JONATHAN L. SMITH Vice president, managing director Citicorp Real Estate Inc., Chicago

If it's true that problems are merely opportunities in work clothes, then Citicorp's Jonathan L. Smith, 39, had better put on his coveralls.

After a recent stint overseeing Citicorp's highly leveraged transactions outside New York City, the longtime real estate lender has returned to his roots in banking: He is now in charge of Citicorp's Midwest and Middle Atlantic real estate portfolio.

That's a $4 billion of loans and property to watch over. With assets from Denver to Washington - and some of them ailing - Mr. Smith is getting a chance to draw on skills he has honed in the HLT trade in 1989 and 1990.

"The key thing in the HLT business is that it is the ultimate in cash-flow banking," he says. "Basically, we are taking an approach to real estate that is more cash-flow-oriented."

During real estate's go-go years, many banks loaned on expectations of perpetually increasing property values, rather than sticking to the basics: analyzing the ability of the rental revenue to repay a loan.

Citicorp is far from unique in beating a retreat to the more traditional practices. But the stakes are far greater at Citicorp, which at last count held about $13.8 billion of commercial real estate assets.

The first step in the bank's approach, modeled after a pilot program tested at Mr. Smith's Chicago office, was to conduct a triage of its portfolio. It separated the loans that are in good shape, and those beyond hope, from loans that can be helped by working with the developer or with new investors.

Once the candidates for long-range workouts are identified, a business plan for each property is developed. How Mr. Smith handles each decision could shape local real estate markets across his domain. It will also play a big role in determining the bank's future.

"If we're right, we should come out better than the industry average" in return to shareholders from real estate lending, he says.

Though he may someday move away from the real estate field, he sounds pleased for now with his problem-solving role. "It's a business where no two days are the same. There is no textbook on how to go about the business," he says.

Mr. Smith sounds moderately upbeat about commercial real estate. But he knows the days are long gone when bankers could loan developers big money based only on some vague anticipation of future needs.

Says he: "When you get to 1995, you'll still be building offices - but only in response to demand."

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