SunTrust Banks is making a renewed push into commercial real estate lending, as the job market and values for properties like office towers and shopping centers show signs of improvement.
The Atlanta-based bank announced Monday it is joining insurer MetLife in a commercial property lending pact that could be valued at up to $5 billion over the next three years.
Under the deal, SunTrust will fund portions of certain commercial real estate mortgages originated and managed by a unit of MetLife. The New York-based insurance giant is a major player in global commercial real estate, including as a lender and owner.
Commercial real estate lending, often called CRE, is a broad designation that includes properties like apartment complexes, office buildings and retail. Like housing, the CRE market crashed in the wake of an overbuilding and investment boom and many lenders took a beating.
The partnership is a sign of SunTrust’s confidence in the rebound of commercial real estate values and the broader economy, said Walt Mercer, the SunTrust executive vice president who heads commercial real estate.
“I think the real estate market in this country at top end of the spectrum continues to be robust,” Mercer said.
Occupancy of office buildings and retail centers and demand for new development are economic barometers. Occupancy rates in Atlanta and nationally are improving. Growing companies tend to lease property or develop new locations on confidence in the direction of the economy.
SunTrust reported $4.31 billion in CRE loans at the end of second quarter, down from $4.83 billion a year earlier. SunTrust diversified its loan portfolio in the wake of the recession, but late last year SunTrust Chief Financial Officer Aleem Gillani told investors he was “optimistic” about targeted CRE lending opportunities.
As the job market and property values among commercial assets have improved, demand for selective new commercial development has also grown.
Investors also have pounced on distressed properties with the intent of acquiring the assets at affordable prices, improving them and returning them to profitability.
SunTrust, Georgia’s largest bank by deposits, recently reported that charge-offs of bad loans were nearly half what they were in second quarter last year. Foreclosed real estate owned by the bank is down 54 percent in that time.
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