Commercial Lending, Terms, Supply,Demand

Prospect for CRE in 2010

Posted on Wednesday, February 10, 2010

Survey says....

* Forty-three percent of respondents to Jones Lang LaSalle’s annual survey expect their loan production to range from $2 to $4 billion in 2010-a number that is more than double the 21 percent that reported sourcing in this range for 2009.

* Showing even more future optimism, 15.2 percent predict they will lend more than $4 billion this year, and nearly 70 percent of respondents say their loan production will ramp up to $2 to $4 billion in 2011.

* But many financial institutions don’t want to hold on to assets and now are coming to terms with the fact that they can no longer ‘extend and pretend’. 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 Jones Lang LaSalle survey also revealed that lenders are becoming more willing to lend larger sums for a single-asset acquisition. Fifty-six percent of respondents said they will lend $50 million or more for the purchase of a single property. Last year, most respondents were only willing to lend up to $25 million for one property.

* As for the sectors that lenders would most prefer to lend, 27 percent say they’ll single out multifamily for their loan dollars, while another 21 percent say they’ll focus on the office sector in 2010. Hotels stand out as the sector to which lenders are least likely to lend, but Jones Lang LaSalle says a select number of lenders indicated an interest in hotel investments given their belief that the sector is at its bottom.

* According to the survey results, there is a significant increase in the number of lenders who are selling performing and non-performing loans. In addition, these lenders are prepared to accept significant discounts in 2010 to create liquidity and to rid themselves of these non-core or problem assets, Jones Lang LaSalle said.
Performing notes are typically selling for 70 to 90 cents on the dollar, while sub-performing, or “scratch and dent” loans are being offloaded for below 60 cents on the dollar.

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