Commercial Lending

Commercial Loans Jeopardize Banks

The Congressional Oversight Panel reported Wednesday that commercial real estate loan failures could jeopardize bank stability.

The panel said most of the bad loans were made at the height of the real estate bubble and are concentrated at smaller banks, which make 40 percent of all small business loans.

“We haven’t seen the worst of the problems yet in terms of loan defaults. This is a large issue for a major portion of the banks out there,” said Matthew Anderson, a partner at research firm Foresight Analytics, which provided data for the report.

Source: MarketWatch, Josh Lipton (02/17/2010)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Lending

Banks Teeter as Commercial RE Struggles

Commercial real estate prices rose 1 percent in November. That’s the first increase in more than a year, according to Moody’s/ReAL Commercial Property Price Indices.

But it’s too soon to say the sector is stabilizing. Moody’s analyst Connie Petruzziello predicts that occupancy and rental rates will fall in the first half of 2010, pushing prices downward as well. She expects prices to decline as much as 45 percent to 55 percent from their peak in 2007 before they begin to recover later this year.

The woes of the commercial real estate market are likely to cause more banks to fail in 2010, Federal Deposit Insurance Corp. Chair Sheila Bair said in a speech to the Commercial Mortgage Securities Association.

Bair said regulators predict higher delinquencies and charge offs for commercial real estate properties in the first three months of this year. “Commercial real estate credit problems are affecting large and small banks alike,” Bair said.

Source: Reuters News, Ilaina Jonas (01/20/2010) and The Wall Street Journal, Michael R. Crittenden (01/20/2010)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Lending

MIT Index Says Commercial Prices On the Rise

Prices of commercial real estate in which there are large numbers of major investors rose 4.4 percent in the third quarter, according to the MIT Center for Real Estate’s transaction-based index.

This is the first increase in more than a year and the largest since the market slowed in mid-2007. Observers see this as a harbinger of better times in the troubled commercial space.

“One quarter does not a trend make and we are still well below normal trading volume,” David Geltner, director of research at MIT/CRE, said in a statement. “Nevertheless, this is the strongest sign of a bottom that we’ve had in two years.”

Source: Reuters News, Ilaina Jonas (10/3/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Lending

Investors Wait for Commercial Opportunity

Investors looking to buy commercial properties on the cheap as the economy slams the commercial real estate industry have been disappointed so far.

Property values have declined on paper, but would-be buyers haven’t been able to walk off with offices, shopping centers, hotels, and warehouses at fire-sale prices, and very few properties are changing hands.

“Investors seem surprised at the lack of quality buying opportunities given the problems in the financial markets and the continued weakening of the industry’s fundamentals,” says Susan Smith, director of the real estate advisory practice at PricewaterhouseCoopers.

Investors are expected to keep waiting because many properties purchased during 2006 and 2007 are over-leveraged and lenders will eventually be forced to foreclose and sell them at a discount.

Source: Los Angeles Times, Roger Vincent (09/15/09)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Lending

IRS Changes Rules to Ease Commercial Refis

The U.S. Internal Revenue Service announced changes to tax rules Tuesday that make it easier for commercial property owners to refinance.

The new guidelines allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, or REMICs, to be refinanced without penalties for investors.

The new regulations allow investors to keep tax savings that they would have lost under the old rules. The IRS is considering expanding the changes to other investment vehicles like real estate investment trusts (REITs).

“A stalemate now exists on commercial mortgage backed security (CMBS) loans that are not currently in default but need modification,” said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying body for property owners and investors. “Today’s announcement should help break the stalemate.”

Sources: The Associated Press, Stephen Ohlemacher (09/15/2009) and The Wall Street Journal, Lingling Wei (09/16/2009)

——————–
Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Lending

Vacancies Still Strain Commercial Properties

Commercial real estate is feeling the pain as retailers cut back on rental space in light of unemployment and a weak economy.

Just this week, Maguire Properties Inc., which owns office buildings in Southern California, walked away from seven of its properties because it couldn’t pay the mortgages and may abandon others, according to rating agency Realpoint.

“The bottom line: defaults are exploding,” said Richard Parkus, an analyst with Deutsche Bank. “It’s terrible. It’s going to be worse than in the early ’90s.”

Source: The Associated Press, Alex Veiga

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Commercial Lending

U.S. Will Extend Lending Program

The Federal Reserve and the Treasury Department have agreed to extend the Term Asset-Backed Loan Facility (TALF), which frees up loans to build apartment communities, office complexes, and other income-generating properties.

The move comes even though the program has yet to make significant progress in resuscitating the ailing commercial property market–due to its relatively small size.

White House officials have no plans to pad the program with more federal resources, even as rising vacancies and declining rents leave building owners vulnerable to default. Some observers fret that a new wave of defaults is on the horizon, with $814 billion in commercial real estate loans on pace to mature between now and 2011.

Source: Washington Post, Annys Shin and David Cho

Commercial Lending

Commercial Market Shows Signs of Rebound

Analysts point out that competition in commercial lending is increasing on the West Coast, which they call a sign that the drought in the commercial loan business is ending.

Citigroup Inc. analyst Darrell Wheeler said there was “aggressive” competition among insurance companies and foreign banks to fund office properties. Other new lending programs include securities sales through the Federal Reserve and opportunity funds that are looking to buy debt-free assets.

“These disposition options would not have existed just two months back, so market conditions are changing very quickly,” Wheeler wrote.

He concluded that with increasing financing “valuations for these assets should quickly recover if the economy is recovering, and we now expect the number of voluntary defaults will start to drop off.”

Source: Reuters News, Al Yoon

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Commercial Lending

Hotels in Default on the Rise

An increasing number of owners of hotels are walking away from their properties and turning the keys over to the bank.

More than 1,000 non-casino hotel properties and 31 casino hotels are in default with a total loan value of more than $25 billion, according to research firm Real Capital Analytics.

Unlike other commercial real estate with long-term leases, guests can abandon a hotel overnight, leaving the management with little or no cash flow.

Many of the hotels in default are publicly traded. “Pricing for hotels really got out of control in 2005 to 2008 and the public companies were aggressive in buying assets, so they piled on a lot of mortgage debt,” says David Loeb, a lodging analyst with Robert W. Baird & Co.

Source: The Wall Street Journal, Kris Hudson

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Commercial Lending

Banks Plan to Keep Lending Tight

Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.

About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.

Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.

“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.

Source: Bloomberg, Craig Torres

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