The Commercial Observer: Congratulations on the promotion. How have your responsibilities changed?
Mr. Martocci: I’ve been doing pretty much the same job for a few years. But the regional president’s position is really a face for the bank and its community. We’re a community bank, so our decision making is sort of locally done, and the regional president is looked to as somebody who is leading the charge, whether it’s external or internal on any decisions that are made for the region. My direct responsibility is commercial real estate and middle market lending, but with this promotion I’m also responsible in the sort of guideline basis for M&T’s retail presence here in New York-which in New York City isn’t terribly large-and its banking.
While a lot of the people who have come back into the market are just looking for stabilized assets, right now, for the top sponsors in the city, there is actual competition for construction loans.
Has your workload increased?
There’s even more filling out paperwork and doing bank openings, doing branch events-all the public relations and representing the bank and the community.
Are you comfortable with that side of the job, being the public face?
You’ll have to determine that when we’re done with the conversation, I guess. I’ve done a fair amount of it. Today I was at NAIOP, the week before Young Men’s/Women’s Real Estate. So I’ve done a fair amount of it, whether it’s the programs or the seminars. So I suppose I’m comfortable with it.
You said something recently that I thought was rather surprising: Construction financing is actually seeing the light of day. Is that the case?
Oh, there’s no question about it. While a lot of the people who have come back into the market are just looking for stabilized assets, right now, for the top sponsors in the city-so like the old families and some others-there is actual competition for construction loans.
Can you give me an example?
There are deals we’re doing right now with some well-known families. One is on upper Fifth (Avenue) that has heavy competition to do the deal. There are 80/20 deals out there where there’s competition, and there’s a fair amount of activity again among the lending community-even on construction projects.
What kind of financing would you say is the most prevalent right now in New York?
Certainly multi-family is something that in New York-particularly rent-stabilized multi-family, with a couple of high-profile exceptions-is an asset class that has performed extraordinarily well. There’s tremendous competition from a pricing standpoint on that. Structures have always been fairly reasonable there. But that would be the asset class with the most competition. Second most would be any sort of asset class that has multiple tenants with fixed-rate, permanent cash-flowing deals where there’s multi-tenants and not too much roll over. There’s tremendous competition for that kind of stuff again. An office space with good tenancy, with not much rollover? There’s competition for that.
Where do you expect the market to be in six months?
Some of this is dependant on what happens in Europe, right? Whether there’s a contagion or not. But what I would say is because of what’s happening in Europe you’re probably going to see low rates for a longer period of time. Whether they’re going to raise rates six months from now-and that’s probably the idea we would have had-that’s certainly gone out to probably 12 months. I think, perversely, it’s probably beneficial to New York City real estate.
What’s your take on the so-called ‘extend and pretend’ strategy that has been utilized by banks in the past several years?
Extend and pretend is obviously not something that we do here at M&T. I think that what you’re referring to is that the regulators through the October guidance sort of said that with the right sponsorship, where you can show cash flow, you can extend loans and not necessarily take the hits you might have taken prior to that guidance. Look, if it’s November of ’09 and you have a maturing loan, you know you don’t have a take-out; the cash flow is there. Almost regardless of the appraisal, it’s in everybody’s best interest to extend that loan so long as it’s current, so long as it cash-flows, it’s there and it’s sustainable; it’s in everybody’s best interest not to foreclose on something that has had difficulties in refinancing.
What are your views on tighter controls on banking regulations that are being discussed in Congress?
The primary impact is upon the investment banking community, or the very large banks. That said, higher capital requirements and consumer protection-and I think everybody favors reasonable consumer protection-makes the banking business more expensive and potentially less profitable if you can’t pass along those costs. There’s a risk that it restrains capital and lending rather than enhances it. Hopefully, there will be some sort of balanced bill that comes out of the reconciliation bill.