Fresno, CA -- (SBWIRE) -- 11/10/2014 -- The Federal Reserve and other agencies say that a large portion of the risk comes from loans made to investment firms for financing takeovers of companies. Those loans, called leveraged loans, accounted for 22.6 percent of large loans outstanding and 74.7 percent of the loans deemed risky by the regulators, according to the agencies’ latest annual review.

The review found ‘serious deficiencies’ in credit standards for making leveraged loans and in managing their risk.

Overall, the review found that $340.8 billion, or 10.1 percent, of big loans outstanding were deemed risky — enough for the examiners to criticize them in writing to the lenders.

That’s about double the levels preceding the crisis that struck in 2008.

Regulators are worried about a heavy load of risky loans weighing on institutions’ financial soundness and the potential threat to the broader banking system.

The lease rates also are slightly higher than office rents, although with some caveats. The C&W/NorthMarq Compass Report placed medical office rates in the region at $18 to the low $20s per square foot compared with $16 to $20 for Class A commercial space.

Still, the construction costs of medical office projects are higher. Commercial spaces have open floor plans, while medical offices have many rooms and expensive heating, plumbing, cooling and electrical equipment, said Effler. Tenant improvement allowances are substantially more than a traditional office, he said, and the health care providers might pay only 25 percent to 50 percent of that cost in cash or financing.

That leaves the developer with the weight of tenant improvements that must be recaptured in higher lease rates, Effler said. So a medical office deal that might require $50 per square foot in tenant improvements results in a landlord paying half or more, he noted.

“I would not say medical office is more favorable because you can get higher rents than other spaces,” he said. “Construction costs are higher.”

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