Citicorp Names Realty Chief
Citycorp took further steps on Wednesday to heal its $14 billion domestic real estate portfolio by appointing its top Third World debt negotiator to oversee the business.
In appointing Robert McCormack to the post, Citicorp made it clear that workout specialists are the key to resolving its problems.
Shifting the Focus
In July, Citicorp chairman John S. Reed appointed William Rhodes, Mr. McCormack's predecessor in Third World debt matters, as a vice chairman with responsibility for problem credits.
Mr. Reed took personal responsibility earlier this year for managing Citicorp's real-estate and Australian loan portfolios, the most damaged parts of its troubled corporate lending sector.
In an internal memorandum, Mr. Reed said that Mr. McCormack, 48, will report directly to him. Robert Laughlin, 45, a vice president who took control of domestic real estate in September 1990, will now report to Mr. McCormack.
Mr. Reed said in a recent speech that the market for selling real estate is moribund, and that property values have not reached bottom. He also predicted that high levels of charge-offs would bedevil Citicorp for several more years.
At the end of the second quarter, about 30% of Citicorp's U.S. commercial real estate portfolio was either nonperforming or foreclosed.
The reorganization calls for a major emphasis on selling foreclosed real estate properties. Citicorp had $1.8 billion of foreclosed commercial real estate on its books at the end of the third quarter, including $1.4 billion in the United States.
The new alignment is the second revamping of Citicorp's real-estate group in about a year. Mr. Laughlin was named 13 months ago to replace Frank Creamer, who headed global real estate. Mr. Creamer was shifted to an "advisory role" in the department, according to a memorandum written at the time.
Analysts said the new alignments portend further promotions for the Third World lending experts who have helped Citicorp resolve what once seemed an impossible problem.
"They had these guys working on LDC debt, which looked hopeless five years ago and now seems like a past problem," said Brent Erensel, an analyst at Mabon Securities, New York. "Now they're bringing these big guns to work on real estate. I think it's a good sign."
Mr. Rhodes, according to the memo from Mr. Reed that was written on Monday, has been asked to spend "significant time on Citicorp's total portfolio, particularly on the nonperformings and individual portfolios or individual credits that justify senior attention."
Mr. McCormack succeeded Mr. Rhodes as head of debt negotiations in February 1990. His successor as chairman of the sovereign debt restructuring committee is Michael de Graffenried, 42, a 20-year Citicorp veteran. Jorge Bermudez was named to assume Mr. McCormack's additional responsibility for managing Citicorp's debt/equity portfolio.
Reed Signaled Move
A bank spokesman said that the managerial shifts in real estate were expected. When Mr. Reed took direct responsibility for real estate, he made it clear that someone with more direct workout experience was necessary for the area. Mr. Laughlin was a former chief of staff to Michael Callen, who runs corporate lending in North America, Europe, and Japan.
Neither Mr. Laughlin nor Mr. McCormack were available for comment. But two sources said that Mr. Laughlin's chief of staff, John McLane, was leaving the bank by "mutual agreement" with Mr. Laughlin.
Stephen Kleege contributed to this article.