Though the largest condominium markets are softening, Corus Bank, one of the nation’s leading lenders to condo projects, is still eager to make loans.

As Corus was boosting the size of its condo-loan portfolio by nearly a third over the 12 months ending in June 2006, to $4 billion from $2.7 billion, it was also setting some ambitious goals for loan originations.

The Chicago-based bank aimed to originate $4 billion in new loans to condominium projects this year.

By the end of June, Corus seemed well on its way to meeting that goal. The bank, whose commercial real estate lending arm focuses almost exclusively on providing construction financing to build new condo properties and convert rentals to condominiums, has already originated more than $2 billion in the first half of 2006, mostly to new construction projects. But most of those loans, $1.2 billion, closed in the first quarter, with the bank’s pace of lending decelerating significantly in the April-June period.

And as the condominium market slows, it’s becoming increasingly difficult to find deals to lend to. “It’s harder for developers to put deals together,” said Dwight Frankfather, first vice president. Fortunately, “other lenders are in retreat,” he said, leaving Corus to dominate the market.

Bending the rules

Even with less competition, the pickings—especially for bigger deals—are getting slimmer. That may be one reason Corus has begun flexing a bit around the edges when it comes to enforcing the bank’s normally stiff underwriting preferences.

Typically, Corus prefers to lend to developers who have pre-sold at least 50 percent of the condominium units, taking in earnest money or buyer deposits equal to 20 percent of the total unit cost. The loans usually cover up to 75 percent of the projected value of a new condominium project. But lately, Corus has shown a willingness to bend its own rules. In March, the bank closed a loan for more than $30 million to Tivoli Properties, Inc., based in Atlanta, to develop Aqua, a new 24-story, 84-unit condominium project, even though the project had pre-sold no units.

“It’s a very nice building in a good location,” explained Frankfather. Aqua is set on a prime corner in Atlanta’s Midtown neighborhood, and its units will average 1,800 square feet, with prices ranging from about $250,000 to over $1 million.

Corus is also making exceptions for much larger deals.

At press time, Corus was near to closing a $315 million loan to construct a new, 450-unit condominium project in the Seattle area. Of that loan amount, $195 million is intended to stay on Corus’ balance sheet, with a participating bank providing the remaining $120 million.

Once again, Corus plans to make this loan even though the community has not pre-sold any of its units.

The bank’s eagerness to lend to condo projects even in a softening market and its willingness to bend its own rules don’t seem to have hurt it much. Corus has had an astonishingly low rate of defaults. It hasn’t had to charge off a commercial real estate loan of any kind since 1999.

But even if Corus executives aren’t worried, investors are. In recent months, Wall Street has punished Corus for its focus on condominium lending, driving the bank’s stock price down to about $21 a share in mid-August from a high of nearly $34 in late April.

“Investors are definitely gambling that we’ll lose money,” Frankfather said. “But I don’t think you’re going to see any additions to the problem loans.”