Banks Plan More Commercial Lending
By Scott Blake
2012 offers a mixed bag in commercial real estate lending.
On the positive side, most US banks surveyed said they plan to do more commercial lending this year.
On the flip side, experts have found, economic growth has slowed in some sectors, real estate loan delinquencies remain high, and many lenders are still tightening loan underwriting standards.
Among the top trends noted by financial advisors for stimulating commercial real estate is foreign investment — one of the Miami market’s strong points.
Miami mortgage broker Horacio Stuart Aguirre said he saw a renewed willingness for lending among bankers at the Mortgage Brokers Association’s annual Commercial Estate Finance Conference.
"This year there was marked difference in the posturing of national lending institutions, be they banks or Wall Street operations," said Mr. Aguirre, president and principal broker at H.S. Aguirre & Associates, a commercial capital and management advisory firm.
"This was a major improvement from that of recent years," he added, "when there was no desire to meet and discuss anything other than "When ya think this [market bust] all will be over?’"
A 2012 survey of banking trends by financial services consultants Omega Performance found that nearly 61% of US banks plan to do more commercial lending this year, and nearly 13% said they plan to do "considerably more" commercial lending.
Moreover, the survey found that nearly 20% of banks planned to slightly ease their lending standards for consumer and commercial loans, while 15% planned to tighten standards slightly. Most said their standards would remain the same.
The outlook also seems promising for small businesses. The Omega survey found that nearly 13% of US banks said their small business lending would increase drastically in 2012, while nearly 64% said it would increase slowly.
Mr. Aguirre said there is plenty of financing out there for the right borrowers.
"Today," he said, "the banks are flush with liquidity and eagerness to get a game going again and have the need to produce earnings and fees. They simply can’t earn a living doing nothing."
But the standards have changed.
"Now," he added, "are the banks coming back with the same reckless and irresponsible behavior of the wild and crazy boom days? No. They are being very selective as to what they are financing and very careful as to due-diligence."
A report by financial advisory firm Deloitte LLC noted that commercial real estate is benefitting from favorable fundamentals and absorption dynamics, with record-low construction activity driving better rent and vacancy trends, particularly in the apartment and lodging sectors.
"This is attracting greater foreign investment, and overall transaction volumes continue to climb," the report states. "Meanwhile, there’s still a significant amount of unused reserve financial capital on the sidelines, waiting for investment opportunities."
Miami, meanwhile, has its own market dynamics. Mr. Aguirre said he sees an emergence of large rental properties in Miami’s urban core
"We need to be careful because too many of these large projects are, in fact, competing with the large inventory of condominiums currently in the rental market pool," he said. "We also need to be careful that too much economic expectations for condominium growth do not cloud expectations of retail property growth."
Mr. Aguirre said he also sees local banks, although flush with cash, being hampered by oversight and government regulations that have greatly reduced the population of eligible borrowers.
"Many clients come to us, telling us that their banker was very interested in financing a small- to medium-sized multi-family property until the credit department pulled a credit report and a background check," Mr. Aguirre said.
"Still," he added, "there are lenders who are looking for business and willing to listen to a story, and if the story is not about how someone walked away, there are strategies to make a deal work."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.