For banks in the real estate business, it's Beantown or bust.

In recent weeks, KeyCorp and investment bank Heller Financial have opened real estate offices in Boston, hoping to capitalize on the city's revitalization.

Deutsche Morgan Grenfell is considering a similar move, while BankAmerica Corp., Nomura Securities, and Lehman Brothers Inc. are increasingly serving the Boston market from offices located elsewhere.

"Any lender that is national cannot afford not to be in this area right now," said Fred Rossi, a principal with Property Information Exchange, a national real estate information service. "It's too hot, there are too many assets flying off the shelf, and too many opportunities to be had."

At the height of the last real estate boom, in the late 1980s, interlopers including Chase Manhattan Corp., Citicorp, and Credit Lyonnais set up shop in Boston. When the market collapsed in the early 1990s, they retreated to their home offices to focus on working out problem loans.

Meanwhile, local lenders like Fleet Financial Group and BankBoston Corp. kept their doors open. The real estate market, fueled by the mutual fund industry, universities, and high-tech companies, eventually sprang back to life, and the hometown banks prospered.

Now outsiders want a piece of the action.

Cleveland-based KeyBank, for example, opened a real estate office in Boston on Oct. 1, and hired John Shea, who had been head of Wells Fargo & Co.'s Boston office, to run it.

George Emmons, executive vice president and head of KeyBank's commercial real estate finance, said he expects $150 million in new loan originations in 1998 from the Boston group, which is currently staffed by three executives. KeyBank is seeking to provide construction financing and interim loans on all property types, with the exception of hotels, Mr. Emmons said.

New York-based Heller, meanwhile, set up shop in Boston several weeks ago, looking for opportunities to invest in refinancings and repositionings of properties, said Dittany Schlegman, Heller executive vice president. The firm provides fixed-rate financing, bridge loans, longer term and interim floating rate bridge loans, participating first mortgages, and second mortgages.

Joel Reck, chairman of the real estate practice at Brown Rudnick Freed & Gesmer, a Boston-based law firm, said the city rebounded much more quickly than expected. In 1992, he said, Boston was considered one of the least attractive markets in which to make a real estate investment.

By 1995 it was the second most popular market for real estate investments, behind Atlanta.

"The turn has been much more rapid than anyone predicted, and it continues to get stronger," Mr. Reck said.

Local bankers said the new entrants do not worry them.

"Opening an office at the seventh inning of the cycle, I can't get excited about it," said Ken Witkin, a managing director and head of real estate finance at Fleet Bank, Boston. "We will be very competitive with anyone who comes into our market.

Mr. Witkin said that despite stiffer competition, Fleet would not lower its underwriting standards. If rivals want to compete on structure, the deal is theirs, he said. "We're not going to become more relaxed this time in structuring our business."

Floyd Wiggins, division executive of commercial real estate for the New England region with BankBoston Corp., also said he is undeterred by the newcomers.

"Competition is always positive, and given our history in the region, we have a commitment that cannot be replicated," Mr. Wiggins said. "This bank has been in real estate lending over 50 years."

Observers say that while Fleet and BankBoston have strong relationships, they do not control the entire market.

"If you can make yourself known, save people money and provide a comparable service, there is room," said Mr. Rossi of Property Information Exchange.

Though some fear that the market will once again overheat, as it did in the early 1990s, most lenders remain optimistic.

"In the next 24 months, absent some unforeseen cataclysmic event, I see the good times we've been experiencing for the last five years continuing relatively unabated," Mr. Wiggins said.

Even when the real estate cycle does turn, "it will be a soft landing," he said, because real estate has been revalued and repriced since the 1980s.

But others are not so sure.

"The issue is going to be how diligent the financial sources are-whether they are providing equity or debt-in requiring sensible and conservative projects," Mr. Witkin said.

Another local real estate lender said that regardless of whether the competing banks are from Boston or New York, "it's too many banks chasing too few deals."

Gerard Cassidy, a bank analyst with Tucker Anthony, added that opening new offices "is always a dangerous strategy on the real estate front."

"If a customer of a bank is satisfied with a banking relationship, new competitors must compete by providing weaker underwriting standards," Mr. Cassidy said. "But are they really winning business they want to keep?"

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