KeyCorp is leading a $115 million loan backing Simon DeBartolo Inc.'s construction of a $145 million retail center in South Miami.

The Shops at Sunset Place, a 510,000-square-foot, open-air retail center, is under construction through a joint venture between Simon DeBartolo, of Indianapolis, and Florida developer Comras Co.

The loan was enthusiastically received in the market and oversubscribed by $30 million, according to lenders involved in the deal. Key ultimately held $35 million of the credit and sold the remaining $80 million to Mellon Bank Corp., Dresdner Bank, CIBC Wood Gundy Securities Corp., Sumitomo Bank, and Comerica Inc.

The mall, which is set to open in autumn 1998, is 65% pre-leased. Anchor tenants include Niketown, Barnes & Noble, Sega Gameworks, and Virgin Megastores.

Simon DeBartolo owns 75% of the project, and Comras owns the remaining shares. Together, the borrowers invested $30 million of their own equity in the project.

Cleveland-based Key, the eighth-largest lender to commercial real estate last year, began to expand its real estate investment trust portfolio in 1993, when others were still recovering from hefty losses.

"It was early, but we saw the formation of the publicly traded REITS with well-capitalized, low-leverage, and very focused management styles, and we got in on the ground floor," said George Emmons, executive vice president and national manager of Key Commercial Real Estate.

Since that time, the 10-member team has built relationships with 20 real estate investment trusts and has increased its portfolio to $700 million, which the bank plans to boost to over $1 billion in the next few years, Mr. Emmons said.

Still, that's only one element of KeyBank's $5.1 billion commercial real estate loan portfolio. The bank said it expects another $3 billion in real estate originations in 1997.

"This whole market is very vibrant today," Mr. Emmons added.

Next month the doors will open at another Key-financed facility.

Key led a $120 million loan to back the construction of The Mall at the Source, a $150 million, 526,000-square-foot shopping mall in Long Island, N.Y., also developed by Simon DeBartolo.

In the late 1980s, many lenders experienced major losses on construction loans for shopping malls, which they made even when malls had little pre- leasing.

The growth of publicly owned real estate investment trusts has changed that significantly. Developers now must make an equity contribution to the project and must pre-lease at least 65% of the development to get financing.

"Generally speaking, investing in development today is safer, because there is much better information about new supply," said one trust analyst.

"I don't know whether there is perfect enough information in the retailing world to mitigate the risk, but the success of a property is often determined by the format of the retail, as opposed to the aggregate demand or supply," the analyst said.

Observers say the Florida market has experienced a great deal of population growth and that the demographics can support more retail projects.

As for the developer, analysts said they regard Simon DeBartolo as one of the premier operators, with relationships with all the major retailers.

"Simon is trying to expand the reach of the customers they address in any of their properties and better understand that channel of distribution," one analyst said. "It's good that they really concentrate on how to bring more ideas and more value to their average customer." u

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