TDECU is lending $28 million for this new hospital in Sweeny, Texas (Rendering courtesy of Sweeny Community Hospital District).
Texas Dow Employees Credit Union of Houston announced Thursday it has closed a $28 million loan to build a new local hospital — another sign of building momentum for commercial lending.
Although the Mortgage Bankers Association said it expects commercial real estate lending to fall in this year's second half, the signs for credit unions and other lenders through the second quarter have shown strong growth.
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TDECU ($4.7 billion in assets, 366,960 members) has been no exception, with the third-quarter hospital deal rocketing its originations well above those for all of 2021. Last year, TDECU's commercial real estate loans fell 23% to $51.7 million. In the first half of this year, TDECU produced $42.5 million — triple its production in the first half of 2021.
TDECU closed the $28 million financing deal on Aug. 1 with the Sweeny Community Hospital District for the construction of a new hospital in Sweeny, a city 65 miles southwest of downtown Houston. A groundbreaking ceremony will be held on Aug. 31, and the $45 million project is expected to be completed in early 2024.
Josh Brian, TDECU's market president, said the hospital district reached out to the credit union to support its capital fundraising.
"The more we looked at it the more we fell in love with the project," Brian said.
Josh Brian "We want to be a part of projects like these," he said. "If there is something going on and we can provide terms that are better, that make more sense, than a large bank then we want to be the community bank that supports that activity."
CU Times has been analyzing second-quarter NCUA data for the 25 largest residential loan producers. Although several big commercial credit union lenders are outside this group, those 25 credit unions produced $3 billion in commercial real estate loans in the second quarter, up 58% from 2021's second quarter. Their first-quarter commercial real estate loans rose 71% to $1.8 billion.
NCUA data for all credit unions showed commercial real estate loans rose 44% to $37.1 billion last year, and rose 46% to $10.6 billion in the first quarter.
The Mortgage Bankers Association has tracked similar trends for all commercial real estate lenders. However, on July 19 it lowered its forecast, predicting a drop in the second half. It said mortgage originations for 2022 would be $733 billion, down 18% from 2021's $891 billion.
On Thursday, the MBA said real estate-backed commercial loan production for the second quarter set another quarterly record, rising 19% from 2021's second quarter.
Jamie Woodwell, vice president for commercial real estate research, said the MBA is still forecasting that commercial lending will slow in the second half.
"That said, improvements in fundamentals and values in recent years provide significant support to properties with outstanding loans and continued financing opportunities for properties whose cash flows can support debt," Woodwell said.
Jamie Woodwell That apparently includes hospitals.
The MBA's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations showed its year's second-quarter index for health care originations was 70% higher than the first quarter and well above every other quarter since the start of 2019 — except for a second quarter 2021 record. This year's second quarter was 3% below that year-ago record.
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Jim DuPlessis
Jim covers economic data trends emerging for credit unions, as well as branch news and dividends.
