Market Extra: Don’t wait for Fed rate cuts, says debt buyer to banks holding distressed commercial real estate

by | Aug 4, 2023 | Stock Market

One person’s trash is another’s treasure, especially when it comes to piles of underwater commercial real-estate loans parked at small and medium-size banks. The regional banking crisis got its spark in March with the shocking collapse of Silicon Valley Bank and Signature Bank, expanding in May with First Republic’s takeover by JPMorgan Chase.

Their demise gave regulators a black eye for not noticing “red flags” or acting sooner on growing risks at lenders as the Federal Reserve jacked up interest rates. Pat Jackson, founder and chief investment officer at Sabal Investment Holdings in Irvine, Calif., thinks community and regional banks piled up with underwater commercial real-estate loans should get ahead of their problems before they risk getting worse. “We can take it in one fell swoop,” Jackson said of Sabal’s ability to buy bulk loan pools from distressed banks, including as one of the biggest buyers of assets seized by the Federal Deposit Insurance Company in the past decade. “Our message to investment banks being hired by bank boards, whether it’s to raise capital or find a merger candidate, is that you need a third-party capital source that’s part of the solution,” he said. “We can take the assets off your books that you don’t want,” he said. “We are those guys.” Sales of loan portfolios from banks already have been happening quietly outside of FDIC takeovers. Several took place ahead of the sale of PacWest Bancorp

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