Some of America's biggest banks are quietly selling their stakes in the troubled sector of the US economy, according to a new report.
Banks are starting to pull back on commercial real estate loans in an effort to "cut their losses," the New York Times reports.
The Times cites Goldman Sachs and Citigroup, which recently sold parts of a $1.7 billion distressed loan secured by office buildings in New York, San Francisco and Boston, as key examples.
Capital One also sold a $1 billion portfolio that included a large number of office loans in New York.
While the value of loans sold by lenders is small compared to the $2.5 trillion in commercial real estate loans held by all U.S. banks, the apparent change in tone is notable.
“...These moves signal a reluctant recognition by some lenders that the banking industry's 'extend and pretend' strategy is running out of steam and that many property owners, especially office building owners, will be unable to pay their mortgages.
This means that large losses for creditors are inevitable and bank earnings will suffer.”
The commercial real estate market continues to suffer from the rise of the work-from-home culture.
According to real estate market data provider ATTOM, there were 625 commercial property foreclosures nationwide in March, up 117% from the previous year.
California fared the worst, with 187 foreclosures reported, a 405% increase since March 2023.
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