Japanese Lender Helps Jump Start Real Estate Project in Cincinnati

After languishing since last year for want of financing, the first stage of a $500 million waterfront project got under way in Cincinnati last week when the developer lined up a Japanese institution to provide a $28.6 million loan.

The deal is one of the few signs of life in an otherwise moribund national real estate market. That Tokyo-based Yasuda Trust & Banking became involved is even more surprising. It was widely thought that Japanese banks were suffering indigestion after gorging on U.S. real estate loans in the late 1980s, when prices were sky-high.

However, a spokesman for Yasuda has said that it will consider other phases of the waterfront development.

A local lender, Fifth Third Bank, is providing an additional $3 million and will service the entire loan.

Advance Sales Encouraging

Andrew Hils, a Fifth Third commercial lending officer, said his bank stepped up to the loan chiefly on the strength of $11 million in advance sales of condos, letters of credit, and financial support of the project by the city of Cincinnati.

However, Fifth Third does not plan to participate in a long-term construction loan, Mr. Hils said. It is staying on largely to fulfill administrative functions for the Japanese bank.

Construction halted last year due to lack of financing commitments. The new loan was secured by letters of credit for $6 million from Benenson Capital Co. of New York and $3 million from Motts Holdings, Hartford, Conn.

Asked about the developers' equity contribution, Mr. Hils said that Benenson is "on the hook for a lot, even if they didn't put up anything out of their own pocket."

The rebirth of the Adams Landing waterfront project is the latest evidence that banks are willing to lend money for construction -- but only if the developer makes a strong financial commitment to the project.

Usually, advance leasing or a strong equity position by the developer is needed to obtain financing.

Stalling of this project was tied to a weak real estate market.

"You'd have to have truly attractive pricing" to appeal to buyers in a city where rental vacancies have been rising for the past three years and rents average only $455 a unit, said Lloyd Linford, president of the Reis Reports, a real estate data analyst.

Mr. Hils of Fifth Third offered a more upbeat assessment: "Demand for apartments is growing here and we expect a very positive consumer response."

Phase two of the project, a 150,000-square-foot office building, is expected to break ground sometime after Adams Place is over 50% completed.

Ultimately, Adams Place will have 1,250 units; the 27-acre Adams Landing will include more than half a million square feet of offices and stores.

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