The SVB collapse has exacerbated challenges for commercial real estate investors this year. In addition to inflation and a substantially higher cost of capital, the banking crisis has catalyzed a regional liquidity crunch, constraining access to capital for small and mid-sized investors.
Although some regional banks are experiencing challenges fulfilling loans in their pipeline, some are thriving through the market uncertainty. Al Beaumariage, SVP and the affordable housing program manager at KeyBank, and Cathy Danigelis, western region manager at KeyBank, said that the bank's diverse deposits have created a strong capital position, helping the bank to maintain business as usual.
Banks Remain Active
A good old-fashioned bank run was the catalyst for the banking crisis. As SVB, Signature and other regional banks showed signs of instability, customers began to pull their deposits, which are used to support lending activity. "Last quarter, a number of banks were not able to close on loans in their pipeline," says Danigelis. KeyBank's deposit-based activity actually grew as a whole during that period, and KeyBank was able to step in on a number of loans.
The bank has maintained liquidity levels above 110% and a loan-to-deposit ratio below 90%, placing the bank's deposit base among the best in the industry. This allowed the bank to service existing clients and fund new loans, despite the newfound uncertainty in the banking sector.
During the first quarter, KeyBank had healthy private placement executions, as well as strong activity through Fannie Mae and Freddie Mac. "On the heels of the SVB issues, both GSEs stepped up and Freddie Mac even reduced its pricing," says Beaumariage.
Proactive Client Conversations
During times of turmoil, people look for guidance and advice. For that reason, KeyBank focused on client connection, proactively reaching out to clients to understand how the economic dislocation had impacted business.
"The majority of our clients are repeat clients and they entrust their developments to KeyBank," says Danigelis, adding that the firm's team is made up of seasoned professionals. "We've each seen a number of downturns, and we're able to offer solutions to problems as they arise because we've likely seen them before."
The bank had a strong position, but it was imperative that they translated that to clients. In the immediate aftermath of the SVB failure, KeyBank communicated its core fundamentals to clients. "We heard that not every bank was reaching out to their clients," adds Danigelis. "That's the touch that we brought to our clients to give them the confidence to continue to go forward."
It is this balance between financial stability and strong client relationships that have driven stability in the regional banking sector. "As a result of our efforts, a very small percentage of clients chose to diversify deposits," explains Beaumariage. Though there is some uncertainty permeating throughout the banking sector, there are still opportunities for real estate investors to remain active.
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Kelsi Maree Borland
