Builders hit by credit crunch as banks tighten cash flow.

Well, if there's a 'silver lining' to this economic disaster, this would be it for me.
And if Houston (home of 'speculative developers') has a problem, then I'm guessing this thing is bigger than Texas, and can't be held back by building a big fence...so to speak.


Banks curtail generous lending practices, putting projects on hold
Houston Chronicle
Aug. 16, 2008


Nick Massad was within weeks of signing the papers on a construction loan to build a $55 million Embassy Suites near downtown's Discovery Green park when the deal began to unravel.

He said the national hotel lender, which he declined to name, would no longer finance 75 percent of the project because it was having trouble getting other banks to participate, a practice used by lenders to limit their exposure to large loans.

Now the hotel developer is back in the market for new financing. This time around, he's talking to a local bank, even though that means he'll likely have to pay a higher interest rate, raise more equity and take out a secondary loan to get his hotel built.

"This tight financing market has made it really difficult," Massad said. "Projects could go by the wayside."

The national credit crunch, which has caused real estate developments around the country to die on the vine or made them far more onerous to finance, is hitting Houston.

In light of huge losses stemming from the subprime mortgage meltdown in various parts of the country, banks have curtailed their formerly generous lending practices to developers seeking capital to build hotels, condos, office buildings and other commercial and residential projects.

"The financing environment right now is pretty hostile," said John Keeling, senior vice president of PKF Consulting, a firm specializing in the hospitality industry.

More collateral required..cont'd

http://www.chron.com/disp/story.mpl/front/5948418.html

they have to risk more of their own capital instead of a financial institution.

I think many will lose at that game. And many more won't play if it means digging into their own
pockets. What's the fun in that?

much to lend, RE values are declining, and the cost of puilding materials is rising.

There is one metric shitload of construction sitting idle and aging rapidly and in an ugly manner in these parts. One developer, he of the Atilla The Hun school of getting his projects approved, beat up on this town I live in, to get the approvals for building a senior complex on the last undeveloped parcel in town. After lots of bullying and smearing of good folks, he has done nothing further. Hasn't even turned a spade.

I hope he is eating out a lot these days. Out of dumpsters.

They had a plan all along.