New York banks have already lost billions in value thanks to new rent law

Community banks feeling the squeeze of rent reforms

TRD NEW YORK /
Jun.June 13, 2019 05:06 PM
NY Community Bank president Joseph Ficalora (Credit: Facebook)

NY Community Bank president Joseph Ficalora (Credit: Facebook)

While it remains to be seen how Albany’s looming rent reforms will impact New York’s multifamily owners, the anticipated changes are already pummeling their lenders.

New York Community Bank, Signature Bank and Dime Community Bank have lost a combined $2.5 billion in market capitalization since the spring when the debate over rent regulations began to paint an increasingly dimmer picture for multifamily financials.

All three banks saw their stocks decline sharply on Wednesday, the day after the state Senate and Assembly announced they had reached an agreement on a reform bill.

“These stocks have really been hammered — not just yesterday, but also in the last month and a half,” said Peter Winter, a stock analyst who covers NYCB and Signature for Wedbush Securities. “[Rent regulation] has been a large part of it, no question.”

Since their respective highs so far this year in March, NYCB’s stock price is down nearly 23 percent to $9.75, while Signature Bank’s has fallen roughly 16 percent to almost $116 per share. Dime Bank’s stock price has fallen about 8.5 percent to almost $18.50 per share.

Gov. Andrew Cuomo is expected to sign a bill later this week that rolls back 25 years’ worth of landlord-friendly policies governing the city’s roughly 1 million rent-regulated apartments. The new rules would place significant limits on the rent increases landlords can push through by eliminating vacancy decontrol and reforming the Major Capital Improvements and Individual Apartment Improvement programs.

Some of the heaviest reforms proposed over the past few months — including rolling back rents that have been increased in recent years and re-regulating previously de-regulated units — didn’t make it into the final legislation.

Winter said that if those reforms had gone through, they would have eaten into rental buildings’ incomes and negatively impacted the loans backing them. In the near term, banks like NYCB and Signature should be ok under the new rules, he noted, since they only lend on existing cash flows unlike more aggressive banks that lend on projected rent growth.

But the trouble for even the more conservative banks could likely come when property owners look to refinance or take out new loans. If property values remain flat or go down because of the new rules, Winter said, fewer owners would be in the market for large loans, making it harder for banks to grow their portfolios.

“The feeling is that you could see less refi activity and less loan demand just because the ability to increase the rent rolls of these buildings really has been hampered,” he said.

A spokesperson for Signature Bank declined to comment until the final bill was passed, and representatives for NYCB and Dime Bank were not immediately available for comment on Thursday.

But NYCB’s president and CEO, Joseph Ficalora, gave a presentation at Morgan Stanley’s U.S. Financials Conference in New York on Wednesday and offered his take on the new regulations. Lenders who issued large loans — expecting rents to keep growing at rates under the old regime — will likely take a loss, he said.

“Those that we compete with, who lend $20 million more than they should … relying on perceived future value,” Ficalora said, “they will in fact default.”


Related Articles

arrow_forward_ios
Blackstone CEO Steven Schwartzman and Stuyvesant Town (Credit: Getty Images)

After authorities vowed review of Stuy Town deal, Blackstone changes course on vacancies

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

Tete-à-tete with TRD: How landlords are dealing with New York’s new rent laws

Tete-à-tete with TRD: How landlords are dealing with New York’s new rent laws

Greystar CEO Bob Faith and the Parkside Place Apartments in Cary, North Carolina (Credit: Greystar and Apartments)

What Greystar’s belief in multifamily says about the health of the economy

 Isaac Kassirer with the apartments at East 117th Street (Credit: iStock, Google Maps)

Con Ed threatens to pull plug on four Dawnay Day buildings

Rupert Murdoch and David Doctorow (Credit: Getty Images, iStock)

News Corp. looks to Opcity lead-generation to boost real estate services biz

Watch The Real Deal's Erin Hudson explain the breaking broker fee news on CBSN

TRD on TV: Erin Hudson talks broker-fee shocker on CBS

Congresswoman Nydia Velasquez and State Senator Julia Salazar (Credit: Getty Images)

“Good cause” eviction bill amended, advances in Albany

arrow_forward_ios
Loading...