Slap-in-the-face reality check: Bankers don’t think the commercial real estate industry is as important as industry members do.
That’s one of the reasons why Jones Lang LaSalle, in its Feb. 23 market “pulse” report, noted that “While credit conditions are showing some improvements, commercial real estate lending largely is not.”
“There are a lot of priorities banks have ahead of commercial real estate mortgages,” said Jere Lucey, managing director of the Real Estate Investment Banking Group for Jones Lang LaSalle. “We’re probably the third or fourth order of priority for most banks. It’s viewed as an important industry, but not as important an industry as corporations or municipalities.”
And, because the market for short- and medium-term notes has dried up, corporations and municipalities have been drawing on their bank facilities like never before, he said.
“Every credit card receivable that comes off of your credit card that was previously being securitized, isn’t being securitized; every auto loan that’s being made that had been previously securitized is no longer being securitized,” Mr. Lucey said.
For vultures, there is some good news buried in the sludge, though it’s the same good news we’ve been hearing for months and months, with little yet to show for it. “In the United States, a number of highly leveraged assets are being brought to market as their mezzanine lenders exercise their contractual and legal rights, and some first lien holders deal with loan maturities,” reads the JLL report.
“You know, we haven’t seen it that much [in New York City],” Mr. Lucey said. But we may soon.
It is, as Mr. Lucey put it, “a rolling process.” Meaning, if the credit markets remain tight, borrowers may not be able to refinance or extend debt maturing in 2009 ($264 billion worth of commercial real estate debt nationwide is scheduled to mature in 2009, according to Real Estate Economics).
When that matures, New York may finally see some distressed assets come to market, some of which may come from REITs, the report indicated.
SL Green implied as much earlier this week, when CEO Marc Holliday told a Citi CEO conference that the REIT had not ruled out selling some of its most prized assets in Manhattan. “We’re not opposed to it,” Mr. Holliday said.