There’s still plenty of capital available in all lending segments for the right retail deal with the right tenants, panelists said at RECon, in Las Vegas, in May.
“The fundamentals are good and strong,” said Ken McIntyre, senior vice president of Hudson City Savings Bank, of Paramus, N.J. McIntyre said he takes exception with the numerous industry professionals comparing the current lending environment with the 2006 market. While there has been a slight erosion in underwriting standards, he said, the present market has more built-in safeguards, he said. “Unlike 2006, where there were loans based on future pro formas, we are all exclusively writing on today’s standards.”
A few problems remain. Big-box centers with troubled or potentially troubled tenants that may not survive the shift to online shopping are among them, said Kieran Quinn, managing director of Guggenheim Commercial Real Estate Finance. However, the quality of the real estate coupled with adequate capital reserves, can overcome that, said O’Neil. “The question always is, how liquid is that space?” An owner who has the expertise to reconfigure a center for smaller tenants can also help tip the balance in the loan decision, McIntyre said.
Federal lending standards are dampening some lenders’ efforts to expand their volumes, McIntyre said. Any bank that has $50 billion or more in loans out is considered a “big bank,” he said. “That puts them in the same category as a $1 trillion bank.” McIntyre’s firm has $37 billion out and has had to turn down transactions to stay under that threshhold. “It’s honestly driving deals,” he said. “Banks are shying away from new business.”
The long-standing concern over loan maturities coming due on 10-year loans issue from last decade still has to be addressed as well, panelists agreed. That will be a challenge, said McIntyre, but the industry is gearing up with partners in mezzanine lending to fill that gap.