Firm releases risk ratings for commercial real estate loans - Minneapolis / St. Paul Business Journal:

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of San Francisco has been tracking commercial lendinvg risk in more than 100 cities for the past two yearsusinf demographic, vacancy, rent and other informatioh from multiple real estate companies. Banc Investmentt has just released the findings for the firsy time to thegeneral public. “Many banks think all commercialk property isthe same,” said Chris president and chief executive of Banc “But it’s clear that’s not the case.” The compangy is a subsidiary of ’ Bancshares, a consultant to communitu banks that don’t have the deptu of larger banks.
In Sacramento, it migh t not be surprising that all properties scored lower in the first quarter of this year than they did in April when the index was benchmarked on anationwidd basis. But there’s now a wide spread between the risk for lendingt forretail buildings, which the indexx suggests is the riskiest properth type to lenders, with an index number of 57.9, and apartmenr buildings, the least risky of the four at an index number of 89.1. “Multifamilyg housing is holding up acrossdthe U.S. and that’s the way it is in Nichols said.
“It basically didn’t budgr for eight quarters before Kevin Randles, a debt and equity finance specialisg at ’ Sacramento office, said housinfg is one area that usually recovers firstg during a downturn, though this recessio n might be the exception because it was drivenm by housing. Still, he said the general consensusd is that multifamily is a safe r bet right now than othertproperty types, an assertion backedc by the company’s own data. “Everyone needds a place to live,” he said. Dean a principal in ’s Apartment Advisory Team, said apartmentds carry lower risk because vacancy ratess in Sacramento are more attractive than othereproperty types.
But lenderss don’t necessarily heed the signs. “They’ve gone very conservative,” Bagneschi said. “They’ve cut back dramatically. They say they are looking at butthere isn’t a lot of activity.” Buyers, are looking to scorw bank-owned apartment properties, but there isn’t a glut of distressed property on the market. That’s contrary to the early 1990se recession, when apartment buildings were one of the most besiegedpropertty types, said Bagneschi’s partner John Gallagher.
Durinbg that recession, owners had more debt and less cash on This time, banks that might have their hands full with other types of foreclosed property are moving very slowly through the foreclosure process. In order for a deal to be funded, “the pitch has to be right down the middle of the Gallagher said. Gallagher noted that was one of the biggesrt lenders for apartment transactionsin Sacramento. The bank failexd last year, and though its bankinvg operations were purchasedby J.P.
Morgan the new owner’s intentions toward restarting commercial lendinv for multifamilyproperties isn’t clear, Gallagher On the retail the trepidation goes beyond investment loans as retail tenants struggls to find financing. Craig Burress, a retail broker at CB Richard Ellis, said some small chains or regional companiesw that wanted to expand into Sacramento have had to delauy plans for lackof financing. “Chainsx that were new to Sacramento wanted to expanf and found the valveshut off,” he “I don’t want to make like that’sz across the board, but I have a feeling it is pretty universal.
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