Magazine article American Banker

Bankers Stay Cautious in Realty Lending Boom

Magazine article American Banker

Bankers Stay Cautious in Realty Lending Boom

Article excerpt

Still gun-shy from the most recent real estate debacle, bankers say they are lending carefully on construction-at least for now.

"Most commercial banks have vivid memories of the early 1990s," said George Emmons, Keybank's executive vice president of commercial real estate. "They must continue to see deals with equity and good preleasing."

Mr. Emmons' cautious tone comes at a time of tremendous opportunity in the real estate market. Hefty amounts of capital are flowing in to finance construction at a rapid pace.

Indeed, a recent report by Landauer Associates Inc. predicted "an acceleration of the construction cycle" that would last at least through 2000.

"The further we've gotten into the 1990s, the more investors of all kinds have recognized that this recovery is for real," said Hugh Kelly, Landauer's executive managing director of research and author of the report. "Lenders of all kinds have recognized that it is creditworthy again," he wrote of real estate.

So far, bankers have been careful not to overextend themselves, analysts said.

"Our typical banks are still not enamored" of real estate, said Anthony Davis, a bank analyst at SBC Warburg Dillon Read. "On balance the lessons of the last cycle have not been forgotten to date."

But some are beginning to wonder how long the discipline will last- especially in the face of increasing competition from investment banks and mortgage real estate investment trusts.

"The real question is, in 12 to 18 months, whether the banks are still sticking to their guns," said Mark Edelstein, a partner in the New York law firm of Milbank Tweed Hadley & McCloy. …

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