Tag: CRE

Get Our Book! On Amazon Now - The Successful Lender’s Field Guide

Lender Training Book

This is a great time for you to pick up our new book – The Successful Lender’s Field Guide. This 170-page book, in both paperback and Kindle format, is the essential commercial lending practitioner's roadmap to running circles around your lending competition. The commercial lending environment is more competitive than ever, and the margin for error has never been smaller. While lenders are formally taught credit fundamentals, little information is provided that quantifies the structural drivers of loan performance – until now.


Here is Where We Are In The CRE Cycle

CRE Commercial Real Estate Outlook

First, let’s stipulate that we really have no idea where we are in the real estate cycle. We recognize that this is less than stellar opening sentence and one that doesn’t inspire confidence, but we don’t want to mislead. That said, since we are forced for management and regulator purposes to monitor the real estate business cycle, we have a model that looks at each major commercial real estate sector and predicts where we are in the economic cycle. For ease of understanding, we have equated the real estate cycle with the proverbial baseball game.

1Q CRE Bank Collateral Value Update

According to the latest data from Moody’s/RCA CPPI, the value of commercial real estate rose by 0.5% in March bringing the total appreciation rate for 2017 to 0.8%. This has been in-line with most bank’s projections that forecasted an average of 3% for the year, or 0.75% for the quarter.  Most of this growth was a result of demand in major metro markets, as smaller markets saw a decline in value of 0.2%.

Rate Shocks, Property Value and Loss Relationship for Bank CRE Loans

Better Management of CRE Credit

When stress testing any given loan, there is a fine but correlated relationship between cash flow, property values, and expected losses. In this article, we gather our data and present a composite CRE benchmark in which to calibrate your bank’s model or expectations. At a minimum, this data will help your bank hone their credit shock assumptions and give you an idea on if you have adequate reserve levels at both the loan and loan portfolio level.


The Historical Mistake


CRE Pricing Update: 2Q

Commercial Real Estate (CRE) Bank Pricing

As we head into the second quarter, banks are reporting being slightly behind their commercial (C&I) and commercial real estate (CRE) loan budgets for 2017 by 3% to 10%. Higher short-term yields, the delayed evolution of President’s Trump economic agenda, and commercial real estate concentration regulatory pressure have all played a role.  Pricing has remained steady over the first quarter in most markets with some major metro markets experiencing a slight decrease in pricing to the tune of two basis points.

22 Retail Tenants That Increase Lending Risk in 2017

2017 Retail Lending Risk

Every year we update our projections on national retail tenants that show higher than average risk of shutting down or having financial problems that elevate probabilities of default in retail centers where banks have loans outstanding. Some of these are obvious and have been in the news for years.

How Current HVCRE Rules Cause More Risk To Banks

Mitigating Construction Loan Risk

Back in June of 2013, the FDIC, OCC, and Federal Reserve jointly approved rules intended to implement new international banking standards. Known as the Basel III Capital Accords, Basel III uses a risk weighting system to determine the capital ratios for higher risk assets. Starting in 2015, all US banks that lend on “high volatility commercial real estate” (HVCRE) are required to hold more capital against such loans.

Why Class C Office Loans Are Better Than Class A

The Credit Risk Of Office Lending

Given our position mid-business cycle, it is time for banks to consider decreasing their lending to Class A office space and increasing their exposure to Class C space. This is the opposite of what most banks are doing and the concept of going “down market” is counterintuitive for most bankers at this stage of the economic cycle. After all, don’t you want to lend in the highest quality properties in a downturn? The answer is no and in this article we look at the data plus the logic behind shifting your commercial portfolio to a lower class and more worn properties.

Why ZIRP Is Building Up Real Estate Risk At Banks [Calculator]

Limiting Commercial Real Estate (CRE) Risk At Banks

There is many ways the current interest rate environment is impacting banks.  The balance sheets of community banks, for instance, are very sensitive to short-term interest rates. Short-term rates drive the cost of funding, loan and securities yields.

How to Book More C&I loans

Most community banks are interested in booking local C&I loans but are unable to generate meaningful outstanding balances.


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