I know what you’re thinking. This guy is trying to stretch the SVB headlines into a multifamily real estate investing story. It must be clickbait.
I get it. But I hope you’ll give me a moment to tell you two ways the SVB and other major bank failures could potentially benefit multifamily syndicators and investors. Then you can decide if there’s any substance to my headline.
Like all of us, I watched the news stories unfold swiftly over this past week. Silicon Valley Bank went from paying bonuses to closing shop within days. There is no need to recount the gory details here.
But as I pondered the bad news falling out from this hopefully localized but potentially more significant situation, I realized two potential bright spots for multifamily syndicators and investors. Not just current players—but those eager to get into this currently over-crowded space.
My short-term thesis is speculative, so I freely admit I could be wrong on this one. But I will plant a confident flag on my longer-term discussions below since I believe these outcomes are virtually inevitable.
The Near-Term Impact For Current Syndicators and Investors
Jerome Powell testified in a semi-annual visit to Capitol Hill last week, “If, and I stress that no decision has been made on this, but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell told the U.S. House of Representatives Financial Services.
The conclusion of many Fed watchers was an interest rate hike of 0.25% to 0.5% on March 22. This is not a surprise since Powell is a disciple of 1980s Fed chair Paul Volcker (who raised rates to 20% on the eve of Reagan’s presidency) and the difficulty the Fed is having reining in inflation.
Silvergate Bank collapsed at about the same time. Followed by Silicon Valley Bank the next week. Then Signature Bank last weekend. Now the waters are roiling across the…