First Union Corp. is continuing to building its real estate capital markets capabilities.
The Charlotte, N.C.-based bank has long served as an intermediary between real estate companies and investors by providing short-term construction loans. On Friday it will start underwriting such loans and marketing them to insurance companies and other institutional investors.
"This adds another arrow to our quiver," said Mike Greco, a senior vice president and managing director of the real estate capital markets group. "Until now that business was being delivered... to our customers by other sources, and we wanted to keep that customer service at the bank."
Historically, commercial banks originated real estate loans but investment banks sold them to investors. But as banks build up their capital markets capabilities, more are beginning to handle the entire process.
First Union plans to source, underwrite, and sell class A permanent nonrecourse commercial real estate loans. The program will offer various types of commercial mortgages, including immediate funding fixed-rate permanent loans, forward fixed-rate permanent loans, and construction/permanent combination loans.
The program will be implemented through First Union's income properties group. Headed by managing director Kroghie Andreson, the unit originates commercial real estate transactions and places them with life insurance companies and pension funds.
Formed this year, the real estate capital markets group offers commercial conduits, credit tenant lease financing, real estate investment trust lending, affordable housing debt, equity financing, and off-balance- sheet lending. The 10-member group plans to double its size in the near future, Mr. Greco said.
He added that the new products allow the bank "to manage its assets and liability positions by using the capital markets as an exit strategy."
Analyst Gerard Cassidy of Tucker Anthony in Boston said other banks are likely to follow First Union's lead and more closely marry their real estate lending business with their capital markets activities.
First Union is "a real innovator and a major player in the capital markets," Mr. Cassidy said. He attributed that to the bank's chairman and chief executive, Edward Crutchfield, who began his career as a bond trader.
"It's very important to have the top guy understanding the capital markets. His influence filters down to the organization. They want this to work."