By Scott Lynn

the-banks-are-backThe Banks are back!!!  Well, at least they are making commercial real estate loans again.  We’ve seen a big uptick in CRE bank loan activity at all strata of the playing field. Local, regional, national, and international banks are all back in full force.

In 2012 Metropolitan Capital Advisors (MCA) closed over $250,000,000 of loans with the bank community, which represented 55% of this year’s book. Historically, almost 60% of our firm’s annual production is placed with banks. When the banks are lending, we are happy campers, and so are our Clients!

In a nutshell, banks have two buckets of money to offer CRE players:

1) Fixed or floating rate loans with terms anywhere from 1 to 10 years. These loans are perfect for acquisitions or refinancing of property with a stabilized income stream.

2) In cases where the property requires construction or renovation with lease up risk, a floating rate loan from a bank may be the best route to go to provide the most flexibility.

Recently, the banks have been active in multifamily, healthcare, and single tenant/user construction loans. However, banks are beginning to spread their wings and are now looking at office, retail, and land development as confidence in the economy has gained traction and as CRE prices have stabilized.

Today, a bank’s cost of funds is so low that the rates they are offering Borrowers are extremely attractive and competitive.  So, what are rates today?  Frankly, it goes right back to the famous real estate cliché, “Depends on the Deal.”  If you are curious about pricing and options from a bank, talk to your CRE Financier…preferably any of the Senior Directors at MCA.

If you are interested in pursuing a bank type loan for your CRE deal, be prepared for full disclosure on the Borrower and its principals.  Standard requested documents include such items as 3 years of Tax Returns, Financial Statements with Contingent Debt and detailed Property Level, and Global and Personal Cash Flows. Don’t beat around the bush by not having this stuff ready to present. The last thing you want to do during a call or meeting is to look like a dummy by responding to the request with, “Um.  Okay, I’ll get you that stuff as soon as I get it prepared.”

With complicated Borrowers and/or Principals the process can feel like a financial proctology exam!  Once again, tapping the expertise of MCA can minimize the pain. And, yes, banks will consider non-recourse loans, but they are still going to want to look in your underwear drawer and know with whom they are doing business.

So, disclosure with transparency is the name of the game if you want to put your hand in a bank’s money bucket.  The effort may very well prove to be worth it as the appetite for CRE loans has increased dramatically over the past year.  Banks offer very attractive pricing and, most certainly, are the best equipped to offer other flexible terms and structure since they usually hold the loans on their books.  The Banks are back, and that is good news for the commercial real estate industry.