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Florida’s BankUnited Waves Goodbye to ‘Terrible Margins’ of NY Multifamily Market

Sometimes regional banks from outta town, like Arkansas-based Bank of the Ozarks and Florida’s BankUnited, elbow their way through the big international banks and New York-based lenders that dominate commercial real estate lending in New York City and make their marks on the Big Apple.

Now, though, what BankUnited seems to be more focused on making is its exit – at least from New York’s multifamily market, which CrediFi data shows declined 19% year-over-year in the first nine months of 2017.

Terrible margins,” CEO Raj Singh said on the bank’s Q4 earnings call, explaining why BankUnited was slowing growth for New York multifamily lending.

“The underlying collateral which is New York multifamily loans, with the cap rates that they have, they are in stratospheric valuation categories and nothing good happens lending into that over the long haul,” he said.

(To read about who might be picking up the slack, see Why NYCB Q4 Earnings Could Spell Good News for Commercial Real Estate Finance in New York City.)

In 2016, CrediFi CEO Ely Razin asked in National Real Estate Investor if BankUnited was waltzing into the Bronx or merely stumbling through, whether the reverse snowbird was “engaged in risky business that could cause its second collapse since 2009” or was “poised to benefit from gentrification trends.”

With a new leader at its helm – Singh succeeded John Kanas as president and CEO in early 2017 – BankUnited now appears to be giving its own answer: not stumbling or waltzing, but slowly backing away.

But just because BankUnited has lost its affection for New York multifamily doesn’t mean the Florida bank is abandoning New York altogether.

After all, while its New York portfolio remained relatively flat in Q4, at year-end the New York region still constituted 29% of BankUnited’s non-covered loan portfolio (compared with 35% each for Florida and the national portfolio).

NYC apartment building

BankUnited’s New York commercial real estate business “won’t grow at an impressive pace like it did a couple of years ago, but it will be fairly stable,” said Singh.

In the fourth quarter, UnitedBank’s Florida franchise contributed non-covered loan growth of $465 million, compared with net growth of just $29 million for New York. Multifamily runoff in New York, or the reduction of loans in the portfolio, was $169 million in the quarter.

Non-multifamily CRE in New York, however, increased $198 million in Q4. And that’s where BankUnited expects to see its growth – outside multifamily.

“From a CRE perspective, we’re tilting towards other asset classes,” Thomas Cornish, the bank’s chief operating officer, said on the earnings call.

Indeed, while non-multifamily commercial real estate loans (excluding construction and land) took up a larger share of BankUnited’s total loan portfolio at year-end 2017 than they had a year earlier, the share of multifamily loans dropped, from 19.8% of the bank’s loan portfolio at year-end 2016 to 15% in 2017, BankUnited said in its 2017 financial results.

And the bank’s total assets increased year-over-year, from nearly $28 billion in December 2016 to over $30 billion at the end of 2017.

“We want more diversity on our portfolio,” said Singh. “We were really extremely heavily weighted into multifamily and we’re trying to build a more diverse portfolio.”

To find out more about the New York City commercial real estate market, get our latest NYC Lending Spotlight here.

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Alex Veksler

Head of Content

Alex Veksler has 16 years of finance, data analysis and project management experience. He is a former vice president at Morgan Stanley, where he worked on product control of equity and fixed-income derivatives products as well as various projects involving finance and technology, such as revamping risk attribution and balance-sheet systems for profits and losses. Alex has previously worked at hedge funds, most recently as a director at Exigent Capital. He has a bachelor’s in computer science from Yeshiva University and an MBA from New York University.

Ely Razin

CEO

Ely Razin founded CrediFi in 2014 with Battery Ventures. A rare combination of seasoned corporate executive and technology entrepreneur, Ely previously served as global head of board governance for Thomson Reuters Accelus and head of business law for Thomson Reuters, after the software company he founded was acquired in 2004. The company, Expert Ease Software, developed AI-based software that automatically summarizes key deal terms for transactions in fields including capital markets, M&A and real estate. Ely began his career as a corporate and securities lawyer, and holds an LLB and MBA from York University.

Frank Muhlon

Head of Transactions

Frank Muhlon oversees CredifX, the commercial real estate financing marketplace that mines the CrediFi database at its core. Prior to joining CrediFi, Frank served as vice president of Northeast region business operations for online CRE property trading platform Ten-X, which has closed over $40 billion in transactions since its inception. He has also held key positions at Orix USA/Houlihan Lokey, Silverstein Properties and Trammell Crow Company. Frank received his master’s degree in real estate finance from New York University and his bachelor’s in finance from Rutgers University.

Charles Mctiernan

Head of Sales

Charles Mctiernan comes to CrediFi from Ned Davis Research Group and Roubini Global Economics, where he was the global head of sales. He also spent more than 10 years at Reuters America Holdings, where he held a number of senior sales leadership roles, including head of solutions sales and head of global accounts. Charles, who received his bachelor’s in economics from East Carolina University, has more than 25 years of experience in technology, data and research sales.

Amichai Levy

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Amichai Levy is the former VP of R&D at Israeli high-tech firm Payoneer, where he developed its signature cross-border payment platform and integrated it with existing bank technology. In his prior role at Ness Technologies, Amichai was a key player in developing an electronic case filing system for Israel’s courts. He has over 20 years of experience in software engineering.

David Fajgman

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David Fajgman brings over 14 years of financial and managerial experience to CrediFi. Prior to joining the CrediFi team, he served as finance director of Bioness Neuromodulation Ltd., which develops and manufactures medical devices involved in neurological rehabilitation. He has previously worked in multiple finance roles at Thomson Reuters and as an accounting and consulting manager at Ernst & Young, where he was responsible for a wide range of clients, including companies listed on the Nasdaq and privately held high-tech companies. David is an Israel-licensed certified public accountant and has a bachelor’s degree in business and accounting.

Liat Bar David

Head of Human Resources

Liat Bar David has over nine years of human resources experience, primarily focused on the high-tech industry. She is a former HR business partner at semiconductor solutions provider Broadcom, where she was responsible for onboarding processes, benefits, policies, training and development, performance management and employee retention. Liat holds a bachelor’s in communication and human services and a master’s in human resources and services, both from the University of Haifa.