Small banks shrinking away from commercial real estate

As regulators are closing in, lenders are backing off

TRD New York /
Oct.October 04, 2016 11:50 AM

Small banks are retreating from financing commercial real estate as federal regulators ramp up scrutiny of such lending.

The Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency have repeatedly issued warnings to commercial real estate lenders, urging banks to strengthen loan terms. As a result, smaller banks are selling off loans and hesitant to issue new ones, leaving private equity funds and other institutional lenders to fill in the gaps, the New York Times reported. JLL’s TRData LogoTINY Aaron Appel told the Times that there’s less competition now for $5 million to $10 million commercial property deals, especially for loans involving construction or redevelopment projects.

Large banks are also pulling back, since they can’t count on selling off portions of large loans to smaller banks. Instead, Michael Gigliotti, a broker for HFF, told the newspaper, property owners are turning to foreign banks. According to the Federal Reserve, American offices of foreign banks now have $51.8 billion in commercial mortgage holdings, a 56 percent increase from last year. For example, a group of foreign banks — led by Bank of China and Deutsche Bank — provided a $1.5 billion construction loan to Related Cos. and Oxford Properties Group for the Shops & Restaurants at Hudson Yards.

In some cases, banks are also teaming up with mezzanine lenders to speed up and simplify deals.

Arkansas-based Bank of the Ozarks seems to be one smaller bank that’s bucking the trend. As one of the most active construction lenders, its New York City real estate loans swelled to $1.9 billion in the second quarter from $1.6 billion at the end of 2015.  [NYT]Kathryn Brenzel


Related Articles

arrow_forward_ios
Joe Moinian and 123 Linden Blvd. (Moinian Group)

These were the top outer borough loans in July

These were the top outer borough loans in July
Clipper Equity's David Bistricer (REIT)

David Bistricer’s Clipper Realty reports record Q2 profit

David Bistricer’s Clipper Realty reports record Q2 profit
Vornado CEO Steven Roth and a rendering of the Farley Post Office building (Getty, iStock, SOM)

Vornado will install facial recognition tech in all its buildings

Vornado will install facial recognition tech in all its buildings
28 Liberty Street (Wikipedia)

Manhattan’s office leasing sees busiest month since January

Manhattan’s office leasing sees busiest month since January
Maison Kayser (Photo via Tools of Men via Flickr)

Maison Kayser may bid New York adieu

Maison Kayser may bid New York adieu
Newmark’s Brian Waterman with 7 Hanover Square (Google Maps, Twitter)

Newmark nabs REBNY prize for deal with NYC Health + Hospitals

Newmark nabs REBNY prize for deal with NYC Health + Hospitals
The legislation from a City Council member introduced a bill to temporarily repeal the commercial rent tax for businesses during the Covid-19 state of emergency. (Getty, iStock)

Commercial rent tax cut introduced in City Council

Commercial rent tax cut introduced in City Council
Michael Rudder, James Nelson, 141 Wooster Street and 633 Third Avenue (Google Maps)

The Outlook: Industry experts break down Manhattan’s office condo market

The Outlook: Industry experts break down Manhattan’s office condo market
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...