| Bank strives to expand its real estate lending business while digesting the First Union merger. |
By Upendra Mishra
The September 2001 merger of Wachovia and First Union has not only created a banking giant -- Wachovia Corp. -- with 20 million customers and $322 billion in assets, but also a real estate lending powerhouse.
"We don't see why we can't increase our market share in excess of 6%. In fact, we could be 10% of the domestic market in the near-term," says Managing Director Bill Green, who came over from First Union and leads the real estate capital markets division. "There are no limitations to our platform."
Wachovia finished No. 8 in NREI's Top Direct Lenders Survey, with $4.1 billion financed in 2001. That figure does not include First Union totals.
While integration teams continue to work hard to implement best practices, identify new marketing opportunities and explore efficiencies, the full merger integration process is expected to be completed in two to three years. So far, however, the merger has been hailed as win-win for both parties, and especially for its real estate group.
"There was very little crossover with First Union. What First Union had, Wachovia did not," Green says. For example, in comparing the operations and services of the two banks, executives determined the capital markets business at the merged bank was made up of about 95% of First Union's accounts and 5% of Wachovia's. In the investment banking arena, First Union had a share of about 85% to Wachovia's 15%. Green adds that Wachovia's traditional real estate banking business accounts for about $25 billion, or nearly 75%, of the merged bank's accounts.
Under the new structure, the firm's real estate financial services are divided into two major categories: traditional real estate banking and real estate corporate/investment banking.
The traditional real estate banking division serves developers, investors, owners, and smaller pension and opportunity fund managers.
The corporate/investment banking division provides services to REITs, corporate real estate users, and larger pension and opportunity fund managers. It also offers operating credit facilities, commercial mortgage-backed securities (CMBS) and mezzanine financing, among other services.
In May, Wachovia launched a national advertising campaign to promote the new Wachovia brand. The campaign's initial stage will promote Wachovia Securities, the brand name under which Wachovia Corp. provides corporate and investment banking, including real estate and retail brokerage services.
Mike Slocum, executive vice president of real estate financial services at Wachovia, says the merger has strengthened the firm's position in its market, which now extends from Connecticut to Florida with 25 different offices throughout the East Coast.
With the integration of the merger process moving smoothly, Wachovia's immediate goal is to increase its share in the $1.7 trillion domestic real estate market, Green says, adding that Wachovia currently provides 6% of the nation's mortgage debt to the banking sector and 6% to the conduit sector.
Wachovia also is expanding into other financial services areas. Earlier this year, the bank launched asset management services for third parties. The future growth of Wachovia and any other real estate financial services provider, however, is closely tied to the economy.
"We have obviously seen a slowdown. Projects are staying much longer on the drawing board," adds Slocum. "But the markets in New England, New Jersey and Eastern Pennsylvania are seeing less deterioration than the Southeast. We have not seen any significant deterioration in our portfolio."