Now that the movement toward securitizing commercial real estate loans finally is gaining steam, only behemoth institutions, such as the Resolution Trust Corp., have been able to take advantage of it.

But a San Diego accountant is working on a way for small banks to sell their commercial real estate loans on a secondary market, much in the same way conforming home mortgages are securitized and sold.

"We've been discussing this concept with a number of banks," said Derek Thomas, partner in charge of real estate consulting services at the San Diego office of Kenneth Laventhal & Co.

Mr. Thomas said his concept is still in the early stages, and wouldn't disclose which community banks will be involved in its testing.

"A bank participating in this would have a clear competitive advantage, and they don't want to tip their hand," he said.

When the RTC complete several deals with Wall Street firms to convert chunks of its huge portfolio of performing and nonperforming commercial real estate loans, it signaled to many banks that they could do the same.

Private developers turning their portfolios over to publicly traded real estate investment trusts have proved that there are investors interested in buying commercial real estate securities:

But Mr. Thomas said such deals need at least a 100 million size for any Wall Street firm to be interested in them. That precludes community banks.

Creating a Venture

Mr. Thomas' idea is for several community banks to form a venture to buy and then sell, via securities, their commercial real estate loans.

"Most small banks can't write that amount of loans by themselves,". Mr. Thomas said. "They would make their loans at the $1 million to $5 million level then, through a conduit company, pool these together with loans" from other banks.

There are barriers to such a system, he said. Pooling differently underwritten loans, for one thing, raises questions about how to rate the pool and who would service the underlying loans.

But Carl Kane, a Kenneth Laventhal partner in New York and a securitization specialist, said, "If small banks want to continue to service the commercial real estate market, they'll find a way to do this."

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