BankUnited Financial Corp., a Coral Gables, Fla., company already under investor fire for its reliance on option adjustable-rate mortgages, ran into a new problem last week over loans to a troubled real estate project.
But the $12.9 billion-asset thrift company quickly tried to quell the criticism. It said it expects "no significant loss" from involvement in a syndicate formed in August of last year that provided $675 million of financing for a housing project led by the home builder Technical Olympic USA Inc.
Keefe, Bruyette & Woods Inc. had raised concerns by saying in a report issued Thursday that BankUnited "was named as an original participant in two of the three tranches of the revolving loan totaling $335 million," and that "even a 10% piece of the total loan would be about $35 million."
Later that day BankUnited said that the report "highly erroneous," that the lender is one of roughly 40 in the syndicate, that its total exposure was $17 million, and that it expected "no significant loss."
Keefe Bruyette responded Friday by saying that even though it stood by its initial report, BankUnited's clarification "is good news."
Construction lending makes up less than 5% of BankUnited's loan book, Keefe Bruyette said in a report issued Friday. "We believe that the profitability of its more important option ARM product will be a major driver of the stock price."
The firm reiterated its "outperform" rating and $33 price target on the stock. (Though it fell on the initial report and rebounded on the bank's rebuttal, BankUnited's stock was flat for the week.)
Technical Olympic, which had planned to build about 3,500 single-family homes and town houses throughout Florida by the end of this year, announced Wednesday that it was seeking forbearance from its lenders, blaming the state's deflating housing market.
The builder and its partners are "requesting waivers from its lenders regarding potential defaults and permitting future advances under the revolving credit facility," Tommy McAden, its president, said in a press release.
Antonio B. Mon, the president and chief executive officer of Technical Olympic, blamed the state's housing sector.
The market "has become more challenging, characterized by weak demand, an oversupply of new and existing inventory homes, increased competition, and an overall lack of buyer urgency," he said in the release. "Although we anticipated a gradual slowdown in the Florida housing market, these conditions have been more severe than anticipated and have negatively impacted the joint venture's ability to meet its projections."
