Shawn Massey, CCIM, SCLS

Banks Open for Business

This is one many guest bloggers that I hope to include throughout the year.

Steve Bergsman is a well-known writer on the subject of real estate. His latest book, Growing Up Levittown: In a Time of Conformity, Controversy and Cultural Crisis, is now available at Amazon.

Banks Open for Business

                 Although some banks appear to be lending less into the commercial real estate arena, the window is still open for business at America’s banks. Unfortunately, how big that opening is has been erratic, and don’t even think of asking for capital unless a host of considerations are prominent.

            The investment market is still hot for core properties in primary markets. Development projects are on hold, but a renovation project in a strong area can get financing especially if you have a new anchor taking vacant space.

            Sponsorship is all-important. Having a successful track record with a particular lender is very helpful.

            Starting at the end of 2010, the lending window for commercial real estate was thrown wide open for the first time since the start of the recession. Then through the first six months of 2011, commercial real estate sales were up almost 150% over the year before for all property types. Everyone was assuming 2011 was going to be a very good year. That didn’t happen.

            New loan origination was probably up 50% through the first three quarters of 2011, but there was a significant pull-back starting in late August.

            The problem, lender and investor confidence was shaken by a slew of uncertainties, problems in Europe, volatility of capital markets, U.S. credit downgrade and the political fighting in Washington.

            As for the banks, through the first three quarters of 2011, lending was up almost 50%. Fourth quarter was not a big quarter.

            While some banks have pulled back a bit, others haven’t. Cleveland-based KeyCorp is one that didn’t

            The big regional bank has been a major commercial real estate lender on a national basis for the past 20 years. From 2007 through 2009, when other U.S. financial institutions were floundering on bad mortgage and weakening commercial real estate, Key aggressively attacked its commercial loan situation and largely resolved its problem loans. Having righted itself quickly, the bank jumped deep into the commercial real estate finance market starting at the end of 2010.

            Key’s income property group did about $200 million in business in 2010, then last year that number rose to $1.4 billion.

            What Key looks for is good sponsors, track record, solid leasing and cash flow, and not a lot of market risk or speculation. In that kind of environment it did have an appetite for retail.

             Other banks haven’t forsaken retail either, but the product (development) has to have a story. It has to have a decent loan-to-value. It has to have a sponsorship that has a track record and can perform. If you hit those things, there is a plenty of capital available – as much capital that has ever been available. If you don’t hit those three things, you will have a difficult time raising capital.

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Shawn Massey, CCIM, SCLS is a partner with The Shopping Center Group a 3rd party retail real estate advisory firm in their Memphis office, an adjunct professor in the graduate real estate program at The University of Memphis and a co-founder and Chairman of the Board for the Memphis Business Academy charter schools (K-12grade) in the Frayser area of Memphis.  

For all your retail real estate needs (tenant representation, landlord representation and property, investment & land sales) I hope that you will choose The Shopping Center Group and me to represent you and your business.  We understand that representation is a privilege and that you have a choice!

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