• Sun. Jun 23rd, 2024

Lender Failure Fallout Reaches Professional Genuine Estate Owners


Mar 16, 2023
Signature Bank, the operator of this branch in Brooklyn, New York, leased office space in Manhattan from Empire State Realty Trust. (Getty Images)


The economic fallout from two significant-profile bank failures incorporates the commercial genuine estate market, with assets house owners across the United States reporting publicity to opportunity losses.

At minimum 4 real estate financial investment trusts this 7 days stated they encounter danger due to the fact of their dealings with Silicon Valley Financial institution or its dad or mum, SVB Fiscal Team: Cousins Houses, Alexandria True Estate Equities, Paramount Team and Hudson Pacific Houses. A fifth REIT, Empire State Realty Believe in, reported Signature Lender is its second-most significant tenant.

The REITs’ publicity ranges from office environment leases and letters of credit rating to investments in substantial-tech companies.

Regulators shut Silicon Valley Financial institution on March 10 after a operate on deposits from its shoppers, which include things like a significant amount of know-how companies. Signature Financial institution was closed on March 12 following a wave of withdrawals from customers fearful about the bank’s ties to cryptocurrencies.

Cousins Attributes, based mostly in Atlanta, said it has $2 million in exposure to Silicon Valley Bank via its lease of 205,000 sq. ft at an business office park Cousins owns in Tempe, Arizona. The Atlanta-based mostly REIT claimed it will generate off the web assets affiliated with the lease at Hayden Ferry Lakeside if the bank’s keeping company files for individual bankruptcy.

Cousins mentioned it retains $11.7 million in letters of credit history for leases at other attributes issued by Silicon Valley Lender. Cousins will change the Silicon Valley Financial institution-issued letters with documents from other monetary establishments.

Alexandria True Estate Equities, based mostly in Pasadena, California, described that Silicon Valley Bank was current by means of March on its 32,152-square-foot lease at a Boston office it owns. The lease generated $1.7 million of annualized rent in 2022, or less than 1% of its full rental earnings. Alexandria did not disclose the certain tackle of the Boston residence.

Alexandria has more exposure to Silicon Valley Financial institution. The REIT held $108.3 million in security deposits from some place of work tenants that have been issued as letters of credit score through the financial institution. Alexandria said it will substitute those letters with new files from other monetary establishments.

Alexandria might also be indirectly exposed to Silicon Valley Bank’s failure via its investments. The corporation manages a portfolio of much more than $1 billion of venture funds investments in existence science, agricultural technology and engineering sector corporations. Some of those people providers “may have banking associations or other company relationships with SVB,” the REIT stated in a regulatory submitting issued Monday.

Silicon Valley Lender in January identified the REIT’s Alexandria Venture Investments subsidiary as the “most lively corporate trader in biopharma” by new deal quantity in 2021 and 2022. Silicon Valley Bank pointed out the award in its publication “Healthcare Investments and Exits: Yearly Report 2022.”

Alexandria explained in the regulatory filing that it has no financial institution accounts or financial loans to or from Silicon Valley Bank.

Paramount Team, primarily based in New York, shown Silicon Valley Bank’s SVB Securities subsidiary as a “key tenant” in its house at 1301 Avenue of the Americas, together with 10 other tenants such as Credit history Agricole and the regulation business Norton Rose Fulbright. The total creating created $130 million in annualized lease in 2022.

Hudson Pacific Homes in Los Angeles said in a regulatory submitting that some tenants and undertaking investments “may have banking associations or other small business relationships with SVB.” It also said that 11 of its 900 tenants, covering 2% of its leased workplace place, have letters of credit score issued by Silicon Valley Bank. It did not give the full benefit of all those letters of credit.

Empire Point out Realty Have confidence in, primarily based in New York, recognized Signature Bank as its 2nd-major tenant measured by lease profits, as of Dec. 31. The financial institution leased office environment house at two Empire Condition houses in New York — 1333 Broadway and 1400 Broadway. The bank’s leases lined 308,207 sq. feet, or 3.2% of the REIT’s total rentable business portfolio, and generated $18.2 million of annualized rent in 2022.

Empire Point out has not furnished particulars on its expected fallout from Signature Bank’s failure and payment of the outstanding leases.

TMG Companions, a privately held authentic estate developer centered in San Francisco, owns 3003 Tasman Travel in Santa Clara, California, wherever Silicon Valley Lender taken care of its headquarters, according to CoStar data. Michael Covarrubias, chairman and CEO of TMG, did not quickly reply to a ask for for comment from CoStar Information.

Other professional genuine estate corporations have also noted financial ties to the unsuccessful banks.

Sonder Holdings, a hospitality technologies firm, stated in a regulatory submitting it experienced $22 million in deposit and running dollars accounts at Silicon Valley Bank as of March 9 and a $60 million credit facility from the lender. Sonder has used $13 million from the credit history facility as letters of credit history.

“We carry on to actively keep an eye on the evolving circumstance with SVB and will take acceptable actions as required,” Sonder explained in the filing.

Latch Inc., which tends to make electronic locks and safety merchandise for buildings, claimed Monday it has $3.1 million in deposits at Silicon Valley Lender, representing a lot less than 2% of its overall cash. Latch’s purchaser base mainly consists of multifamily setting up entrepreneurs and builders.

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