 |
 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> April 2004
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
|
COMMERCIAL BANKS WINNING BACK CUSTOMERS
 |
| Click image to view charts (392k PDF). |
Demand for commercial real estate loans strengthened in January for the first time since 2000, according to the Federal Reserve Board’s quarterly survey on bank lending. Banking analysts credit several things for the renewed demand, among them that customer-bank relations have relaxed.
In the late 1990s, when many large loans were defaulting, lenders tightened credit standards and got choosier about their customers, says Craig Woker, a banking analyst at research firm Morningstar.
Apparently, they got too strict, and some real estate companies moved to less traditional sources of financing, such as the commercial-mortgage-backed securities market.
“When things were bottoming out in terms of commercial loans getting made, [we] had a lot of finger-pointing,” said Woker.
 |
Both sides have given a little. Companies have strengthened their balance sheets and are approaching the banks as more creditworthy entities. Banks, for their part, have not only loosened their underwriting standards, they’re also offering new loan products. LaSalle Bank, for instance, created a group in October that provides loans of between $1 million and $5 million. One of the attractions is that LaSalle has slashed its fees for services including appraisals and environmental and engineering assessments to a fraction of the typical $30,000, says Charles Krawitz, national director of the Chicago-based bank’s LaSalle Select, a small-loan program.
Indeed, the Fed survey reports that about 20 percent of U.S. banks increased the size of their commercial loans and offer longer maturities, while more than 15 percent report that demand for commercial real estate loans has risen over the past three months.
That give-and-take relationship appears to be helping banks, however slightly. According to the Fed, commercial banks held about $516.3 billion of commercial mortgages in 1999, 49 percent of the market. By the third quarter of 2003, that had risen to $752 billion, or 51 percent.
Acadia Realty Trust, White Plains, N.Y., says things have eased, though the firm does not borrow heavily, preferring joint ventures instead. Acadia Realty executives say banks are more willing now to tighten spreads (the yield difference between a loan and some benchmark government bond), easing things for borrowers.
“We’ve seen our spreads compress between 20 and 35 basis points, especially in the area of floating-rate loans,” said Jon Grisham, an Acadia Realty spokesman.
Of course, just because the banks are getting busier doesn’t mean the nontraditional sources are slowing down. Real estate developers are still knocking pretty hard on specialty lenders’ doors.
“We’re seeing more development-deal requests, primarily in the retail sector,” said David Beckerman, managing director of Bellevue, Wash.-based Metrovation Capital, a high-debt commercial real estate lender.
 | Current Issue March 2010 |