Some lenders make cautious return

Real Estate Weekly,  April 21, 1993  by Therese Fitzgerald

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Barry Citrin, director, Mortgage Lending, Sonnenblick Goldman, said the first choice of the life insurance companies is multi-family. The second is anchored retail and the third light industrial. Everything else, lead by office buildings, he said, would be a "distant fourth."

Citrin, who does a lot of work with PruExpress, a division of Prudential Insurance, said what is being lent mostly are the mid-sized and smaller sums - $1 million to $20 million.

"That seems to have a lotto do with the change in values," he said, "it's tough to make a large deal work," he said.

Borrowers representatives seems to agree that they are getting less out-right refusals, indicating that banks are shopping around again. "Everybody now is willing to look, willing to talk," said Jerry Swartz, principal in Pergolis Swartz Associates Inc., a commercial mortgage brokerage.

In addition, to multi-family properties and strong retail shopping centers, Swartz said, build-to-suits are also attracting traditional debt financing.

But he said lenders are looking for 90's-type transactions.

"The deal itself has to be conservative," Swartz said. "The lender wants to see equity from the borrower and usually hard equity."

Bank are selling a lot ofthe assets they gained through foreclosure, and many believe, that after this house cleaning is completed, banks will be again looking for sources of income.

"All of a sudden, they'll find themselves havingto make money," said Alan Gross, chairman, GFC Capital Group.

Foreign Lenders

More Quiet

Foreign lenders, especially the Japanese, are viewed by many to be outofthe market completely. So the domestic sources are responsible for most of today's activity.

"To the extent there's a pulse out there, I think it's the domestic banks," said Longua.

TheJapanese banks, he said, havebeen "wounded" by the loss in value to their collateral, and the U. S. legal system has not given them the relief they hoped for.

SomeEuropean institutionsand Pacific Rim banks that did not invest in the roaring 80's,however, are beginning to get their feet wet due to the drop in prices.

But with foreign lenders, Swartz said, the once popular "participating" mortgage, where one lender took the lead position and sold subordinate positions, has lost its favor.

"Lenders aren't prepared to do that because they're afraid of spinning their wheels and not getting the other participants, he said.

Swartz said he has been able to do some "club loans" involving foreign lenders. In this transaction four or so foreignbased lenders would all commit their percentage up front.

But, he said, while domestic lenders are scrutinizing the borrower and the property, the foreign institutions are placing their greater emphasis on the borrower.

"They really are concerned with the borrower and his credit worthiness and image," Swartz said.

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