In the early months of the 2007-08 financial crises, a loan manager faces a real estate financing decision. Should he approve a bullet structure three-year loan to a longstanding client, a legendary Texan developer? The developer, who near retirement downsized his business, is seeking financing for his only project: residential or commercial development on an attractive piece of land in suburban Houston. The loan manager considers the decision in light of the mortgage market turmoil, seeing commercial projects as safer, but also factoring that the residential market could bring higher returns if the market stabilizes soon. The manager collects the data and asks an analyst to assess the risks; that ultimately requires assessing the economics of both projects from both the bank's and the developer's perspectives. The bank could still change the interest rate on the loan to receive adequate compensation for the risk it carries, but the loan manager knows that doing so will change their long-term client willingness to take on the loan.
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January 20 2017
Crawford Development Co. and Southeast Bank of Texas Available to Purchase
This case was written by Assistant Professors Anton Ovchinnikov and Elena Loutskina as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. The authors thank Assistant Professor Casey Lichtendahl, Jayson Lipsey (MBA '08), and Brian Burke (MBA '08) for their help in preparing this case.
Publisher: Emerald Publishing
Copyright © 2007 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.
2007
University of Virginia Darden School Foundation
Licensed re-use rights only. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-electronic, mechanical, photocopying, recording, or otherwise-without the permission of the Darden School Foundation.
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Ovchinnikov AS, Loutskina E (2017;), "Crawford Development Co. and Southeast Bank of Texas". Darden Business Publishing Cases, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/case.darden.2016.000080
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