In Brief: The State Of Commercial Lending In 2010

Commercial lenders and borrowers are cautiously optimistic that an uptick in lending will materialize in 2010. Spreads on commercial mortgage loan rates have narrowed significantly from early 2009 levels and property values remain low. Thus, money for new commercial real estate deals can be borrowed relatively inexpensively to buy real estate at bargain prices. Against this backdrop, various lenders plan to make significant commercial loans in 2010. For example:

  • On March 5, 2010, reported that JPMorgan Chase plans to lend $10 billion to small businesses in 2010; Forbes also reported that Wells Fargo and The Huntington National Bank will increase small business lending.
  • On February 15, 2010, the Richmond (Virginia) Times-Dispatch reported that the Abu Dhabi Investment Authority, the largest sovereign wealth fund in the world, aims to invest $10 billion in commercial real estate deals in the United States during the next three years.
  • On February 11, 2010, the Wall Street Journal publicized The Huntington National Bank’s intention to hire 150 bankers charged with doubling the bank’s small business portfolio over the next three years.
  • Jones Lang LaSalle, a professional services firm specializing in real estate services and investment management, issued its annual 2010 Lenders’ Expectations Report which included results from a survey of nationwide lenders indicating that 43 percent of these lenders expect commercial real estate loan production in the range of $1 to $3 billion in 2010. By comparison, in 2009, only 21 percent of lenders surveyed by the firm expected loan production in this range.

This year also witnessed the first multi-borrower commercial mortgage-backed securities (CMBS) deal since June 2008, according to data from BusinessWeek/Bloomberg. The deal involved a $53.5 million refinancing of a corporate park near Pittsburgh and owned by a Pennsylvania-based company. Other multi-borrower CMBS deals appear to be in the works, too. On February 17, 2010, BusinessWeek reported that Gimcher Realty Trust of Columbus is working with Goldman Sachs to refinance approximately $37.2 million in debt on a Tennessee shopping mall that may be bundled with other loans and packaged as securities.

Naturally, steps toward recovery have been circumspect. The Federal Reserve Board’s January 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices reveals that, for the most part, commercial banks stopped tightening lending standards in the last quarter of 2009. But, banks still have yet to loosen the tightened standards instituted in the preceding two years. And, there are other concerns facing the commercial lending industry this year. The Business Courier of Cincinnati recently reported that the economic crisis has reduced local commercial real estate values by thirty to forty percent and distressed properties are responsible for impeding economic recovery.

On balance, there are indications – both anecdotal and statistical – that 2010 may be a better year for commercial lending than 2009. In light of these promising developments in commercial real estate activities, the roll out of Excel Title Services – a Kentucky and Cincinnati title company – seems particularly timely and will complement well DBL Law’s other commercial real estate acquisition and financing services.