Signature Bank Collapse Creates New Challenges for New York Real Estate Players

FDIC has clients with less than $250,000 in their accounts covered; when deposits over that amount will be accessible is unclear.

Aerial panorama of New York City skyscrapers at dusk as seen from above the 29th street, close to Hudson Yards and Chelsea neighborhood

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The seizure by regulators of Signature Bank, a go-to lender for New York real estate developers, adds new challenges in a market already struggling in the aftermath of the pandemic.

While Signature's customers have been assured their deposits are protected-including those exceeding the $250,000 Federal Deposit Insurance Corp. limit-they'll likely need to replace letters of credit, a standard part of real estate transactions. It also remains unclear when they'll be able to access deposits over the FDIC limit or if they'll be able to access lines of credit.

The bank had long been a provider of services and a source of funding for New York's real estate industry. Its $35.7 billion in real estate loans accounted for more than a third of its $110.4 billion in assets at the end of 2022, according to data from the Federal Deposit Insurance Corp. obtained by Bisnow. The bank expanded its real estate loan book more than fourfold over the past decade, FDIC data show.

Signature also expanded its reach in the cryptocurrency industry. As a series of scandals and scams, along with rising interest rates, pushed down cryptocurrency values, many of its traditional customers worried the bank was in trouble and started pulling out their money, accelerating the crisis. For commercial landlords, particularly owners of offices and retail space, worries about their bank just added to their concerns about the tricky post-pandemic business climate in New York,

Key Takeaways

  • Commercial real estate customers are unclear about their money's fate amid the collapse of major lender Signature Bank.
  • Drawing on loans and replacing letters of credit are among top concerns from depositors.
  • The FDIC has clients with less than $250,000 in their accounts covered, but when deposits over that amount will be accessible is unclear.

Ran Eliasaf, the founder of private equity group Northwind, said his firm was banking with Signature and heard rumblings that the bank could be on shaky ground before the weekend. 

“We started hearing rumors Friday that there might be issues so we acted fast and we actually pulled most of our capital out of there,” Eliasaf said on CNBC’s “The Exchange. “The bankers at Signature on the phone told us listen, ‘We know as much as you do right now.’ And our response was ‘Okay, it's better to be safe than sorry.’”

He said the group had access to all of its capital call lines with Signature, and would have no problems returning to bank with them in the future. 

Government officials are doing their best to quell customers' fears. 

“The banks are open,” New York Gov. Kathy Hochul said. “Everything is fine, calm. Now the FDIC is in charge of the bank, and they’ll be communicating any further details.” 

Still, many questions remain unanswered, such as servicing on loans. Multifamily loans can cover a multitude of uses, and it's unclear how requests for that money are being handled. 

“We’re going to them and saying if you’ve got a letter of credit with Signature, you need to replace that,” Rosenberg & Estis attorney Eric Orenstein told The Real Deal.

Signature Bank's growth coincided with the soaring valuations of New York property, and most landlords and developers in the city had relationships with the bank, including former President Donald Trump and members of his family. Ivanka Trump, the ex-president's daughter, served on the bank's board from 2011-2013.

In 2021, Signature Bank shut down Trump’s personal accounts, which held more than $5 million, after the Jan. 6 Capitol riot

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  2. BisNow, "What The Historic Collapses Of SVB, Signature Bank Mean For Commercial Real Estate Investors."
  3. CNBC, "Banks pulling back real estate loans creates opportunities for private lenders, says Northwind's Ran Eliasaf."
  4. TheRealDeal, "Uncertainty grips Signature Bank’s real estate customers."

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