- The Washington Times - Wednesday, January 11, 2006

Two major banks have obtained permission from the Treasury Department to build hotels.

The Office of the Comptroller of the Currency, the Treasury Department’s bank regulator, gave PNC Financial Services Group Inc. of Pittsburgh permission to build a $170 million complex near its headquarters that would include a 150-room hotel, 30 condominiums and a 25- to 30-story office building.

Bank of America obtained permission to build a 15-story Ritz-Carlton hotel at its headquarters complex in Charlotte, N.C.

In both cases, at least part of the space would be occupied by renters or buyers who are not necessarily associated with the banks.

Federal law normally prohibits banks from owning or developing real estate unless it is going to be used by the institutions to conduct their financial services businesses.

The law is intended to prevent banks from putting the money of their loan customers and depositors into the risky real estate industry, because an economic downturn could wipe out their investments.

The banks also could use their easy access to capital to squeeze out the competition from real estate agents and control rents, real estate agents say.

“We feel [the recent permission is] one short step from development to brokerage and property management, which is a concern of our members as well,” said Steve Cook, spokesman for the National Association of Realtors.

The hotels, condos and offices planned by PNC and Bank of America are next to their headquarters buildings.

PNC and Bank of America say they have no commercial development plans beyond their headquarters property.

“It enables us to have a very nice hotel to use for clients and visitors and suppliers and others who come to our corporate headquarters,” Terry Francisco, spokesman for Bank of America, said about the planned Ritz-Carlton hotel.

PNC Financial Services says its hotel-office-condo project would be used by tenants initially, but that the bank plans to take over at least some of the property as it expands.

“We are not in the real estate development business,” said Brian Goerke, spokesman for PNC. “This is a unique circumstance.”

Chuck Muckenfuss, a partner in the law firm Gibson, Dunn & Crutcher LLP specializing in financial institutions, said the Treasury Department decision is not necessarily a change.

“The idea that bank premises or bank buildings get used for other purposes is not at all a new idea,” Mr. Muckenfuss said.

Banks frequently build buildings bigger than needed for their purposes and rent out the rest, he said.

In other news …

• The National Association of Realtors this week predicted that the housing market will return to a slower rate of price growth in 2006.

“A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization,” said David Lereah, NAR’s chief economist.

Existing-home sales are forecast to ease by 4.4 percent to 6.79 million this year, compared with the record 7.10 million last year.

Property Lines runs on Thursdays. Call Tom Ramstack at 202/636-3180 or e-mail tramstack@washingtontimes.com.

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