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Downgrades of BofA, Wells Fargo and Citigroup Leave CRE in Limbo

NEW YORK CITY-Sources tell GlobeSt.com’s Jacqueline Hlavenka that the larger issue behind Moody’s latest action is a potential lending chill.

By Jacqueline Hlavenka | Updated on September 22, 2011

NEW YORK CITY-The commercial real estate industry is still on-the-fence about whether the downgrade of Bank of America, Wells Fargo and Citigroup by Moody’s Investors Service will immediately affect deal-making and property pricing. But sources tell GlobeSt.com that lending for new construction and development could take a hit in an already stagnant market.

“The ratings downgrades were mainly related to the impact of Dodd-Frank and the notion that banks are not ‘too big to fail,’” says Matthew Anderson, managing director of Trepp, LLC, in an e-mail. “The larger issues are banks’ appetite for CRE lending and demand from borrowers. Both are weak. Among the big banks, Wells Fargo stands out as having grown its commercial mortgage book. All have seen their construction & land development books continue to shrink because of charge-offs and the lack of new construction activity.”

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