Commercial Building Loans Growing | Torrey Pines Bank sees $500M, up from $425M in 2014

Source: By Roger Showley, January 21, 2015 UT San Diego

 

Banks are boosting real estate development loans as the economy improves, with Torrey Pines Bank expecting $500 million in activity this year.

 

Share PhotWilliam McLennan, the bank's chief real estate officer, said that's up from $400 million in 2013 and $425 million last year, with about 60 percent going for local projects.

 

"The markets are improving and the amount borrowed and the projects proposed and started have continued to increase," he said, especially in coastal areas of the state.

 

Unlike other banks, Torrey Pines did not experience a spate of lender defaults during the recession, he said, and as a result, it was able to continue commercial loans while others pulled back.

 

Founded in 2003, the bank operates seven branches locally and as part of Phoenix-based Western Alliance Bank counts $10 billion in assets. McLellan, a UC San Diego graduate, has worked in real estate banking and lending for more than 25 years.

 

Lately, construction loans have ramped up to represent about half the bank's commercial real estate lending activity, more than twice the rate of just two years ago. McLennan said loans range from $500,000 to $25 million.

"The hottest market right now is multifamily residential," he said, with projects ranging from 10 to more than 100 units and sometimes thousands. "There are projects in the process of being entitled that are just giant. It's really broad -- it's all over the place." 

Historically, single-family, detached-home subdivisions have dominated residential construction lending. But the shortage of land and changing consumer preference have led to more emphasis on multifamily and attached-projects. For-sale projects, both houses and condos, also are not as prevalent as rentals. 

"There's a general hesitancy of people to make a move (to buy)," he said. "I think they're getting more and more motivated. But the recession was pretty tough on people. Some lost what they had and are not willing or able to step back into the market. Some don't want the risk." 

The next generation of buyers, now in their 20s, is not purchasing at the same pace as counterparts in past decades.  

"They're delaying that part of their lives," he said. "Some of it is their income, their tolerance for risk and where they want to live." 

McLennan said mixed-use projects, involving both commercial as well as residential spaces, are gaining ground in many places.  

"It's almost the norm rather than the exception because that's what cities want," he said. "I've seen a lot of it and I continue to see that." 

But he said most mixed-use developers focus on the residential portion and don't count on the retail portion to generate much of the bottom-line profit: "That's not a focus of why builders are building it." 

McLennan predicted 2015 will be a "really good year" in real estate lending, based on growing jobs, stable state finances and improvement in certain lagging regions, such as Sacramento. Interest rates will remain relatively stable and growth should show up in all real estate sectors. 

"If we were in a football game, we'd be on the 35- to 40-yard line, heading toward the end zone," he said.

On the other hand, he agreed with many analysts that San Diego housing affordability is worsening and underwriting remains very conservative. When renters turn to buying, he said it's likely many will opt for condos.

 

DISCLAIMER: This blog/article has been curated from an alternate source and is designed for informational purposes to highlight the commercial real estate market. It solely represents the opinion of the specific blogger/author and does not necessarily represent the opinion of Pacific Coast Commercial. www.PacificCoastCommercial.com

 

 

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