The mood surrounding commercial real estate lending in Massachusetts has improved greatly in recent months, but new lending data from the first quarter of 2010 shows a market still searching for a bottom.
The number of commercial real estate loans in the state fell by 8 percent year-over-year in the first quarter compared to the same time in 2009, even as overall loan volume grew by 8 percent, according to new data from The Warren Group, publisher of Banker & Tradesman.
Lenders wrote roughly $4.6 billion in commercial real estate mortgages in the first quarter of 2010, compared to $4.3 billion in the first quarter of 2009. The total number of commercial real estate mortgages written in the quarter fell to 1,508, from 1,637 a year earlier.
“The world has changed a lot in the past three months,” said Todd Finard of Finard Properties. “We’ve seen the reemergence of the capital markets for the right deals. They’re real estate loans that actually look like real estate loans, not personal loans. The money is being loaned on the fundamentals of the real estate again.”
Local Presence
Data from the state’s top 10 commercial real estate lenders shows local banks continuing to gain market share while their larger competitors grapple with severe market dislocations.
Rockland Trust jumped ahead of TD Bank to grab the top market share position. Cape Cod Five Cents Savings Bank, the 18th most active lender in the first quarter of 2009, was the fifth most active lender in the first quarter this year. Middlesex Savings Bank doubled the amount of money it put on the street last year. Salem Five Cents Mortgage Corp. held its market share while tripling its commercial mortgage volume output.
“The difference between this spring and the spring of 2009 is night and day,” said John Gorga, president of the Boston commercial real estate finance firm Fantini & Gorga. “There’s a much greater willingness to be lending into this market.”
In 2009, Gorga said, community banks remained active for deals up to $15 million, while large lenders worked to repair their balance sheets. Those big lenders are now back in the marketplace, but falling values and faltering property performance have kept them from closing on a raft of deals.
The Warren Group data shows that even though Bank of America grew its market share slightly in the first quarter of 2010, the volume of mortgages the bank wrote in the first quarter fell by more than 80 percent. The slowdown was so drastic that, in the first quarter, commercial real estate investors borrowed more money from Salem Five than they borrowed from Bank of America.
RBS Citizens, which recently told Banker & Tradesman it was shifting its commercial real estate lending strategy to focus more on lucrative relationships over deal volume, posted a year-over-year bump in activity. Its loans grew by 8 percent, and its loan volume jumped by nearly 40 percent.
Peter Goedecke, managing member of the Boston finance firm Goedecke & Co., said while many community lenders have been enjoying breathing room as bigger lenders have pulled back to focus on bigger customers, life insurance companies are now pressing bank lenders “on all fronts.” Life companies are in the market for mortgages from $1 million to $100 million, Goedecke said, and in many cases, their rates are now lower than banks’.
Goedecke said while “pretty much everybody is back in the market, and the psychology is completely different than it was even three months ago,” commercial lenders reentering the market need time to find and close on deals that work for them. “It’s not plumbing. You can’t just turn the spigot. And it’s even harder if you’re trying to do thoughtful, conservative business.”
