Signature Bank, which holds nearly $ 15 billion in multi-family loans, reported that rent collection from rent-regulated apartments has taken a hit.
This contributed to the bank’s net income for the first quarter of just $ 99.6 million, compared to $ 143.5 million for the same period last year.
Fourteen percent of Signature Bank’s $ 50 billion loan portfolio have requested deferrals. The bank grants a deferral of principal and interest for three months and adds it at the end of the loan, but could extend the deferrals to six months if the crisis continues.
Rents received from rent stabilized apartments were only 50% of normal levels in April, said Joseph DePaolo, president of Signature. Market-priced apartments fared better, with collection close to 80%. Fifty percent of Signature Bank’s multi-family portfolio is rent-stabilized, DePaolo said. There are approximately 1 million rent stabilized apartments in New York City.
Despite the deficits, as jobless claims in the United States exceeded $ 26 million last month, DePaolo maintained that his borrowers had already faced crises – and that they were prepared for the recession.
“We see this as temporary,” DePaolo said. “Those who don’t survive are other people’s customers, not our own.”
Community banks such as Signature Bank have long been the essential lenders for New York City rent stabilized landlords. DePaolo said the bank has large multigenerational customers who have owned multiple apartment buildings for decades. He said those clients had not requested a postponement – and that in fact, they were “sitting on the sidelines” to buy distressed assets on the cheap from less well-located multi-family owners.
“Our customers are going to buy, not sell,” DePaolo said. “They’re not on Fifth Avenue. It will not be a problem for them to buy at a reduced price. (The Fifth Avenue reference was apparently to distressed owners of high-end retail property.)
But DePaolo’s confidence in the financial condition of its borrowers could be shaken if more tenants withhold their rents, a possibility he addressed when calling the results.
“We think [rent levels] have leveled off, but not if everyone is going to strike on May 1 rents, ”DePaolo said. “But we don’t think most people want to do this.”
Groups of tenants are trying to launch a mass strike in May to persuade lawmakers to cancel rent and mortgage payments – a move that could upend the multi-family market.