Expanded authority to engage in real estate development activities granted to two of the nation’s largest banking conglomerates recently by the Office of the Comptroller of the Currency brings national banks uncomfortably close to being allowed to engage in commercial real estate brokerage and puts them in conflict with the Gramm-Leach-Bliley Act, the National Association of Realtors says.
NAR President Tom Stevens said the association plans to file a Freedom of Information Act request to determine whether the OCC has quietly authorized other banks to engage in real estate activities that may violate the letter or spirit of GLB, as well as the National Bank Act, and bring banks one step closer to engaging in commercial real estate brokerage.
Bank of America and PNC Financial Services Group Inc. received permission from the OCC in December for two major real estate projects that exceed typical bank real-estate development permitted to accommodate a bank’s business. PNC will invest $122 million in a complex near its headquarters that will include a 30-story building for offices, a 150-room hotel and 32 condominiums. PNC employees are projected to occupy 22 percent of the new office and hotel space.
Bank of America plans to develop and own a 150-room, 15-story Ritz-Carlton hotel as part of its headquarters complex in Charlotte and to use more than 37.5 percent of the rooms on an annual basis.
Stevens said NAR is concerned that one of the banks expects to use only 22 percent of the hotel and office space for its employees and customers, leaving the remainder for non-bank public activity, and that it is developing condominium units for immediate sale solely to make the project “economically viable.”
In addition, bank occupancy of the second project may not exceed 50 percent. He said that he is also concerned that the OCC based its approval of the projects on Interpretive Letters written in1993 but which were not released to the public until December 19.
“These regulatory approvals bring banks closer to controlling commercial real estate projects from top to bottom. Should banks, with all the advantage of a federal banking charter, be allowed to use their cheaper capital and control of credit to bring about the same consolidation in real estate brokerage that they have already brought to their own business, consumers will surely suffer,” said Stevens.
Beyond filing a FOIA request to determine the full scope of the OCC’s actions authorizing real estate development activities for national banks, Stevens did not speculate on whether NAR will take additional steps to challenge the OCC rulings.
NAR has led real estate industry opposition to a rule proposed by the Federal Reserve and the Treasury Department in 2001 that would have allowed federally chartered national bank conglomerates to enter residential and commercial real estate brokerage and property management. Congress has passed legislation blocking a final rule every year since then.