Banks tighten lending standards
The mixture of an economic slowdown and a reduced tolerance for risk is influencing banks to adopt more stringent lending standards and terms regarding commercial real estate loans, according to the Federal Reserve's survey, "The January 2001 Senior Loan Officer Opinion Survey." This survey addressed loan officers from 57 large domestic banks and 24 U.S. branches and agencies of foreign banks.
In the November 2000 survey only 26% of domestic banks reported tightened standards. The January survey brought that number up to more than 40%. Both foreign and domestic banks indicated over the past year they had tightened terms on commercial real estate loans. For instance, about half of the domestic banks increased spreads over their cost of funds, and about 40% demanded higher debt-service coverage ratios.
Another reason foreign respondents expressed concern about the commercial real estate loan market was the availability of take-out financing. In response, many foreign institutions tightened their requirements for take-out financing, demanded higher loan-to-value ratios and raised debt-service coverage ratios.
Demand for commercial real estate loans weakened almost 30% according to domestic respondents and 15% according to foreign respondents. Even so, the overall consensus was that respondents were more concerned with the general economic slump than with the outlook for the commercial real estate market where they operate.
GE Capital Real Estate Streamlines North American Operations
GE Capital realigned its North American division to streamline operations and become more customer focused. The North American division is responsible for lending, investing and capital market activities in the United States and Canada.
This realignment formed three primary groups to focus on the North America real estate customers. The Principal Capital Group, based in Dallas, headed by Dan Smith, will provide fixed and floating rate debt products to developers and owners. The New York-based Institutional Accounts, led by Rich Grimaldi, will focus on opportunity funds, publicly traded companies and REITs. Cheryl Feltgen will head the Specialized Industries group based in Stamford, Conn., which will focus on manufactured housing, affordable housing, hotels, senior living and potential new industries.
Buchanan Street Partners boasts $150 million in transactions
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Newport Beach, Calif.-based Buchanan Street Partners completed $150 million in commercial real estate transactions in three months. This should keep the company on track to generate more than $550 million in total capitalizations in its first year of operation, according to a company representative.
Some recent financing deals include: Talega Business Park for $22.5 million; a Los Angeles-based Embassy Suites for $17.8 million; Warner Atriums based in Woodland Hills, Calif., for $11 million; and San Jose, Calif.-based Villa Hotel for $10.5 million.
Buchanan financing expertise ranges from conventional, floating and fixed-rate mortgages construction loans, bridge financing, participating and high-leveraged debt, mezzanine debt and joint ventures.