Financing Loosens Up

There are many reasons to feel positive about the state of commercial real estate finance. CRE loan originations for the second quarter of 2012 were up 25 percent over the same period in 2011, according to the Mortgage Bankers Association. And a growing number of lenders are looking beyond gateway cities and Class A assets when making loans.

Several factors are combining to boost lenders’ confidence. A stabilizing, if sluggish, economy and low mortgage rates, due to a capital flight from Europe, are raising the appeal of financing commercial real estate.

But improving property fundamentals and rising values in most property types are the key factors making the difference.

Combined A and B loans can push loan-to-value ratios as high as 85 percent for the right property and an established sponsor.

Commercial banks—national, regional, and community—have also stepped up lending by a whopping 58 percent over last year’s second quarter. “Banks that have cleaned up failed loans are being much more aggressive and getting the message out that they want to lend.

Another big boost for lending this year: Appraised values have risen and forecast values have improved, so loans are funded at higher levels, Grusd says.