Wednesday, February 3, 2010
Real Estate Banking
"Bank of America Corp.'s [BofA] shotgun marriage to Merrill Lynch & Co. has produced plenty of ill will, and big profits in real-estate investment banking. ... The secret of success: [BofA] leveraged its relationships with real-estate borrowers to generate a flood of investment-banking work, much of it handled by former Merrill bankers who decided to stick around after the securities firm was acquired last year. ... Many expect a rash of initial public offerings by private companies comparable to the one that followed by commercial real-estate collapse of the early 1990s, with large payoffs for underwriters. ... [BofA] was a lead lender to REITS in 26 of the 39 stock offerings in which it was the left bookrunner, according to an analysis of data provided by Dealogic and SNL Financial. ... 'I have always taken the position that unless firms provide us with debt capital, we don't give them any business,' said Debra Cafaro, chief executive of Ventas Inc., a health-care related REIT that raised $312 million of equity in April with [BofA] as a lead bookrunner", Anton Troinovski at the WSJ, 13 January 2010, link:
All the more reason to separate investment and commercial banking. That Ventas can go to the same store for loans and equity is a problem for FDIC insured institutions. Bring back Glass-Steagall.