Edition: U.S. / Global

Bankers Competing to Lend In New York's Poorer Areas

Published: July 11, 1994
(Page 2 of 2)

But Freddie Mac has had trouble meeting that goal, and has only committed $50 million so far. Mr. Van Varick said the agency needed time to let borrowers know it was back in the market, but also is up against many more competitors than before.

There are two explanations for the growing interest in lending, and most bankers and building owners offer a combination of them. The first is internal: banks are stronger.

"The city's economy hasn't changed," said Robert Chambrey, a mortgage broker who is active in the Bronx. "The banking industry is healthier. Of the six banks I work with in the Bronx, three weren't in the market three years ago." City Changes, Too

But others say bankers are responding to changes in the city itself, particularly in the Bronx, where city and neighborhood development groups have helped rejuvenate many neighborhoods over the last decade. When lenders visit potential borrowers' buildings in the South Bronx now, they are as likely to see a block filled with viable, working buildings as a set of burned-out shells.

"The economy is stronger and the city's programs have given the Bronx a shot in the arm," said Richard Pergolis, another mortgage broker who grew up in the Bronx and has worked with building owners there for 14 years. "They weren't just putting fancy pictures in the windows of burned out buildings. There are real people in those buildings now. That's massive progress."

Public progress has led to private gains, as bankers are more willing to gamble on new neighborhoods. For example, Mr. Pergolis's firm, Pergolis Swartz, has helped finance 115 properties in the Bronx in the last two years, worth $100 million, about 10 times greater than their volume of business in the previous two years.

While banks are increasingly willing to lend, they are nonetheless careful about whom they lend to. They say they are most comfortable with professional owner-managers, who have a history with the bank and in the borough, and who have the resources to screen tenants and press for rent payments, two keys to success in lower-income neighborhoods. Professional Landlords

More lending, then, has given rise to more large-scale ownership, with landlords holding 30, 40 or even 100 buildings in the Bronx. Many of these owners have expanded their holdings by buying buildings that earlier Freddie Mac borrowers defaulted on.

These professional owners, in turn, are able to convince their banks to support ventures in other Bronx neighborhoods, ever farther south.

"The lenders kind of follow major building owners into those areas," said Mr. Denler of First Federal. "There had been a period of deterioration in those neighborhoods but now we have gotten to the point where lenders and managers are no longer afraid to invest there."

Jeffrey Levine has seen a new spurt of interest in the work buildings he renovates in the Bronx, in Harlem and in Flatbush, just south of Prospect Park. He said that until two years ago, he had difficulty finding private lenders outside of the Community Preservation Corporation, which pools public and private money for real-estate deals in poor neighborhoods, and Chemical Bank's community investment group. Interest and Credit

"All of a sudden there is a flurry of banks that were not familiar with these areas before that are now looking to lend in them," Mr. Levine said. "Banks are anxious to lend money where the economics are good, and even more in communities where they can get credit for their loans."

Banks must meet Community Reinvestment Act requirements, investing a certain percentage in neighborhoods where they have branches. These loans can help meet those requirements and also helps them boost their community relations credit. Whether the lending trend will continue depends on the economy, and extending it to poorer neighborhoods may require government subsidies to bring banks into the market.

Still, owners are optimistic. David Ribler held onto four buildings in the Bronx through the 1970's, but sold three others in the South Bronx when they were the only thing standing in the rubble of their neighborhoods.

"I think it's beneficial for the borough," Mr. Ribler, who grew up in Kingsbridge Heights, said of the new money for owners. "I'm not the only one who stayed. Hopefully the people who did will reap the rewards now."

Photo: Robert Cohen had difficulty financing the purchase of two buildings on Pelham Parkway in the Bronx in 1991. Today, four or five banks are competing for his business in refinancing the properties, as new sources of money become available in working-class neighborhoods in the city. (Dith Pran/The New York Times)(pg. B2) Map of the Bronx showing location of Pelham Parkway. (pg. B2)