Valley National Bank is the latest financial institution reducing its exposure to the real estate sector.
The New Jersey-based entity of Valley National Bancorp sold nearly $1 billion worth of property loans to Brookfield Asset Management, Bloomberg reported. Brookfield received 1% discount on the acquisition.
The contractual balance on the loan portfolio is $925 million, according to a release about the sale. All but about $100 million had been identified and transferred to be held for a sale by the end of the third quarter.
Valley Bank will continue customer-facing servicing duties on the loans.
In a statement, Valley Bank CEO Iran Robbins said the bank had been monitoring loan-sale opportunities throughout the year. The bank expects to recognize an “incremental” net loss on part of the debt and transaction costs in the fourth quarter.
Valley Bank is a regional bank with more than $62 billion in assets, operating in New York, New Jersey, Florida and beyond. As other banks retreated from real estate, Valley Bank emerged as a critical lending lifeline in New York City, working with both midsized landlords and institutional players.
As of the summer of 2022, Valley Bank was New York City’s 12th-largest real estate lender. Between July 2021 and July 2022, Robbins’ bank issued nearly $850 million across over 350 loans.
Valley Bank’s exposure to real estate became something of a calling card. At one point last spring, the bank ranked atop S&P Global’s list of banks exceeding regulatory guidance on commercial real estate loan concentration. As of December 2022, its commercial real estate loan-to-capital ratio was 439.7 percent, well above the 300 percent threshold regulators recommend.
Where Valley Bank once ebbed from its counterparts, it now seems to be moving in lockstep. Last month, Deutsche Bank completed the sale of $1 billion in U.S. commercial real estate loans. Canadian Imperial Bank of Commerce also sold $316 million of office loans earlier this year, accepting a discount to toss the debt.
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