Commercial Mortgage Finance

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Yellow Belly

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Just wondering if anyone has found a commercial lender with an appetite for business at the moment?

I am a broker (formerly a banker), and have been finding it increasingly difficult to place good quality commercial loans for the past 2-3 months. The reality that I am finding is that many banks might as well have a "closed for business" sign up.

I have a number of quality applicants who are really struggling to get loan approval at present (all would have sailed through 6 months ago!). We are also finding that the cases which we are getting approved (less than 10% of all applications!!!) are being priced at unbelievable margin. Deals that would have been priced off at 5.25-5.75% in 2007 are now attracting rates of 6.5-7.25%.

If lenders are going to continue to apply the LTV, underwriting criteria, and pricing that is currently in place, then I fear for the Irish property market. With impending ECB rate increases all most certainly in the pipeline, combined within a reluctance of the banking sector to release capital I can see a stage where commercial property values could go into free fall. This really is a case of the banking sector taking back your umbrella when it is starting to rain, and while it is important for the banks to protect themselves, it appears that many of them are prepared to close up shop "unofficially".

Has anyone found a willing commercial lender in recent months or is my experience untypical?
 
Banks are looking at the borrowers as much as the deal and the property. There are so many scary stories and real instances out there at the moment where some of the Banks created a very false image of lending money to every Joe Soap and taking equity portions of other properties as security instead of hard cash. There are so many property traders and big and small developers in serious trouble,it does appear that the Commercial market is about to crash.


Saying that IIB and AIB are lending but to the right persons and for the right property.
 
mercman said:
Banks are looking at the borrowers as much as the deal and the property. There are so many scary stories and real instances out there at the moment where some of the Banks created a very false image of lending money to every Joe Soap and taking equity portions of other properties as security instead of hard cash. There are so many property traders and big and small developers in serious trouble,it does appear that the Commercial market is about to crash.


Saying that IIB and AIB are lending but to the right persons and for the right property.
Click to expand...

what is the right property if what you say about a crash comes true
 
I agree Mercman- almost all small/medium developers & property agents are in huge trouble. Basically as sales are now non- existent there main income "artery" has been severed, and as you know business will not survive long with zero revenue.

Even with price reductions of up to €100k off some properties (basically selling at a loss) many are finding it difficult to shift. In many cases this is because people interested in purchasing are struggling to get finance.

For example- 6 months ago a residential investor could borrow 90% of pur price (270k if property was 300K- input 30k plus costs) now the property has fallen to 270k but with new lending criteria he can only borrow 225k- his input now must be 45k, even though the property is costing less.

At the moment with deposit rates hitting circa. 5%+ it would be hard to find a rational reason for purchasing an investment property as you certainly won't get a yield of anywhere near 5%.

Very choppy waters on the horizon indeed I'm afarid, and I don't think that the banks will be throwing too many clients into their "life boat"!!!
 
Can I ask does anyone know what are the current commercial lending rates or where would I find them. I can only seem to find residential rates in all searches I do. Also what % can you typically get on loan, is it the same as residential 80 - 90 %
Thanks.
 
Generally speaking Irish banks do not publically quote commercial rates as the end rate depends on the risk weighting attached to an individual proposal.

I doubt if there is much appetite from Irish Banks to be active in the commercial market. If you are successful in securing an approval I would believe you could pay anything from c 300-400bps above 3 month euribor.

Residential credit policies are under daily review and I would believe it hard to achieve c80-90% for a residential proposal. Commercial proposal historically attracted a lower LTV c <=80% aggregate LTV. BUT you cannot apply this view in today's changing environmnet. Irish banks are using their liquidity for lending in it's core market-residential. In my opinion I believe if you are succesful in convincing the banks that your commercial proposal is an acceptable risk the maximum LTV for owner occupier would be c60-70% LTV.

Hope to helps you and please be very cautious out there if you are considering a commercial loan. If you are considering buying for speculative purposes I would advise you to not or for owner occupier be very cautious - renting may be the option in the short-term - less risk.
 
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