Commercial real estate lending has picked up markedly during the past year indicating that actions taken by the Federal Reserve to reduce short and long-term interest rates are paying dividends in this area. While interest rates remain low, senior living providers and investors who are interested in obtaining inexpensive capital for acquisitions, growth, or other needs should contact the Chicago-based financing firm Cambridge Realty Capitalto learn more about the different financing options that it offers.
During the past year the amount of commercial real estate loans held by U.S. banks has increased by 6% and now stands at roughly $1.6 trillion. Growth rates do differ among the states and some have seen a decline in commercial real estate (CRE) lending while others have experienced a significant uptick in their CRE loan portfolios. Two of the nation’s largest states, California and New York, led the way in terms of having the largest increase in total dollars as each state added $14 billion to their year-over-year totals. Ohio banks were next with an increase of $9.5 billion, followed by Texas with an increase of $6.1 billion, New Jersey with an increase of $4.8 billion, and finally Philadelphia, which had an increase of $4.1 billion. In percentage terms, Arizona’s banks saw the greatest year-over-year increase with an increase of 50%; Utah came in second at 27%.
However, even with low interest rates, some states actually saw their CRE loan portfolios decrease during the past year. For example, Oregon, Rhode Island, Louisiana, and Nevada each experienced a decline of approximately $1 billion in their year-over-year CRE loan holdings. Nevada’s figures weren’t unexpected because it was one of the state’s that was hit hardest by the recession and its economy is still recovering from it. Nevada’s banks’ outstanding CRE loans have declined by 33% year-over-year, clearly indicating that even with considerable stimulus from the Federal Reserve, the state’s economy hasn’t improved enough to support additional lending. However, optimism is growing in the state as evidenced by comments from Robert Sarver, the Chairman and CEO of Western Alliance Bancorporation. Western Alliance is a regional bank that is based in Phoenix and it expects its Nevada pipeline to grow during the second half of 2014. In its quarterly earnings call last month, Mr. Sarver stated that “Nevada is doing okay. The gain in revenue has still not bounced back real strong. Loan demand is still not real robust but the market there in terms of real estate values and business operations is gradually improving.”
Many lenders in Nevada are hopeful that Mr. Sarver’s expectations regarding real estate and business growth in Nevada will come to fruition. Similarly, lenders in other states that experienced a decline in CRE loans such as Oregon and Rhode Island are also hopeful that loan activity will pick up as the economy continues to improve. Time will tell if their optimism is well placed but they can take comfort in knowing that the general consensus among analysts is that the economy will continue to grow during the remainder of the year and this should lead to increased demand for loans of all types. Accordingly, as the economy picks up steam and interest rates continue to remain low, senior housing providers who are interested in obtaining capital for growth and other needs should continue to look to Cambridge Realty Capital and the many different financing programs that it offers for these and other purposes.