Maverick Real Estate Partners

"Extend and Pretend" has become "Delay and Pray". Loan extensions are far more difficult to accomplish today because declining property cash flows can no longer cover rising debt service. Banks need borrowers to make meaningful pay downs to right-size their loans, yet few borrowers have the will or ability to do so. To prevent further erosion of their balance sheets, regional banks have tried to sell these sub-performing loans. Yet after receiving bids of 30% to 70% of unpaid principal balances when they were expecting to sell near par (100%), they've pulled their sales from the market. Their actions are logical. If they sell assets today at big discounts, it completely wipes out what little loan-loss reserves they had, and would likely lead to a stock price plunge or worse... a run on the bank. I mean, virtually their entire loan books are held at par, while they couldn't even sell their low risk loans at that level (they've tried that too)! Yet if they #delay, they can at least #pray for better days ahead. The problem is that the more time that passes, the more bad loans will pile up - even if rates drop over the next year as expected. In a true Catch-22, many regional banks are damned with either path they take. The tipping point will come... for some banks sooner than others. Their regulator will take over, or they'll get gobbled up by their larger competitors. That we can bank on... Until then, keep your fingers crossed and say your prayers! #delayandpray #regionalbanks #loansales #banking

In the newest edition of #ColumbiaBusiness, learn how two CBS grads became successful mainstays in the commercial #realestate investment market. David Aviram ’06 and Ted Martell ’06 share their journey of founding Maverick Real Estate Partners below:

Columbia Business School is where Ted Martell and I formed our strong bond while planting the seeds for Maverick Real Estate Partners. That was 20 years ago (holy ___ )! The alumni magazine wanted to share our story to inspire other entrepreneurs to take their leap and make their mark. On your journey, you’ll need a high tolerance for pain and discomfort. I still feel it today. That means we’re continuing to learn and grow. The struggle is the reward.

The Bronx is drowning! The Bronx and upper Manhattan are underwater on their rent stabilized multifamily loans. These markets contain very high percentages of 100% rent stabilized properties and have experienced the greatest tightening of spreads between the sales price per square foot and the existing debt balance per square foot. Without any equity value for an owner to recoup, nor an ability to meaningfully raise rents, one can assume that most landlords will not make the necessary capital improvements that are sorely needed to maintain satisfactory living standards for tenants. Lenders will get caught holding the bag, whether they infuse the capital themselves, or reduce their loan balances to provide the existing owners with a financial incentive to perform adequate maintenance. While these properties have been renovated over time and many have strong old bones, they’re still about 100 years old! Things fall apart… We can’t expect landlords and lenders to keep holding their breath. They’ve got to come up for some air soon, or we’ll start to see some pretty dire outcomes. Dive deeper into Maverick’s underwater analysis in our latest white paper: insights.maverickrep.com #banking #rentstabilization #bronx #multifamily

Who will solve this $90 billion problem? Signature Bank and New York Community Bank (NYCB) were two of the "big three" banks lending on Rent Stabilized Multifamily properties. With Signature gone and NYCB in full retreat, will any other lenders step in to fill a massive void? If not, there will be a severe crisis for both borrowers and lenders alike. Read more about this at insights.maverickrep.com #banking #rentstabilization

Banks have pulled back on Rent Stabilized Multifamily more than any other property type in NYC, including Office. With the most active lenders nearly eliminating new Rent Stabilized exposure, what remains is a fragmented landscape of one-off transactions that leaves Borrowers with very few options upon maturity. Values have plummeted in part because of the lack of debt capital available in the market. Get the full story here: insights.maverickrep.com

Many banks were active in the rent stabilized multifamily market in NYC. A few went deep. Others took more risk. Some did both. Healthy banks will sell loans to right-size their CRE exposure. I fear the weaker ones won't be able to withstand the hit. What happens to them? How will they behave? We have some answers in our white paper: https://lnkd.in/ebbHYyya #banking #loansales #regionalbanks

What’s happened to the value of Rent Stabilized properties since the passage of the Housing Stability & Tenant Protection Act in 2019? A 28% median decline, with some properties seeing losses of up to 70%, is bad news for the owners of these properties – but the impact to the health of regional banks that have financed these properties is a much bigger concern. Read more in Maverick’s new white paper, now available at https://lnkd.in/eXH3pAT5

[New White Paper] Rent Stabilized Multifamily properties are in trouble, and a crisis is brewing for lenders. Several regional banks beyond NYCB show hazardous levels of exposure, and refinancing options for current borrowers are scarce to non-existent. Maverick's new white paper has two dozen informative visualizations that illustrate the depth of this problem. Now available for download (no registration required) at https://lnkd.in/eXH3pAT5

Jim Yetter was Maverick's first team member after Ted and I founded Maverick in 2010. We're now a team of 18 and growing, as Jim runs Investments. It was lots of fun getting into the weeds of NYC multifamily, regional banks, and the changing market landscape with Jim, Seth, and Joe. https://lnkd.in/eCD4MYTm