Independent Banker - April 2024 - 17

and industrial properties.
" We already know the project and
we know the client, and that's better
than struggling to make a new loan, "
says Pirok. The bank also has a desire
to do more term lending with threeand
five-year loans.
Seacoast Bank also would like to do
more term lending in 2024, which has
traditionally been a core focus for the
bank's CRE lending team. The bank
provides three-year and five-year
loans, sometimes going up to seven or
even 10 years on term.
" Our pipeline is heavy construction
at the moment, " Norton says. " I would
like to balance it out more, but it is
tough because construction demand
is significantly higher than term, and
refinances are [nearly] nonexistent. "
Although lenders are looking to
make good, profitable loans, they
also are well aware of the lingering
challenges and risks that remain
in the real estate market, including
slowing rent growth, spikes in
insurance costs that are putting
pressure on operating expenses and
pockets of oversupply in some areas.
To help offset those risks, banks
are aligning with quality sponsors
and paying careful attention to the
financial assumptions going into a
deal related to income, expenses and
market conditions.
" From a risk perspective, it's still a
little more challenging than it was a
couple of years ago, " says Norton. " So,
we're still a little more cautious than
usual, but there's no better time than
when others are on the sidelines to
make the best loans you'll ever put in
your portfolio. "
Beth Mattson-Teig is a writer
in Minnesota.
APRIL 17 | 3 ET / 2 CT
The
Compliance
Tightrope
Balancing Security
With Budget in
Community Banking
Featuring:
Mark Sangster
Vice President,
Chief of Strategy
Adlumin
Lower rates expected to spark demand
Bankers are keeping an eye on CRE lending challenges affecting
both supply and demand for capital. Demand from borrowers is
well off the robust pace of lending that many banks saw in 2022.
MSCI Real Assets reports that volume was down 51% year-on-year
for 2023 but notes that this was a fall from a temporary high in the
market. Relative to the average annual pace of deal volume from
2015 to 2019, volume was down only 32%.
Lenders are optimistic that CRE transaction activity will pick up
this year following the more dovish pivot from the Fed. Based on
Fed meeting minutes released in December, some Fed members
expect the federal funds rate to fall to 4.6% by the end of 2024,
suggesting that the Fed will cut rates by 75 basis points this year.
Although the timing and size of those cuts is still difficult to
predict, borrowers should get some relief from high capital costs.
" I certainly don't see rates going up any more, " says Paul Pirok,
senior managing director, Dallas-Fort Worth real estate, at Veritex
Community Bank in Dallas. " That should make things a lot more
liquid in the commercial real estate space. "
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Independent Banker - April 2024

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