In what may be the largest loan syndication ever by number of lenders, 101 community banks are financing a $118.5 million commercial real estate project in Kansas City, Mo.
Banks in the network range in asset size from $20 million to $300 million, and the average participation was $750,000. The largest piece was $5 million and the smallest $100,000, according to David W. Dahlin, the managing director of BB Syndication Services Inc., which brought the banks together.
"It gives community banks the ability to be involved in a loan that, due to the banks' size and the loan size, they would never be involved in," he said.
BB Syndication, a unit of Bankers Bancorp. Inc. of Madison, Wis., was created in 2001 to collaborate with other bankers' banks on syndicated loans. It has made many since then, but this loan is different because of the number of banks involved and because so many of them are lending outside their home markets.
"A community bank needs to be looking at these alternatives, because even in our backyards it is so competitive," said Gerald R. Luebke, the president of the $165 million-asset Oregon Community Bank and Trust in Oregon, Wis., which took a $3 million piece of the loan. Mr. Luebke said syndicated loans diversify Oregon Community's portfolio and help it compete with larger banks.
Mr. Dahlin said 61 of the participating banks are Wisconsin or Iowa customers of its $298 million-asset parent, and 40 work with the $101 million-asset Bankers' Bank of Kansas in Wichita.
"We had a waiting list of banks looking to get in that did not get the opportunity," he said.
Mr. Dahlin would not disclose the loan's rate or terms but did say the community banks beat several large banks competing for the loan. Rounding up approvals from the 101 banks took 25 days, he said. The loan closed in late March but was not announced until last week.
The loan will finance the construction of a corporate campus for Bernstein Rein Advertising Inc., which will use roughly three-quarters of the 203,000 square feet of office space. The project also includes the Advertising Icon museum; a 128-room boutique hotel; 27,000 square feet of retail and restaurant space; a 1,000-space underground parking lot; and a 261-seat auditorium.
Bernstein Rein checked 13 references before selecting the syndicate of community bankers, Mr. Dahlin said.
"When we were competing for this financing, compared to the other big players, we were an unknown," he said. "Just like we did our due diligence on Bernstein Rein, they did their due diligence on us.
"The reason we probably came out on top is we asked the developer what are the most important points of the financing and tried to craft the deal that way, as opposed to saying 'this is how we do these deals, take it or leave it.' "
Bruce Schriefer, Bankers' Bank of Kansas' president and chief executive, said each of the 101 banks had to make its own credit decision. All had access to the financial statements and could attend a lenders meeting to see the site and meet the people involved. The bankers' decisions were based on the loan-to-value ratio and the debt service plans, just like any other loan, he said.
"It makes the credit decision on a pound-for-pound basis pretty comparable" to smaller deals that community banks are accustomed to doing, Mr. Schriefer said.
Thomas M. Awtry, the president and CEO of the $257 million-asset South Ottumwa Savings Bank in Iowa, agreed.
"Really they're not all that much different. They are just a few more zeroes," Mr. Awtry said.
South Ottumwa has a $2 million piece of the deal. "We are about 65% loaned up and are in a community that doesn't offer large commercial loan deals," he said. "It gives us the opportunity to get some nice loans."
Mr. Luebke said another good thing about making a loan alongside so many other bankers is the chance to pick brains. Someone who isn't that familiar with a particular sector or geographic area can talk with someone who knows it well.
"We really in a sense all work together," Mr. Luebke said. "You have a better assurance for yourself in making these kinds of decisions because you have all these other bankers working with you to trade ideas."
