The failure of Manhattan-based Signature Bank last week, which came right after the collapse of Silicon Valley Bank, sent shockwaves through New York City’s real estate industry. Signature Bank has been a major player as a lender to multifamily developers in the city, with half of the bank’s lending activity going to real estate companies and developers. But the local bank also has a large Manhattan office footprint of its own with some of the city’s biggest landlords. Those lease obligations are now in question after federal regulators seized the bank a week ago in order to protect depositors.
Signature Bank’s footprint in Manhattan spans at least 472,000 square feet as well as nine locations in the other New York City boroughs of Brooklyn, Queens, and the Bronx. The bank’s largest lease is at Empire State Realty Trust’s 1400 Broadway office tower in the Garment District, where Signature expanded its footprint last year to a total of 313,000 square feet across 11 floors, amounting to one-third of the tower’s space.
Most of the bank’s office leases, about 83 percent, are not scheduled to expire before 2032, according to CompStak data, but if the company becomes insolvent it might not be able to continue to pay those rents. The government has shown that it will protect debtors in banks (at least for now) but will allow the banks to go into bankruptcy. This might affect the risk perception of even larger banks when it comes to leases in the eyes of underwriters and make office properties that rely on financial tenants less desirable.
