Signature Bank, which holds nearly $15 billion in multifamily loans, reported that rent collection from rent-regulated apartments has taken a beating.
That contributed to the bank’s reporting net income for the first quarter of just $99.6 million, down from $143.5 million for the same period last year.
Fourteen percent of Signature Bank’s $50 billion loan portfolio has asked for deferrals on payments. The bank is granting deferral of principal and interest for three months and adding it to the end of the loan, but could extend deferrals to six months if the crisis is prolonged.
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Rents collected from rent-stabilized apartments were at just 50 percent of normal levels in April, said Joseph DePaolo, Signature’s president. Market-rate apartments fared better, with collection at closer to 80 percent. Fifty percent of Signature Bank’s multifamily portfolio is rent-stabilized, DePaolo said. There are about 1 million rent-stabilized apartments in New York City.
Despite the shortfalls, as unemployment claims in the U.S. topped 26 million in the last month, DePaolo maintained that its borrowers have faced crises before — and are prepared for the downturn.
“We view this as temporary,” DePaolo said. “Those that do not survive are clients of others, not ours.”
Community banks such as Signature Bank have long been the go-to lenders for New York City’s rent-stabilized landlords. DePaolo said that the bank has some large, multi-generational clients who have owned multiple apartment buildings for decades. He said those clients have not asked for deferrals — and in fact are “waiting on the sidelines” to buy distressed assets on the cheap from less well-situated multifamily property owners.
“Our clients are going to be doing the buying, not the selling,” said DePaolo. “They’re not on Fifth Avenue. It’s not going to be an issue for them to buy at a discount.” (The Fifth Avenue reference was apparently to struggling owners of high-end retail property.)
But DePaolo’s confidence in his borrowers’ financial footing could be shaken if more tenants withhold their rents, a possibility that he addressed on the earnings call.
“We think [rent levels] have stabilized, but not if everyone’s going to go on a rent strike on May 1,” said DePaolo. “But we don’t believe most people want to do that.”
Tenant groups are trying to launch a mass strike in May to persuade lawmakers to cancel rent and mortgage payments — a move that could upend the multifamily market.