Since the first of the year, FirstBank of Denver has invested $79 million in high-profile real estate along the 16th Street Mall.
Recent deals include a $57.3 million loan this month to the new owners of the Pavilions shopping center; a $9 million refinancing of the Denver Dry building; a $6 million loan for purchase of the Washington/McClintock building; and a $7 million loan for the former Fontius building, now called the Sage Building.
FirstBank’s push into commercial real estate lending started in 2003, bank President Ron Tilton said. The bank has more than tripled its commercial loan portfolio from $505 million in 2004 to $1.67 billion as of June 30.
FirstBank is in a stronger position than many of its competitors to lend. The bank’s delinquent loans and other nonperforming assets in the second quarter were a relatively low 0.15 percent of the total. The bank also has one of the highest capital reserves in the state, with capital equal to 16.2 percent of loans and other risk-based assets. Most banks operate in the 10 to 12 percent range.
“We invest with local people on local properties,” Tilton said. “We build long-term relationships.”
Success in a niche
Among those people is Evan Makovsky, who controls both the Sage and the Washington/ McClintock buildings. Makovsky likes the financing structure FirstBank offers, typically a fixed-rate loan for 50 percent of the value of the property.
Many development loans have variable rates and are for 75 percent of the value of the project.
“FirstBank fits a bit of a niche that few other banks do,” Makovsky said. “Once I know what my fixed term is, my project either works or it doesn’t based on that interest rate. If you are in a variable-rate loan, it could go up or down.”
While many lenders have pulled back from making commercial loans, FirstBank has been able to continue financing projects because of its conservative approach, Tilton said. That also means less competition for business.
“Competition ebbs and flows,” he said. “The credit crunch has dried up sources for these types of loans and given us an opportunity.”
Larry Martin of bank consulting firm Bank Strategies Inc., said before the recent credit crunch, competition was increasing for FirstBank, and it responded to a slowdown in marketshare growth by moving into Arizona.
“They operate with an extremely conservative philosophy, and they don’t make giant moves quickly without testing the water first,” Martin said.
Invested in stability
FirstBank understands commercial real estate and an ability to look at a deal to determine whether it will work, said Mark Sidell, president of Gart Properties, which purchased the Pavilions.
“They’re loaning their own capital, so the decisions and execution are closely linked, and they have an entrepreneurial spirit,” Sidell said.
Gart, which paid $94.5 million for the Pavilions, plans to spend another $25 million on renovations.
“They will support the project all the way through,” Sidell said. “The loan is structured in a way that allows us to grow the facility and borrow more, as long as we continue to invest alongside them.”
The bank also never got caught up in the subprime mortgage lending frenzy, always requiring 20 percent down. It also doesn’t sell its loans on the secondary market.
“It gives us a different view of what kinds of risks we want on the balance sheet,” Tilton said.
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
