SVB Impacts to Real Estate

[Sean Kelly-Rand]

Hey BiggerPockets Crew! It's been a heluva week in the capital markets! And a crazy Friday for those in real estate on the east and west coast tech heavy markets with the collapse of SVB. 

Initial impacts coming out of the FDIC take over are:

- Several closing attorneys used Boston Private / SVB for their escrow accounts so transactions that were closing on Friday/Monday in Boston or San Fran could have issues. I already know that one investor funded to an escrow account on Friday and has no idea where the funds are.

- Many firms used SVB/Boston Private for their business banking - I have already received one notification from a NYC based real estate private equity fund to all of their investors that their firm had significant investor accounts with SVB/Boston Private. 

- The follow-on is creating a hectic weekend for financial professionals figuring out exposures (it could be within your investments or clients)  or tenants or suppliers/vendors.

- Going forward: If SVB could collapse so suddenly who else could be next? There is talk of First Republic (and have heard from a few people I spoke with that they moved money on Friday) but overall they are seen to be a very well run bank. I predict that we'll know by end of the week.

- Issues plaguing SVB aren't entirely unique: banks have low returns on long-duration assets which have fallen in value while their cost of capital (deposits and short-term borrowings) have increased dramatically. 

Advice to investors is to check on accounts and make sure you don't have a number of single bank concentrations and holdings per LLC and per individual are below the FDIC limits. Study the limits today.

It's going to be a crazy week in the capital markets as we all figure out what the FDIC is willing to backstop on SVB and then the follow-on. If the FDIC doesn't guarantee all deposits then there is likely to be some contagion as investors/business yank deposits from the weaker regional banks.

Expect delayed closings - maybe wait a week before funding large escrow amounts. 

I was with Lehman real estate in '08 so have been through this before and am watching the situation closely. 

Feel free to contact me with any insights. I would love to hear what impacts you've seen and how its affecting your home market. We're all in this together now!

[Michael Wooldridge]

Quote from @Nate Marshall:

Quote from @Michael Wooldridge:

Quote from @Nate Marshall:

It will be short but brutal for some. Silicon Valley though needs a deep cleansing after Theranos and even WeWork and Uber not withstanding they forced out their CEO/Founders. 

Peter Thiel should be commended for getting his founders out. We got to see David Sacks and Jesse Draper grovel for taxpayer money. Remember there is no Theranos with Jesse Draper and her Dad propping up Elizabeth Holmes from the getgo. 

 Sorry but Peter Thiel cause the crash to happen. And now a bunch of VCs are talking about comiting to buy in if they get certain things. THis isn't Thiel warning about impending crash this is thiel causing the crash and trying to pivot afterwards,

And the only reason fed might agree is they don't want the big 3 to get bigger. 

 Thiel should be commended for what he did. Moved his founders and his money. The problem with Silicon Valley is that for every Peter Thiel there are 10 Elizabeth Holmes and Jesse Draper types!

 Cool you love Thiel. As I just said he purposely caused the crash and is now trying to profit off it leveraging federal govt stepping in because they don't want the big 3 to get bigger. 

Nothing to be commended. The man is a turd trying to firesale the country. Playing with the banking system like this should end up with fines - no different than what musk did around twitter. Except the health of our country and for that matter the globe relies on those credit markets flowing. 

It's literally lighting a nuclear version of fishing with dynamite....