In 2009, Central Oklahoma continued to see a drop in commercial land development opportunities. Financial institutions tightened their belts on lending practices, and investors held on to their cash, as confidence in the market remained uncertain.

While there was movement on several construction projects locally, most of the projects were financed three to four years ago, when credit rules were less stringent.

Mark Inman, senior vice president for CB Richard Ellis/Oklahoma, points to one notable exception. Despite the general downturn in land development, he says, certain low-risk deals involving single tenants – such as chain drugstores, automotive parts stores or fast-casual dining establishments – will continue to move forward.

“There will be a lot of owner-type projects continue,” Inman says. “But those are all in the same lines of restaurants and franchises/franchisees that own their own deal, and they’re building it.”

TAKING A BEATING
Others see major challenges, however. Scott Woodard, a developer with The Bell Companies, says his firm has managed to complete more than half of its mixed-use Fountain Lake project, situated at the northeast corner of Eastern and Memorial Road in Edmond. But going forward, he says, investors and land owners will continue to face higher equity requirements to finance similar projects.

“A deal that I could typically have done for between $300,000 to $400,000 is now going to cost me $800,000,” Woodard says. “The reality is, you’ve got to have pretty deep pockets to do those types of deals anymore.”

In addition, he says investors could take a hit on some projects they’re currently developing. As the loans on them come up for renewal, he says, appraisers could likely reduce the value of the properties.

“I think we’re pretty much stuck for 2010, and I don’t think we’ve seen the worst of it,” Woodard says. “There will be more cash sucked out of investors and owners to keep loans current.”

INCREASED SCRUTINY
Cynthia Archiniaco, Kirkpatrick Bank vice president, says financial institutions have felt some heat, as well. Following the national meltdown in the real estate sector, she says, regulators have really been looking over the banking industry’s shoulders.

“It’s like this pendulum that swung clear the other way in the aftermath of what occurred,” Archiniaco says, “even though none of the banks who were regulated by the feds actually caused the problem that seized the nation.”

As a result, she says many banks are having to amend their lending policies or procedures. At the same time, commercial real estate investors have been hurt by economic pressures. With retail sales slowing, she says some landlords may have lost tenants or have had to adjust rental rates to help keep them in business.

At this point, developers have grown much more cautious about starting new projects unless they can secure firm leases for much of that space in advance.

“We have seen a drastic reduction in the number of deals to even be able to get involved in,” Archiniaco says.
“I think most Oklahoma community banks would say the same thing. Our difficulty in lending isn’t that we’re not ready to or don’t have the money. It’s that we don’t have the deals.

“People’s first instinct, when there’s financial insecurity, is not to go out and spend something. It’s not, ‘Let’s go out and invest.’ It’s, ‘Let’s batten down the hatches, and let’s see what’s going to happen here. Let’s put away a little nest egg, because what if I wake up tomorrow and I don’t have a job?’”

Ultimately, however, she believes that solid banking services and customer relationships will see the industry through difficult times.

“We have never been out there hunting accounts or relationships based on the latest promotion. We look after our customers, and we try to do the right thing for everybody all of the time,” Archiniaco says. “Our relationships with our customers tend to be longterm. And in the end, it’s the steady relationship that sees you through a difficult time. I think that’s what people are beginning to realize.”

photo/Shannon Cornman