Bank Survey Reveals Cautious Optimism For Commercial Real Estate

July 25, 2002
SAN FRANCISCO--(BUSINESS WIRE FEATURES)--July 25, 2002--A current survey of commercial real estate lending officers at banks throughout the country found that commercial real estate credit conditions are more favorable than they were at the beginning of the year. Similarly, the bankers surveyed feel slightly more optimistic about commercial real estate than they were earlier this year. The "Bridger Midyear 2002 Survey of Lenders' Commercial Real Estate Perspectives," conducted by Northern California-based Bridger Commercial Funding, reflects the current opinions of 145 senior loan officers at 109 banks across the nation, and updates a similar Bridger survey completed in January.

Almost half the bankers surveyed expect lending volume to pick up in the second half of 2002, while only 1/3 expected higher volumes when surveyed in January. Strategically, banks will be more aggressive in building their commercial real estate loan portfolios during the balance of the year, according to the loan officers. Eighty-one percent of respondents indicated that their institutions will selectively increase the amount of commercial real estate loans outstanding, up from 70% six months ago. Overall, 92% of loan officers stated that their banks' portfolios would grow in the second half, up from 78% in January.

    The bankers' optimism about loan growth in the second half of 2002 comes amid credit standards that remain stable, but tight, they reported. Forty percent of the respondents indicated that credit and underwriting standards at their institutions did not change during January through June, while 55% see tighter credit standards (as compared to 82% reporting tighter credit standards six months ago).

    "Ironically, in the current economic downturn commercial real estate may end up being the shining star among bank loan portfolios," said Peter Grabell, senior vice president of Bridger. "In the recession of the early `90's, commercial real estate performed poorly and brought many banks to their knees. This time around, it's the corporate credits that are causing problems for banks," Grabell added. Toward this end, the survey showed virtually no change in lenders' projections about the performance of their commercial real estate portfolios in the second half. Once again, over 85% of lenders surveyed expect delinquency levels to be moderate at worst, with few foreclosures anticipated.

    "Surprisingly, 82% of the bankers surveyed reported that the availability of terrorism insurance has little effect on their lending strategies. By contrast, the lack of available terrorism insurance coverage, as well as the newly restrictive terms and cost of coverage that is available, is the biggest issue facing permanent mortgage lenders today," Grabell commented. He speculated the fact that banks' traditionally making shorter-term loans contributed to this finding in the survey. Nevertheless, he cautioned that bankers should pay close attention to the progress of congressional legislation on terrorism insurance this summer, as they find that properties they've loaned on have new gaps in insurance that previously were not material.

    Bridger Commercial Funding is the leading commercial real estate capital markets resource serving the U.S. banking industry, with over 850 bank relationships nationwide. Bridger's innovative products and technology applications help banks maximize their risk-adjusted returns by accessing the secondary mortgage market. Bridger's commercial mortgage-backed securities (CMBS) loan origination program enables banks to boost financial performance by generating substantial fee income while retaining and enhancing borrower relationships. In addition, Bridger's BankXchange(TM) program optimizes banks' loan portfolio risk profiles and returns by facilitating purchases and sales of loan portfolios, whole loans and participations. Through a growing network of over 3,100 commercial loan officers nationwide, Bridger is commercial real estate banking's premier provider of secondary market origination and trading solutions.

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