Barnett Banks Inc. expects to begin selling commercial real estate loans within 30 days though its joint securitization venture with Shoptaw-James Inc., a program that eventually will securitize more than $300 million annually.

Securitization is on the rise as commercial banks cautiously reenter the real estate market. The technique enables banks to remove existing loans from the balance sheet and to disperse the risk of new loans to investors.

Banks are finding a market for conservatively underwritten commercial real estate loans but virtually no appetite on the part of investors for speculative construction loans.

Barnett's first pool, being sold though CS First Boston, will consist of mortgages on apartments with at least three years of operating history. Later in the year the bank expects to bring to market a pool of loans on existing retail and industrial properties and miniwarehouses.

On Monday, William R. Nicholson, director of commercial real estate at the bank, discussed the evolving real estate marketplace in a telephone interview.

Q.: How does a bank make money in real estate these days?

NICHOLSON: We do the traditional commercial lending on income-producing properties. A significant portion of portfolio is made up of residentially oriented builder-tract loans, condominium loans and development loans for single family subdivisions. With the ongoing population growth in Florida, we see that as a significant opportunity.

Through Main America Capital, which is our joint venture with Shoptaw-James Inc., in Atlanta, we're involved in securitizing commercial mortgages. We expect to be selling our first loans within 30 days.

Q.: Are we talking about securitizing loans already on the books, or originating new ones for securitization?

NICHOLSON: We're securitizing loans that Barnett originates, as well as Schoptaw-James' and other correspondents that we have selected.

We get a critical mass that's put in a pool first. First Boston is acting as investment bank. Eventually we hope to get up to $300 million a year, but we're a long way from there now.

Q.: What kind of property is being financed?

NICHOLSON: We'll do office industrial, apartment, retail and mini-warehouses. The upcoming sale is limited to apartment loans, but later in the year we'll do another sale with the balance of property types in it.

Q.: Why have you partnered with these mortgage banks? Are you trying to diversify geographically?

NICHOLSON: We wanted to be geographically dispersed and dispersed by product type. We also wanted people that are experts in the long term business. That's what our long-term partners brought to us.

Q.: Are you making loans on new projects for secutization?

NICHOLSON: No. We want at least three years of operating history. Also the maximum loan size is $3 million. We don't have a minimum size, but realistically it's down to a million - or possibly to a half-million dollars.

Q.: What are market conditions like in Barnett's region?

NICHOLSON: We are very pleased with the way traditional commercial property has been recovering in Florida and the Georgia markets that we cover. We're seeing vacancy rates in office buildings diminishing more rapidly than we thought.

Well-located retail properties are filling up, but we still have problems with retail that was improperly located. With the influx into. Florida, we see a demand for single-family residential development. It's also a potentially strong market for industrial property. That market has demonstrated strength.

Q.: What about interest rates?

NICHOLSON: We see more lenders in the market than a year ago. As a consequence there is price competition, although we think that the major Southeast and regional banks are continuing to maintain high quality underwriting standards.

Q.: When will construction loans for commercial property pick up?

NICHOLSON: Right now there is new construction for retail and industrial space. Office construction is pretty much limited to built-to-suit projects. We do not anticipate any downtown office building coming on in the major markets where there is not substantial preleasing, or suburban buildings without more more than 50% preleasing.

I think lenders arc going to be more cognizant of income and the quality of tenants, especially with regard to office space, since the losses occurred in that sector.

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