Colorado Real Estate Journal - June 15, 2016
Lakewood-based FirstBank made a near record $722.6 million in business loans in the first quarter. The loans by FirstBank, one of the nation’s largest privately held banks and the second largest in Colorado, included construction, land development and real estate. Indeed, most of the loans it made involved real estate. FirstBank also provided financing for equipment and for clients needing U.S. Small Business Administration loans in the first quarter. But business lending only accounted for about $51 million of the total. “The balance was for commercial real estate, with roughly 50 percent for construction lending and 50 percent for other types of loans,” including bridge loans and refinances, according to Ron Tilton, president of FirstBank Denver. While FirstBank also has operations in California and Arizona, Tilton estimated 80 percent of the loans were in Colorado. It was an active quarter for FirstBank. “It was right in line with what we did in the first quarter of 2015, which was our biggest first quarter,” in terms of lending, Tilton said. “We are on the same pace as in 2015.” The two main asset classes FirstBank made loans on were multifamily and office. Loans included the well-received MOTO apartment building and a 240-unit housing community planned in Silverthorne. “We also do some mixed-use,” Tilton said. “A good example would be a hotel with retail on the ground floor.” FirstBank also made retail loans. “We would like to do more industrial, but we just haven’t had that many opportunities,” Tilton said. FirstBank continues to make a lot of multifamily loans, but at the same time, it is worried the market is becoming overbuilt, especially for high-end communities in and near downtown. “My answer may sound confusing, as we continue to make multifamily loans, but we are concerned about all of the inventory coming on line,” he said. He follows Cary Bruteig’s analysis of the apartment market very closely, for example. Bruteig, the owner of Apartment Appraisers & Consultants, publishes Apartment Insights, a multifamily database that includes sales, occupancy levels and rental rates. Because of fears of overbuilding, FirstBank has tightened its lending standards. It’s not alone in doing so. “My sense is that most lenders are tightening their lending standards when it comes to multifamily lending,” Tilton said. That means that FirstBank requires more equity in deals. “It varies with the loan size, but I would say that with a small deal, we will require a minimum of 25 percent equity and with the larger deals we want 40 percent to 45 percent down,” Tilton said. As far as a “sweet spot” for lending, “we are a little bifurcated,” Tilton said. “We will do a lot of $15 million to $20 million deals and then we might make a very large new construction deal, like you see in Five Points or downtown or along light-rail stops,” he said. They also will provide financing for small investment groups or one or two families that are buying apartment communities built in the 1970s and 1980s. “We will do a lot of $1 million to $2 million loans,” for those types of buyers. “Those deals might be for two local families or real estate partners looking to buy a small property in Capitol Hill, for example,” he said. One reason FirstBank hasn’t stopped making apartment loans is because of the growth of Denver’s increasingly diversified economy. “There is a lot of discussion in our industry about overbuilding in downtown or along light rail and in TOD (transit-oriented development) projects, but you can argue both sides,” Tilton said. “These are the places where the demand is occurring,” he said. “So we are not shying away from lending in downtown or TOD or RiverNorth, just because there are a lot of projects moving forward,” he said. Also, FirstBank puts a lot of stock in the track record of the developers it deals with. “It’s interesting, because in the vast majority of the cases, we have been doing business with the people for a long time,” Tilton said. “But, in their next deal, they might be bringing on a new investment group or investment partners, whom we have never met before. Denver is a big city with a lot going on, but it also is a tight-knit community and a lot of people want to be here,” Tilton said. Other News Leon McBroom and Eric Tupler of the Holliday Fenoglio Fowler team in Denver, recently arranged a $14.46 million loan for an industrial property in RiNo, which will be converted into “creative” office space. McBroom, an associate director at HFF, and Tupler, a senior managing director, arranged the bridge and construction financing for 2323 Delgany, an 83,133-square-foot, 100 percent leased industrial warehouse. They worked exclusively on behalf of the borrower, a joint venture between Denver-based EverWest Real Estate Partners and WHI Real Estate Partners LP of Chicago. McBroom and Tupler secured the fixed-to-floating-rate loan through First National Denver. First National Denver is a division of the First National Bank of Santa Fe. The initial fixed-rate loan funding will be allocated toward the acquisition of the property. Future floating-rate funding will be used to convert the property to creative office space. Situated on 3.46 acres, 2323 Delgany is the northwestern border of Denver’s central business district at the corner of Delgany and Park Avenue West in the rapidly redeveloping RiNo mixed-use neighborhood. Union Station, Coors Field, the Colorado Convention Center and Interstate 25 are within a mile of the property. Originally constructed in 1975 as a Twin-T industrial warehouse, the borrower plans to convert the asset to a creative office property as tenant leases expire in 2017. “We are pleased to complete this financing as it will significantly enhance our ability to successfully reposition this asset,” said EverWest’s Paul Andrews. “First National is proud to have been of service to two very valued clients and appreciates the opportunity,” added Jonathan Smith, executive vice president of First National.