Propmodo Daily

By Franco Faraudo · Apr. 8, 2024

Greetings!

New York Community Bank is in deep trouble, as we'll explore in today's email. A disastrous earnings report, fueled by losses from the Signature Bank acquisition, led to a dividend cut and a 40% stock plunge. Investors are now betting on bankruptcy, while NYCB faces a class-action lawsuit alleging they concealed the deal's risks. Mounting legal costs and negative press worsen the situation, making the bank's survival heavily reliant on market perception.

Also, in a new article we examine the impact of the SEC's climate disclosure rules on the real estate industry. While less stringent than originally proposed, the rules will still require significant adjustments. Large real estate firms will face compliance challenges due to varying regional regulations and the need for accurate emissions data. Companies will need to disclose physical climate risks and invest in technology to collect and analyze emissions and climate risk information.

This week in Propmodo Technology, sponsored by SWTCH Energy, we're exploring multifamily management. Discover how technology optimizes feasibility studies, the rising value of electric vehicle charging stations, and strategies to accelerate lease-ups.

Now, let's dig in!

NYCB Hit with Class-Action Lawsuit Alleging They Hid Acquisition Risks

New York Community Bank has endured a difficult year, and the situation only appears to be worsening. In January, NYCB's earnings report revealed a substantial $252 million loss in the final quarter of 2023. This loss prompted a significant dividend cut, largely attributed to a $552 million provision for loan losses. These provisions were necessary to cover struggling loans acquired in the recent $38.2 billion purchase of Signature Bank debt from receivership. The acquisition has pushed NYCB into a Category IV bank status, necessitating increased allowances for credit losses.

After the earnings were announced, NYCB’s stock price crashed almost 40 percent, and speculators shorted the company, expecting a possible bankruptcy. But that still wasn’t the end of the bank’s troubles.

On Friday, the law firm Bragar Eagel & Squire announced a class action lawsuit against NYCB, alleging that the bank made "materially false and/or misleading statements" and "failed to disclose material adverse facts about the company’s business, operations, and prospects." The suit specifically claims the bank didn't reveal the full extent of losses they would incur from purchasing Signature’s loans. Bragar Eagel & Squire has extensive experience with such class-action lawsuits against banks and is also currently litigating against American National Bankshares Inc. in its acquisition of Atlantic Union Bankshares Corporation.

This is likely not the outcome NYCB envisioned when it made the purchase. At the time, acquiring $12.9 billion of loans for just $2.7 billion seemed like a great deal, regardless of book value. However, in hindsight, they might regret the decision entirely. The negative press has been significant, and now legal fees will add tangible costs. In the current investing climate, perception is reality. If enough of the market believes NYCB is destined to fail, their fate might already be sealed.

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