Discounted Bids for Signature’s Apartment-backed Loans Reflects Value Decline of Rent-Regulated Sector

The sale of Signature Bank loans backed by New York apartments signals the ongoing deterioration of property values within the rent-regulated sector as leading bidders offer less than 70 cents of the loans’ face value. Legislation enacted in 2019 by New York State imposed tighter regulation making it much tougher for multifamily property owners to raise rent on rent-regulated units, thereby reducing the ability to cover repair and renovation costs, and combined with rising interest rates, has reduced the value of this property type. About half of the $33 billion in Signature Bank’s real estate loans being auctioned fall within the rent-regulated category; while the remaining half consists of assets backed by a range of commercial property including nonregulated apartment buildings. The resulting prices paid for the loans will “provide the market critical data points in determining how far values have fallen.”