Commerce Bancorp is expanding its reach into commercial mortgage banking.
The $3.8 billion-asset banking company, based in Cherry Hill, N.J., announced last week that it is forming Commerce Commercial Mortgage Banking Group, a move designed to tighten the link between its commercial real estate lending and the capital markets.
The group's mission is to originate and place mortgages with long-term lending sources such as insurance companies, conduit financing programs, and investment banks.
Commerce typically makes construction loans from $1 million to $7 million. Through the new group, it could make loans up to $20 million.
Bringing capital markets capabilities to small and midsize developers "is the natural progression and expansion of services for the real estate clients that we have," said Robert Falese, executive vice president and senior lending officer at Commerce.
"We're in a unique position," Mr. Falese added. "We're small enough to make this work for the customer but large enough to support the investment."
The company named senior vice presidents James Byron and Anthony DiNicholas to head up the program. Mr. Byron and Mr. DiNicholas previously worked at David Cranheim Mortgage Corp., Chatham, N.J. Mr. Falese said he plans to add two to four executives to the group in the next 18 months.
Construction loans make up 25% to 30% of Commerce's loan portfolio. The bank typically loans up to 70% of a given project's value and requires the developer to finance 20% to 30% with equity contributions.
Commerce operates throughout New Jersey, southeastern Pennsylvania, and Delaware.
Donald Eisen, a senior managing director at Cushman & Wakefield, said that in this region "everything is in place for a great real estate market.
"The area is benefiting from high employment, a very strong dollar, and low interest rates. In addition, suburban markets are going to further benefit from a New York City market that is very tight," he said.
A real estate banker at another institution applauded Commerce's move. "Your portfolio is a sitting duck if you don't have that capacity," the banker said. "More and more capital markets products are being created for the real estate client base, and if you don't deliver that full service, someone else will wind up with the business."