Staying Solvent

By Hannah Wallace August 31, 2006

We were having coffee at Sarasota News & Books when my friend told me it's not so easy getting a loan these days. He's a developer of small single-family projects, perhaps only a dozen homes at a time; and he says banks have finally tightened the reins. According to my friend, the days of cheap, easy money from local banks ended last spring when the Neil Mohamed Husani scandal surfaced. Husani is the Southwest Florida real estate investor who is being investigated by the FBI for buying $43 million in property in Sarasota and Manatee, then selling the properties immediately to partners at inflated prices. He received bank loans based on those higher values.

Bankers I've talked to don't like any mention of the story. It's an embarrassment, one Fifth Third Banker admitted. But Husani is hardly the main reason it's tougher to get a loan. The real estate boom is over and it's time for everyone, banks included, to sober up. As Florida real estate consultant Jack McCabe told us, "Until about six months ago, almost anyone who could fog a mirror could get a loan." Today, "the spigot has been shut off" for anyone wanting to develop a condominium, he says. "Mainstay institutionals are only offering one-tenth of what they were offering [to condo developers] 12 months ago," and McCabe expects a high rate of foreclosures around the state during the next three years.

Yet no local bankers I talked to would admit to worrying about the real estate downturn, despite such speculation about how many investors and homeowners eventually will default on their loans. (Banks most at risk are those with 15 percent of assets invested in new construction mortgages, according to the FDIC.) Bankers such as Debbie Layer, market president for the West Florida division of BankUnited, says when banks stick with their principles for quality loans, they have nothing to worry about. "Banks who know their communities will be fine," she says.

Maybe she's right, but Florida is famous for its boom and bust real estate cycles. And I'm eternally amazed at how susceptible most of us are when a market-whether its dotcom stocks, gold or real estate-looks intoxicatingly profitable. Is our greed always so close to the surface? Too many of us are too willing to believe that it's easy to make a quick buck.

I thought about that while interviewing Kim and Charles Githler about InterShow, the investment seminar business they have built from the ground up into the largest in the world. It's been a 30-year affair. Even though the Githlers produce seminars for adrenaline-pumped day traders, they don't believe in investing that way themselves. "We're risk averse," says Kim. Kim and Charles survived the ups and downs of their business by diversifying their investments (stocks and real estate), working day and night, and by watching every penny. "We're careful and we do our research," says Charles. What a concept.

CORRECTION: Movo Mobile, LLC has never been associated with Boomerang Mobile, and Movo co-founders Robert Cesaric and David Rippetoe, once Boomerang employees, did not own or operate that company.

Filed under
Show Comments