Big US banks are selling off commercial real estate loans

Big US banks are trying to get rid of their commercial real estate loans, but there aren't many buyers because property markets are stressed.

A report from Bloomberg this week says that big banks want to sell some of their business real estate loans, but there are few buyers because the sector is having a lot of trouble.

Sources told Bloomberg this week that JPMorgan, Goldman Sachs, Capital One, and M&T Bank are all trying to sell off some of their commercial real estate debt, but they have yet to find many buyers.

As problems in the real estate market get worse, banks may be ready to sell property loans at a discount. However, sources say that some banks hesitate to sell commercial real estate debt at too low a price because that could bring back fears of banking problems. Because of this, many banks are keeping the debt while they look for better deals.

Bloomberg said that JPMorgan was trying to sell a $350 million loan backed by the HSBC Tower in Manhattan. Sources said the bank was giving potential buyers financing with very low-interest rates.

Sources say that Capital One has also been trying to get rid of its collection of New York-based office debt. The company's chief financial officer said last month that the bank wants to sell $900 million office loans.

Sources say that Goldman Sachs has been trying to sell its loans on hotels and apartment buildings, while M&T Bank has been trying to get rid of a loan on a hotel.

Experts have been warning about trouble in the business real estate market since a number of bank failures at the beginning of 2023 led to a rapid tightening of credit conditions on top of the Fed's campaign to raise interest rates. This is terrible news for the business real estate industry, which has about $1.5 trillion in debt that needs to be refinanced over the next three years. If rates stay high and property values go down, this debt could run into trouble.

As business real estate builders get more and more behind on their payments, the risk of foreclosure has also gone up. Some experts in the field have warned that this could turn into a full-blown commercial real estate crisis. According to a recent MSCI study, around $155 billion of commercial real estate debt is at risk of default.