Despite the current instability of the commercial real estate market, an increasing number of lenders are expanding their commercial lending activities, according to a Feb. 17 CoStar Group report.
From November to December, new commercial real estate lending more than doubled, and existing account renewals increased 57 percent. Overall, total new commercial real estate commitments surged 157 percent. In addition, some larger financial intuitions have increased their CRE asset disposal activities.
According to Jones Lang LaSalle’s annual 2010 Lender’s Production Expectations Survey, other banks plan to follow suit, CoStar Group reported. The survey showed that 43 percent of respondents expect loan production to range from $2 billion to $4 billion in 2010, more than double the previous year, while 70 percent indicated the same range for 2011. Moreover, the number of respondents expecting to lend more than $4 billion in 2010 increased from 9.3 percent in 2009 to 15.2 percent.
"Lenders we spoke with say they'll be giving borrowers 24-plus month extensions in order to avoid foreclosure on high quality, well-located assets," Bart Steinfeld, a managing director at Jones Lang LaSalle, told the CoStar Group. "With more than $1 trillion worth of commercial real estate loans expected to mature between now and 2013, it's no surprise that a majority of borrowers are placing significant importance on restructuring those loans.”
Of the respondents who indicated that they will be increasing single-asset acquisition lending activities, 28 percent are planning to lend $50 million to $100 million and an additional 28 percent are planning to lend more than $100 million. The number of respondents planning to increase single-asset acquisition lending to between $50 million to $100 million in 2011 jumped to 64 percent.
More than 67 percent of life company respondents indicated that 40 percent to 60 percent of their portfolios will be allocated to refinancing maturing loans in 2010. However, the respondents indicated that they will maintain tight underwriting standards similar to those in 2009. According to more than 74 percent of life company respondents, loan-to-value ratios will fall between 50 percent to 70 percent in both 2010 and 2011.
The majority of respondents, 59 percent, indicated that loan terms in 2010 will range five or more years while only 28 percent indicated three to five years.
When asked about which sectors they would most prefer to lend to in 2010, 27 percent of the respondents indicated multifamily while 21 percent indicated office. The hotel sector was the least-preferred sector.
The number of respondents who indicated that they are selling performing and non-performing loans increased, according to the survey. Of the respondents, 29 percent indicated that they are selling performing loans at 90 cents on the dollar while 24 percent indicated 70 cents to 80 cents on the dollar.