Georgia banks take another look at commercial real estate

Georgia bankers bruised by a real estate shock are letting three important letters pass their lips again: CRE.

CRE stands for commercial real estate, a broad designation of loans for such things as buying or developing retail centers or small offices or even skyscrapers (for the biggest of banks, that is). Many in banking also include in that category loans to build or buy apartment complexes.

The jobs picture in metro Atlanta and across the Southeast is improving modestly, turmoil in housing has continued to make apartment financing a hot market and major companies are flush with ready cash and are spending some of it to improve facilities. Others are taking advantage of good interest rates to get financing backed by their own property, said Chris Marinac, a bank analyst with FIG Partners in Atlanta.

The nation had a housing bubble in the run-up to recession, but it also had one in commercial real estate. Metro Atlanta in particular, with new glitzy skyscrapers and strip retail popping up hither and yon, was overbuilt. Banks and other lenders are still sorting out boom-era loans that soured.

But now, with the economy improving ever so slightly and banks loosening up a bit, CRE is growing more popular.

Top officials with SunTrust Banks and Synovus Financial – the two largest banking companies based in Georgia – told analysts in Boston this month that they see opportunities in CRE. This comes after the banks have shed billions of dollars in loans in the market over the past few years.

“A year ago, you would have never heard me say ‘I can’t wait to get back into the CRE business,’ ” said Synovus Chairman and CEO Kessel Stelling, “But we think in our markets there are some very strong opportunities for very well underwritten … deals there.”

Stelling specifically mentioned apartment lending in a talk with analysts and said metro Atlanta’s commercial real estate sector, while still soft, was showing some stabilization.

Columbus-based Synovus has reduced its concentration in CRE from $12.3 billion at the end of 2008 to $6.7 billion in the third quarter.

Aleem Gillani, the chief financial officer at SunTrust, said at the same conference that the bank was “optimistic” about targeted CRE lending opportunities.

Atlanta-based SunTrust reported $5.3 billion in commercial real estate and commercial construction loans at the end of the third quarter, down from 11.7 billion at the end of 2009.

Though CRE loan balances among Georgia banks are likely to have fallen again in the third quarter – lending data for the statewide industry will be available next month – many banks noted increased commercial property lending in the third quarter, according to a FIG Partners analysis of earnings reports.

State Bank & Trust, Community & Southern Bank, Fidelity Bank and Brand Bank are among the metro area community lenders to increase CRE loans. State Bank and Community & Southern are banks that have been acquirers of failed institutions that are attempting to build market share.

“The banks have to put money to work and can’t sit with their heads in the sand,” Marinac said, though he cautioned that the increase is not a sign that the giddy days of the boom are back again.