Commercial Large Project Lending Improves
I found some good news for the commercial real estate market, lending is improving for large projects.
The drought in lending in these markets as property valuations plummeted has been disconcerting to say the least, down right terrifying if you are looking to roll over a commercial real estate loan.
But as banks start to see the bottom, they are much better able to analyze the risks involved with new loans. And what a surprise, they can make prudent decisions to lend money.
This is not to say the banks are in good shape. Bad loans made over the past 3 years are going to cost them nearly 150 billion dollars in losses. But the truism remains, banks need to lend money to stay in business.
They just are able to have a foundation now in which to do so profitably.
The Jones Lang LaSalle survey indicated that 56% of the lenders surveyed were willing to lend $50 million or more toward purchase of a single property. Last year most respondents were willing to lend only up to $25 million to buy an asset.
“A few life companies and investment banks we spoke with indicated that they’re willing to lend $150 to $500 million on large, single asset acquisitions in 2010,” said David Hendrickson, managing director of Jones Lang LaSalle’s real estate investment banking practice.
Another reason for the return of lending, market participants say, is the Federal Reserve’s Term Asset-Backed Loan Facility, which helped bring the first bond backed by commercial mortgages post-crisis to market last October. This year, up to $20 billion of commercial mortgage bond issuance is expected, according to Aaron Bryson of Barclays Capital.
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Commercial Large Project Lending Improves
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