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Back-To-Back Bank Collapse Leaves Real Estate in a Whirlwind of Uncertainty

Up until last Friday, the biggest concern for PropTechs were higher interest rates and a soft decline in VC investment compared to last summer. Then news broke that California regulators had shut down Silicon Valley Bank (SVB). By Sunday, New York regulators closed Signature Bank, meaning that the second- and third-largest bank failures in American history took place over the course of a single weekend. While a dark cloud of uncertainty looms overhead, one thing is clear: the demise of two of the largest U.S. banks will have a seismic impact on the real estate industry, and subsequently the real estate technology sector.

While SVB was known for partnering with startups and primarily lent to private equity and venture capital firms, 15 percent of SVB’s loans were secured by residential mortgages and commercial real estate. At the end of 2022, SVB had $8.3 billion in personal residence mortgage-backed loans, along with $138 million in home equity credit lines. Moreover, it had $2.6 billion in commercial real estate loans, 35 percent of which were secured by multifamily complexes and 21 percent by offices. Signature, on the other hand, was a commercial bank that concentrated on nine national business lines, including commercial real estate. The FDIC has reportedly taken over Signature, which had $110.36 billion in assets and $88.59 billion in deposits at the end of 2022, according to the New York State Department of Bank Services.

On Monday, President Joe Biden made assurances that the U.S. banking system was safe despite SVB’s and Signature’s collapse, and that deposits will “be there when [customers] need them.” He added that his administration is working to minimize the harm caused by both banks’ failure. Even so, the fallout is sending jitters throughout the entire commercial real estate industry.

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