CRE Lenders Optimistic About 2010 Production

An increasing number of lenders to the commercial real estate sector predict loan production will increase this year, according to Jones Lang LaSalle's annual 2010 Lenders' Production Expectations Survey.

Forty-three percent of respondents expect their loan production to range from $2 billion to $4 billion in 2010 – a number that is more than double the rate that lenders surveyed reported sourcing in 2009 (at 21%).

Showing even more future optimism, nearly 70% of respondents say their loan production will ramp up to $2 billion to $4 billion in 2011. In another encouraging metric, the number of lenders that expect to lend more than $4 billion jumped up 6% from 9.3% in 2009 to 15.2% in 2010.

Jones Lang LaSalle's survey – administered directly to 60 nationwide lenders through a face-to-face questionnaire – included a mix of insurance companies, commercial mortgage-backed securities dealers, private equity lenders, commercial banks and government agencies. It was conducted over several days during this week's Mortgage Bankers Association's Commercial Real Estate Finance/Multifamily Housing Convention and Expo in Las Vegas.

"Lenders we spoke with say they'll be giving borrowers 24+ month extensions in order to avoid foreclosure on high-quality, well-located assets," says Bart Steinfeld, Jones Lang LaSalle's managing director of the real estate investment banking practice. "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.

"However, many financial institutions don't want to hold onto assets and now are coming to terms with the fact that they can no longer "extend and pretend,'" he adds. "They're now realizing it makes good sense to move these assets off their balance sheets to create greater ability to originate loans this year."

The number of lenders willing to lend greater sums toward single-asset acquisitions is also shifting. In 2009, the majority of respondents indicated they would lend only $10 million to $25 million on a single asset acquisition. In 2010, the greatest percentage of respondents was split evenly at 28% each among those willing to lend $50 million to $100 million and $100 million plus (hence, 56% will lend $50 million or more for single-asset purchases). In 2011, the number of lenders willing to lend $50 million to $100 million plus rises by 8% to 64% of respondents.

"A few life companies and investment banks we spoke with indicated that they're willing to lend $150 million to $500 million on large, single-asset acquisitions in 2010," says David Hendrickson, managing director of Jones Lang LaSalle's real estate investment banking practice.

Approaching maturities will continue to share the stage in 2010, with more than 67% of life company respondents acknowledging 40% to 60% of their portfolios will be allocated to the refinancing of maturing loans.

SOURCE: Jones Lang LaSalle


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