Susquehanna Bancshares, Inc., with almost $1 billion in deposits in this region, was one of the first banks with a local presence to announce its participation in the US Treasury Department's voluntary Capital Purchase Program, part of the Troubled Asset Relief Program (TARP).

Under the program, Susquehanna applied for and received $300 million in early 2009. In return, it issued the Treasury $300 million in non-voting, senior shares of Susquehanna preferred stock and warrants to purchase $45 million of Susquehanna common stock, or 15% of the value of the preferred stock. In accordance with the Capital Purchase Program, the preferred shares pay an annual 5% dividend for the first five years, and 9% annually after the fifth year, if they are not redeemed. It looks like that 9% will not be achieved.

Last week, Susquehanna announced that it has begun a public offering of common stock to raise $300 million of capital, the same amount it borrowed from TARP. While it is still speculative as to whether they will repay all, or just a portion of the TARP funds (Susquehanna intends to use the net proceeds for general corporate purposes, which can include TARP repayment and future acquisitions), it appears as if only a fraction of the TARP money was, or the fresh capital will be, used to actually lend to the community.

However, in addition to the $300 million of capital being raised, Susquehanna plans to raise an additional $50 million by selling other securities. The fact that Susquehanna is taking these measures means that it is becoming healthier, and will likely foray back into active commercial real estate lending in the months ahead.

Harleysville/First Niagara Merger Delayed, But Lending Inevitable

Harleysville National Bank, one of the Philadelphia region's most active real estate lenders prior to the credit crisis, may be back in business in the second half of 2010, just with a new name. Harleysville, who suffered primarily from too much portfolio exposure to the housing bubble, agreed earlier in the year to be acquired by First Niagara Bank of Buffalo in a $237 million deal.

News broke last week of the merger delay from the end of this month to sometime in the second quarter. Speculation swirled that the delay had been caused by the capital reserve requirements being imposed on Harleysville by the US Office of the Comptroller. Regulators had pushed back Harleysville's deadline to meet such capital ratios from March 31 to May 31. However, First Niagara expects to receive regulatory approval of the deal and close no later than April 12.

Whenever the deal formally closes, and all 83 Harleysville National bank branches are converted to First Niagara branches, it should foster increased commercial real estate lending.

"For the past two decades, First Niagara Bank has lent into the Commercial Real Estate market on a consistent and uninterrupted basis – having steadily grown the in-footprint portfolio to approximately $3 billion - clearly making it one of the Bank's primary core competencies today and into the future," said Daniel Cantara, EVP of Commercial Services for First Niagara. "First Niagara's commercial real estate portfolio consists of a wide array of investor property types with the single largest concentration (nearly 40%) in multi-family. The bank's lending team is empowered at the local level with the authority to make loan decisions. Its growing capital base over the past few years has allowed itself to selectively move 'up market' to now serve the full spectrum of Commercial Real Estate developers."

Retail Developer Gets Creative to Backfill Empty Space

The retail sector has been hit hard in terms of vacancy during this most recent economic downturn. Shopping center owners have felt pain, scrambling to fill vacancies, offer concessions to retain tenants, restructuring existing leases, and fighting one another for the few tenants looking to expand. One local center developed and owned by Fred Weitzman of Wynnewood Development has been a shining example of these market challenges, and how to overcome them.

Back in 2001, Weitzman developed a 150,000-square-foot lifestyle shopping center for southwestern Delaware and Chester County's burgeoning population known as the Shoppes at Brinton Lake. After stellar success and 100% occupancy in its first 4 years of existence, the center started experiencing problems in 2005.

Organized Living, a 20,000-square-foot tenant went bankrupt. Weitzman quickly subdivided the space and backfilled half of it with retailers Gymboree and Justice (formerly known as the Limited), but had his eyes on popular high-end clothier Anthropologie to occupy the remaining space. Weitzman had to wait almost two years to reel them in, but has been rewarded with their superb store sales since they opened in January 2008.

To add to these challenges, the 27,000-square-foot Zagara's grocery store that was one of the center's original tenants, started to face issues in 2004. After a series of corporate transfers and several failed food store operators, Weitzman seized this opportunity to take back control of the space in July of 2007. Weitzman waited over 18 months before the former Zagara space was successfully replaced by a Fresh Market grocery store in April 2009, along with a women's apparel store Coldwater Creek for the balance of the space.

"We now have five tenants in those two spaces instead of only two, which favorably expands the tenant mix of our center. I am happy with the grocery store. It is doing great and has expanded to its third location in our region," said Weitzman.

Weitzman has also signed The Ski Bum, a winter sporting goods store to replace an existing underperforming tenant. Now, only 4,000 square feet of the once vacant 50,000 square feet remain, and Weitzman has a litany of prospects lined up.

"We expect to be back to 100% occupancy within two months. We've noticed sales coming back substantially," said Weitzman. Hopefully this is a sign that the worst is behind us.