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Capital One Seeks to Offload More NYC Commercial-Property Loans

(Bloomberg) -- Capital One Financial Corp. is seeking to sell more New York commercial real estate debt as property values fall.

Most Read from Bloomberg

The McLean, Virginia-based bank is accepting bids for loans totaling nearly $200 million, which includes debt backed by offices and apartments, according to marketing materials seen by Bloomberg News.

Capital One has hired brokerage Jones Lang Lasalle Inc. to sell a $120 million non-performing loan backed by five office buildings in the NoMad neighborhood of New York City. The loan was originated in 2019 and is in default for failure to pay the principal balance in May.

The bank is also selling a nearly $71 million portfolio consisting of nine performing loans backed by pre-war mixed-use properties in Manhattan, with ground-floor retail and apartments. The apartments and retail space were 92% and 67% occupied, respectively, as of July, and the loan is maturing next year. The deal is being offered at a slight discount, according to a person familiar with the matter who asked not to be named citing private information.

A spokesperson for JLL had no immediate comment. A representative for Capital One didn’t immediately return a message seeking comment.

Banks have been working to sell portfolios of commercial-property debt as they seek to manage their exposure to the sector. Soaring borrowing costs have weighed on valuations, with commercial real estate prices slumping 16% in September from a peak in March 2022, according to real estate analytics firm Green Street.

Read More: Property Loans Are So Unappealing That Banks Want to Dump Them

Many loans that received short-term extensions post-Covid are now starting to mature and lenders are growing increasingly wary of potential defaults. Even the biggest landlords, from Blackstone Inc. to Brookfield Asset Management Ltd., have started to walk away from properties.

Some lenders have been willing to accept discounts and boost incentives to reduce their exposure. Earlier this year, Capital One sold an office-loan portfolio to Fortress Investment Group.

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©2023 Bloomberg L.P.

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