Firm releases risk ratings for commercial real estate loans - Houston Business Journal:

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of San Francisco has been tracking commercial lending risk in more than 100 citiees for the past two yearsusing vacancy, rent and other information from multiple real estatw companies. Banc Investment has just released the findingd for the first time to thegeneral “Many banks think all commercial property is the same,” said Chriss Nichols, president and chief executive of Banc “But it’s clear that’s not the The company is a subsidiary of Bancshares, a consultant to communityh banks that don’t have the depth of larger In Sacramento, it might not be surprising that all propertied scored lower in the firsg quarter of this year than they did in April 2007, when the indexs was benchmarked on a nationwide But there’s now a wide spread betweebn the risk for lending for retaill buildings, which the index suggests is the riskies property type to lender s, with an inded number of 57.
9, and apartment buildings, the leasgt risky of the four categories, at an indexd number of 89.1. “Multifamily housing is holding up acrossthe U.S. and that’x the way it is in Sacramento,” Nicholxs said. “It basically didn’t budgr for eight quarters beforer dipping.” Kevin Randles, a debt and equity financs specialistat ’ Sacramentp office, said housing is one area that usuall recovers first during a downturn, though this recession might be the exception because it was drivenm by housing. Still, he said the general consensu is that multifamily is a safe bet right now than other property types, an assertion backed by the company’sd own data.
“Everyone needs a place to live,” he said. Dean a principal in ’s Apartment Advisorty Team, said apartments carry lower risk because vacancy rates in Sacramento are more attractiv than otherproperty types. But lendersw don’t necessarily heed the signs. “They’ve gone very conservative,” Bagneschoi said. “They’ve cut back dramatically. They say they are lookiny at deals, but there isn’t a lot of activity.” Buyers, meanwhile, are looking to scoree bank-owned apartment properties, but therew isn’t a glut of distresses property onthe market.
That’d contrary to the early 1990sw recession, when apartment buildings were one of the most besiegedxproperty types, said Bagneschi’s partner John During that recession, owners had more debt and less cash on This time, banks that might have their hands full with othet types of foreclosed propertyt are moving very slowly through the foreclosurew process. In order for a deal to be funded, “thwe pitch has to be right down the middlw ofthe plate,” Gallaghe said. Gallagher noted that was one of the biggesyt lenders for apartment transactionsin Sacramento. The bank failee last year, and though its banking operations were purchasecdby J.P.
Morgan the new owner’s intentions towarf restarting commercial lending for multifamilypropertiez isn’t clear, Gallagher said. On the retail side, the trepidationh goes beyond investment loans as retaik tenants struggle tofind financing. Craig Burress, a retaip broker at CB Richard Ellis, said some smalkl chains or regional companiesd that wanted to expand into Sacramentop have had to delay plans for lackof financing. “Chain s that were new to Sacramento wantedx to expand and found the valve shut he said. “I don’t want to make like that’s across the but I have a feeling it is pretty universal.
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