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Metropolitan adds group to help developers move to permanent loans

Rob Threlkeld

Rob Threlkeld

By TED CARTER

Ridgeland’s 9-year-old Metropolitan Bank is adding to its niche specialty in commercial lending with creation of a division designed to help developers transition from short-term to long-term loans.

Metropolitan Capital Advisors, the bank’s new business advisory group, provides a new tier of specialized advisory services to both bank and non-bank clients involved in construction and development projects, said Rick Adams, chief revenue officer for the $1 billion Metropolitan Bank.

Adams said the initial focus will be permanent debt placement by which the bank will advise and help with placement of construction and project financing in the permanent market. A permanent loan typically has a long-term fixed-rate with a long amortization, said Rob Threlkeld, a veteran Memphis real estate finance professional who will head up the new group as senior managing director.

“We do short-term, mainly construction financing,” Threlkeld said, referring to the early-stage loans that carry a guaranty from the borrower and are customarily refinanced after the five or so years.

“On the other side of the coin is the permanent loan,” Threlkeld said. “It’s non-recourse financing, usually a 10-year fixed rate with a 30-year amortization.”

The non-recourse financing is secured by the asset the loan is financing and frees the borrower to pursue new financing for other projects. “We want them to borrow again from the bank,” Threlkeld said. “They want to be nimble and keep doing what they are doing.”

The permanent loan typically goes to lenders and investors outside the bank, including mortgage-backed securities and government-sponsored entities such as HUD and Freddie Mac and Fannie Mae.

“We have relationships with those people and will facilitate that,” Threlkeld said.

The bank benefits from fees assessed in facilitating the transition and by freeing up money for new short-term lending to both new commercial borrowers and borrowers who have transitioned earlier loans to the permanent market.

Geographically, the Capital Advisors division’s services will be in Metropolitan’s metro footprints of Jackson, Memphis and Nashville, according to Adams, the bank’s chief revenue officer.

“Robust” commercial loan volumes in the three markets led to creation of the Capital Advisors division, said Adams, who describes Metropolitan as a commercial and capital bank rather than a community retail bank focused on consumer lending.

In an interview in March 2012, Metropolitan Chairman and CEO Curt Gabardi estimated  commercial and industrial lending made up 40 percent of the bank’s loan portfolio. The new division “represents a natural extension of Metropolitan’s simple, multi-channel operating strategy,” Gabardi said in a recent email.

This, he said, “allows our commercial clients to choose the best long-term financing option to meet their needs.”

Gabardi started Metropolitan in the midst of the banking crisis of 2008 and after 17 months of breaking even had several quarters of profitability by early 2012.  The bank is now co-headquartered in Ridgeland and Memphis. Its eight locations include the Nashville market.

Watkins & Eager’s Ben Williams, chairman of the Jackson law firm’s commercial lending and finance practice group, said he expects Metropolitan’s new Capital Advisors division will help fill a need in the region’s fragmented and somewhat undeveloped capital advisory offerings.

The service will be especially helpful to development borrowers who have never availed themselves of permanent loans and those who take loans permanent so infrequently they do not already have an established adviser, said Williams, who with Watson & Eager’s Molly Jeffcoat Moody writes the Mississippi Business Journal’s Commercial Finance 701 column.

“Even for seasoned developers with prior relationships, each project is a new deal and borrowers would be interested in talking to an advisor – such as one closer to home and particularly if the adviser is with their banks,” Williams said in an email.

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