Despite recent news that banks such as Signature Bank will “rein in” loans in the mult-family sector, New York Community Bank (NYCB) CEO and President Joseph Ficalora doesn’t seem much change in value in the sector. Many believe that the rent reform laws has adversely affected lending in the sector however he dispelled that notion with respect to his own bank. He states that the bank’s core business model is in the area and doesn’t seem much change according to an article in The Real Deal.
Mr. Ficarola also stated that he didn’t see any loss in valuation since The Housing Stability and Tenant Protection Act went into effect in 2019. He goes on to say “We have been six months under new rent regulations, to date we are not seeing any negative asset-quality trends. 50 percent or $18.7 billion of our total multifamily portfolio is subject to the Housing Stability and Tenant Protection Act. The average loan to value ratio is 53 percent.” The bank has recently purchased $771 million in multifamily mortgages that it previously originated and sold to other institutions. Ficalora states that some institutions are looking to leave New York City’s heavily regulated market.
There has been growing concern that the enactment of the rent reform laws will have an adverse effect on valuation. We recently reported that smaller landlords are looking to get out of the market or hold on to properties until there is changes in the law. It should be noted that since the enactment of the law valuations have been hard to gauge as only a few transactions have closed since the middle of 2019. Also many multi-family transactions were sold at a discount according to the article.
Another trend owners of multi-family properties are performing is holding units open in order to combine with adjacent units to set the first rent. Ficarola said “We’re seeing owners leave apartments vacant to join units together. That’s something wealthier players can do, we’re seeing a lot of that.”
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