Washington Federal Bank, a wholly owned subsidiary of WaFd, said it has signed an agreement to sell a portion of its commercial multifamily real estate loan portfolio to Bank of America for approximately $2.9 billion.
WaFd said in a Securities and Exchange Commission (SEC) filing on Friday (May 17) that the transaction includes 2,000 commercial multifamily real estate loans with a current outstanding principal balance totaling $3.2 billion.
Reuters reported on Friday that the move comes at a time when the commercial real estate sector is struggling and that the deal will help the Washington Fed reduce its exposure to the market.
The report said the commercial real estate sector is facing challenges from rising borrowing costs and falling occupancy rates, raising concerns from investors and regulators.
The area was one of three potential issues regarding financial stability highlighted by Federal Reserve Governor Lisa Cook in a May 8 speech.
Cook said the commercial real estate sector is still feeling the effects of the pandemic and the changes to how many people live, shop and work, with multifamily properties in particular seeing values fall over the past year.
“In the end, I think CRE [commercial real estate] “The risks are currently significant but manageable and we will continue to monitor this area closely in the short and medium term,” Cook said.
In February, JPMorgan Chase CEO Jamie Dimon told CNBC that only a “portion” of the commercial real estate sector would experience problems unless the country avoided a recession, as many property owners were already dealing with current stress levels and the challenges of falling valuations and rising interest rates were already known.
But rising interest rates and a recession could create more problems in the sector, with some banks having more trouble in commercial real estate than others, Dimon added.
Newmark CEO Barry Gosin told the Financial Times in April that banks face a “wall” of $2 trillion in real estate debt coming due over the next three years and need to reduce their exposure to commercial real estate.
“Banks will be under pressure,” Gosin said.
Read more: Bank of America, Banks, BoA, BofA, Commercial Real Estate, News, PYMNTS News, Real Estate, Real Estate Loans, WaFd, Washington Federal Bank, Featured News
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