Big banks are getting back into commercial real estate lending, according a recent statement from the ICSC Western Division conference held last week in San Diego, CA. But the rules have changed, and they face a crowded field of new competitors, including private equity pools and community banks, experts say.

“For the past five years, we never even bothered to go to the large banks, because they weren’t financing many deals,” said Bradford Kitchen, president of Alterra Real Estate Advisors, Columbus, Ohio. “In the height of the downturn, they were sending clients to other banks. A lot of smaller banks took business, and some of the bigger banks ruined long-term relationships with clients.”

In 2010 — the last year of the recession, or the first year of recovery, depending on one’s perspective — national banks controlled 9 percent of the lending market and regional/local banks held 11 percent. In contrast, insurance companies had 23 percent of the pie, and commercial-mortgage-backed securities accounted for 44 percent, according to Real Capital Analytics.

“A lot of the banks are shying away from the multifamily segment, where they have been active over the last several years, and starting to go into retail, office and industrial,” said Brandon Harrington, a vice president of capital markets at Walker & Dunlop, Phoenix.

Last year the national banks took 12 percent of the commercial lending market, while regional/local banks held 13 percent, versus 15 percent for insurance companies and 45 percent for CMBS. The most recent numbers — as of September — from Real Capital Analytics show national banks at 13 percent of the commercial market, regional/local banks up at 20 percent, insurers falling off to 7 percent, and CMBS holding steady at 45 percent.

“The landscape has changed,” said Chuck Nwokocha, a senior risk management consultant at Sageworks, Raleigh, N.C. “Banks are competing with nontraditional lenders as well.”

To win business, the national banks are embracing more nonrecourse lending. “The community banks are extremely active and trying to stay relevant,” said Arlon Brown, a senior vice president at Parsons Commercial Group, Framingham, Mass. Where Brown puts together financing depends on the size of the deal. Between $1 million and $10 million, he will consider a community bank, although the major handicap with a small bank is that they typically prefer to lend in five-year increments. A smaller bank may give a 10-year commitment, but that would be subject to review after five years, he says. For a $10 million to $20 million financing, Brown says he would turn to a regional or a national.

“A lot of banks don’t become competitive once the loan amounts pass $10 million, because that’s when the life companies, private equity funds and CMBS funds steal market share,” said Harrington. “Today most shopping center deals are still CMBS and with life companies.”

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Phoenix, Arizona – John L. Trujillo comes to Sperry Van Ness with over a decade of experience in Commercial Real Estate.  John will be specializing in Retail Leasing & Sales.  His vast experience includes Brokerage Leasing & Sales, Acquisitions & Management and Commercial Property Development. John has also worked for 2 major Arizona General Contractor’s in their real estate divisions.

“The Phoenix Sperry Van Ness office is proud to welcome another exceptional advisor to our growing retail division,” said Perry Laufenberg, Designated Broker and Partner of the Phoenix Sperry Van Ness office. “His in-depth market knowledge, savvy marketing skills and industry affiliations are an asset to Sperry Van Ness.”

John is a fifth generation Arizonan. He received his Master of Real Estate Development degree from Arizona State University from the W.P. Carey School of Business.  He also holds a Bachelor degree in Interdisciplinary Studies: Theatre & Justice Studies from Arizona State University.

His affiliations include the International Council of Shopping Centers (ICSC), Arizona Association of Realtors (AAR), Urban Land Institute (ULI) and National Association of Realtors (NAR).

John L. Trujillo can be reached at 480-425-5509 or john.trujillo@svn.com

Now is a good time to sell assets, said a panelist at ICSC’s OAC (Open-Air Center) Summit Thursday, in Washington. “If you have a desire or need to monetize your investment, this is a beautiful time to do it,” said the panelist, William Wolfe, president of First Washington Realty, based in Bethesda, Md. The company owns high-quality grocery anchored centers across the U.S. His firm might sell a handful of centers this year, he said. “This in an extraordinary time to take advantage of this market.”

And though interest rates went up last year (the 10-Year Treasury note bumped up from 1.65 percent to around 3 percent), and are expected to continue to do so, the impact on cap rates hasn’t been substantial, said panelist Jeffrey Dunne, a vice chairman at CBRE. In fact, cap rates are in a pretty good place right now for sellers. Class A centers in primary markets are seeing rates of between 4.75 percent and 5.75 percent, while assets in secondary markets are trading between 5.5 percent and 6.25 percent. “You clearly see cap rates going down, but at a lesser rate to last year,” Dunne said.

On the buyer side, for class A assets it continues to be traditional REITs and large institutions that want to hold onto their investments long term. The main players for B centers in secondary markets who are looking for a higher yield on their investments are non-traded REITs, explained panelist Sheridan Schechner, managing director and head of Americas real estate investment banking at Barclays Capital. He also said that CMBS funding will mostly take place for the higher-yield transactions and that he expects CMBS funding this year to increase to $125 billion from $90 billion in 2013.

Meanwhile, Schechner and Wolfe disagreed as to whether it is better to own a large portfolio versus a smaller group of assets. Schechner said that a bigger portfolio is more to the advantage of an owner because there is less volatility if a major tenant vacates several spaces. Wolfe disagreed, saying a small high-quality portfolio brings in higher rents and can more easily fill vacancies. “Bigger is never better,” Wolf remarked. “Better is better.”