Lenders' Insatiable Appetite for Commercial Real Estate
Lenders Make Riskier Apartment Loans in Second Quarter | by Hui-yong Yu | Rising prices in the nation's leading commercial real estate markets prompted lenders to make riskier loans in the second quarter. According to a report released today by Chandan Economics, debt yields -- the ratio of property income to loan balance -- for new office and apartment loans fell markedly between the first and second quarter. The largest systematic declines were in New York, Washington, DC, and San Francisco. Bloomberg's Hui-yong Yu writes:
The ratio of rental income to loan balances on high-rise apartments fell to 8.7 percent from 9.7 percent a year earlier, Chandan Economics said. So-called debt yield for securitized loans on all types of commercial properties, including apartments, rarely fell to less than 12 percent during the four decades through early 2006, before plunging as the market peaked, according to Toronto-based debt-rating company DBRS.
Read the Bloomberg coverage of Chandan Economics' Quarterly Loan Quality Report at their website.