Bridger Survey Finds Banks Readily Lending on Commercial Real Estate.

Business Editors/Real Estate Writers

SAN FRANCISCO--(BUSINESS WIRE)--Aug. 28, 2003

Banks are maintaining or growing their commercial real estate loan portfolios despite tightening their underwriting standards, according to a newly released survey conducted by Bridger Commercial Funding. The "Survey of Lenders' Commercial Real Estate Perspectives" for the second half of 2003 reflects the opinions of loan officers and senior management from 80 commercial banks across the nation. Bridger's semi-annual survey is targeted at bankers who are active in commercial real estate lending, and provides a nationwide perspective on the near-term outlook for commercial real estate activity.

Eighty-six percent of respondents foresee their banks' commercial real estate lending volumes either remaining level or rising for the rest of the year, virtually mirroring the results found in Bridger's previous survey that covered the first half of the year. Noteworthy, though, is the rate of increase -- 15% -- in the number of bankers that anticipate higher loan volume in the second half, suggesting a nascent recovery in the sector. Similarly, 34% of bankers surveyed expressed bullishness about the sector, up from 27% at the beginning of 2003.

Loan growth will come despite tightening underwriting standards, Bridger's survey results indicate. Over half the respondents (55%) indicated that their institution's underwriting standards tightened to some extent during the first half of the year, which comes on top of a similar percentage (58%) having reported tightened underwriting standards earlier in the year.

"While their lending spigots are open, banks are illustrating discipline about the new loans they'll book," said Peter Grabell, Bridger's Senior Vice President of Relationship Management. "In both of our 2003 surveys, 70% of the bankers indicated their banks are selectively building their loan portfolios, which is favorable for borrowers. It suggests that commercial real estate is performing relatively well, and that bankers want to provide debt capital."

In a notable departure from the previous real estate recession of the early 1990's, bankers have healthy commercial real estate portfolios, with 88% of those surveyed reporting delinquency levels below 1% and little REO. Survey respondents cited multifamily (84%), retail (77%), and warehouse/industrial (70%) as the strongest performing property types, distantly followed by office (41%) and lodging (16%).

"We were somewhat surprised by the relative strength bankers saw in retail and the continued weakness in the lodging sector," Grabell remarked. "We expected adverse tenant credit issues to have more of an impact on retail than has evidently been the case. But perhaps the strong sales figures that most retailers reported in July suggest that economic recovery is finally at hand," he added. "We also predicted that hospitality properties might show signs of improvement since new construction has been so limited for the past two years. But the bankers are indicating that concerns about the sector nonetheless remain. The weakness reported in the office sector validates the secondary market's outlook, where the ability to underwrite loans on office buildings has been negatively impacted by higher vacancy rates and declining rents," Grabell observed.

"Our survey results are very encouraging for borrowers acquiring or refinancing properties. Banks indicated they are most aggressive on those types of loans, while they reported softness in construction and value-added lending," stated Grabell. "It's a great time to be a commercial real estate borrower; the sector has generally performed well and banks want to lend on it."

Detailed results and other information on the real estate capital markets can be obtained through Bridger's website at www.BridgerFunding.com.

Bridger is the U.S. banking industry's leading provider of commercial real estate capital and balance sheet management services, supplying permanent loan origination and seasoned debt trading capabilities to over 1,400 banks nationwide. Bridger gives banks ready access to the secondary mortgage market as a balance sheet management strategy. Bridger's products include a CMBS loan origination program and loan trading service through its BankXchange(TM) platform, helping banks generate fee income while enhancing borrower relationships and optimizing their portfolio risk-return profiles.