$350 Billion in Commercial Refinancing in 2012, 2013: Expert Advises Caution
In terms of the commercial real estate markets, the years 2012 and 2013 are poised to hold the largest volumes of debt refinancing ever seen in the U.S.
KC Conway, executive managing director of real estate analytics at Colliers International, shared those figures during his keynote address at CU Business Group’s National Business Services Conference on Tuesday in Portland, Ore.
While this presents opportunity for credit unions, Conway’s advice was to proceed cautiously and do homework before jumping into these deals. He also commented on the major CRE industries, noting that manufacturing and industrial/warehouse offer solid fundamentals for lending today.
The Seattle-based Colliers International is a global commercial real estate services company with more than 12,300 professionals operating out of more than 522 offices in 62 countries.
One way to view the CRE markets, along with the U.S. economy, is from the seat of a tractor, Conway offered rather tongue in cheek.
“Every path has a few puddles – that’s the best title for a credit policy,” Conway told the audience of 150 attendees at CUBG’s conference.
Referring to financial institutions’ lack of action taken on problem credits, Conway said “if you find yourself in a hole, stop digging. Good judgment comes from experience, and a lot of that comes from bad judgment.”
Appraisals were also an area of focus in Conway’s view of the CRE markets. He discussed the importance of independence in the appraisal process and diversification in choosing appraisers as key success factors.
“Credit unions need to challenge assumptions in appraisals,” stated Conway as he showed an example of Florida condominiums which had 25% of their value from “view premiums.”
As for credit unions’ interactions with examiners, Conway suggested “do not corner something that is meaner than you.”