vice president at W & H Properties, the building’s manager. About 45 percent of the current vacancy is intentional, with space
being held off the market for renovation, Posniak said. That translates
to about 270,000 or 280,000 of the building’s 600,000 vacant square
feet. The rest of the vacant space, about 320,000 square feet, is on
the market. More

[more]

Federal regulators have ordered developer Shaya Boymelgreen’s
LibertyPointe Bank to cease and desist from risky lending. According to
an order posted today on the Federal Deposit Insurance Corporation Web
site, the bank had excessively high levels of delinquent loans, was not
setting aside enough funds to deal with loan losses, and had
concentrated too much of its portfolio in commercial real estate
lending. The bank’s $182 million portfolio has about $13 million worth
of non-accruing multi-family loans and $10 million in non-accruing
construction loans. [more]