Small banks shrinking away from commercial real estate

As regulators are closing in, lenders are backing off

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
Clare Newman with Governors Island (Credit: Governors Island, Getty Images)

Governors Island redevelopment opposed as excessive

Governors Island redevelopment opposed as excessive
Blackstone's Ken Caplan (iStock; Blackstone)

Industrial now 36% of Blackstone’s RE portfolio

Industrial now 36% of Blackstone’s RE portfolio
Almanac Realty Investors managing director Matthew Kaplan (Almanac Realty; iStock)

Workforce housing investor gets $320M boost

Workforce housing investor gets $320M boost
Corcoran to sublet 50K sf in IBM Building

Corcoran to sublet 50K sf in IBM Building

Corcoran to sublet 50K sf in IBM Building
 Robert Morse, executive chairman of Bridge Investment Group, one of the major Opportunity Zone investors focusing on real estate.  (Bridge, Stanford)

Opportunity Zone investments got a boost in 2020

Opportunity Zone investments got a boost in 2020
333 Johnson Avenue with Royalton Capital’s Jin Lee, Sciame Construction's Frank Sciame and Normandy Real Estate Partners' Finn Wentworth (Royalton Capital, Sciame, Normandy)

Normandy sued by former partners for hiding Netflix deal

Normandy sued by former partners for hiding Netflix deal
Fabric co-founder, CEO Elram Goren (Getty, Elram Goren via LinkedIn)

Startup wants to bring “micro-warehouses” to vacant retail

Startup wants to bring “micro-warehouses” to vacant retail
Security around Trump Tower to be reduced after 45th POTUS leaves office. (Getty, The Trump Organization)

Fifth Avenue will look different after Trump leaves office

Fifth Avenue will look different after Trump leaves office
arrow_forward_ios

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

Loading...