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Reclassification may boost CRE development lending

On Behalf of | Apr 8, 2016 | Uncategorized

Missouri commercial real estate developers may soon be able to see increased lending for their proposed projects from MetLife. The insurance giant, which had been designated as a systemically important financial institution, or SIFI, in 2010, could soon lose this classification and gain increased leeway to act as a lender in the process. Although regulators may appeal the decision, a U.S. District Court has ruled that the company is no longer important enough to merit the SIFI status.

Being judged as too big to fail meant that MetLife had to set aside significant sums of money in reserve. It also meant that many of its key operations were overseen by federal regulators. While the company completed notable commercial real estate lending deals under these terms, such as its $350 million 2015 loan for a Texas Nordstrom’s shopping center, analysts believe the increased freedom could let it make better offers to developers in need of financing.

Experts say that in addition to making it easier for company to make loans with its funds, the new decision may prompt responsible action because the firm doesn’t want to return to the days of oversight. Decreased focus on audits and other expensive administrative procedures may also play a role in reducing the cost of doing business and enable MetLife to lower its rates further.

The high cost of commercial property often makes it difficult to acquire without an external source of funds, and land costs are but a small part of the overall needs of a project. Funding is dependent on perceived risk, meaning that developers may want to have legal counsel assist in putting together a loan package.