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Kim Gatley
enior Vice President & Director of Research at REOC San Antonio

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Lenders shy away from commercial real estate

BankIconSmall banks reportedly are becoming reluctant to back commercial real estate as federal regulators scrutinize relaxed lending standards. The Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency have issued several warnings to commercial real estate lenders in an effort to get banks to strengthen loan terms, according to a report in The New York Times.

For small banks, commercial property loans are among some of their largest loans, so that guideline stands as a challenge. As smaller lenders move to sell off loans — and are reluctant to issue new ones — private equity funds and other institutional lenders are filling the void and moving in on the lucrative deals.

According to Bloomberg, private funds are seeking a record $32 billion for commercial-property debt. Buyout firms, real estate investment trusts and hedge funds can make large loans seen as too risky for banks. These companies can then turn around and charge higher interest rates than what might be found from certain banks.

Foreign banks are moving in on the opportunities, as well. American offices of foreign banks have $51.8 billion in commercial mortgage holdings, up 56 percent from just a year ago, according to the Federal Reserve. The Shops at Hudson Yards project in New York, for example, was financed entirely by foreign banks, according to the Times.

Click here to read the full article: Lenders shy away from commercial real estate San Antonio Business Journal 10-4-2016



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