How BMO Harris’ new real estate lending chief plans to attack the next downturn – Crain’s Chicago Business


Kim Liautaud’s primary charge from her bosses at BMO Harris Bank is a tough one: Find a way to boost commercial lending at a time when property sales and new developments are ripe for decline.

It’s a good thing she’s an optimist.

“We still think (real estate) is a growth sector for us,” said the 25-year financing veteran. “We like to say our outlook for commercial real estate is moderately positive.”

Liautaud, 51, will bring that attitude to her new role at the Chicago-based bank, overseeing its roughly $10 billion commercial lending portfolio as the newly appointed managing director and head of U.S. commercial real estate.

Leading a team of 120 people, the Heller Financial and Merrill Lynch alumna aims to capture between $3 billion and $4 billion in new loan business nationally per year.

But the head winds are picking up. After a couple of lucrative years for landlords cashing out at high prices, deal volume is down. Sales of commercial properties nationwide through August fell 6 percent from the same period in 2016, according to New York-based research firm Real Capital Analytics. That means fewer investors seeking construction loans.

On top of that, the near future of the U.S. economy and real estate market—which many experts say are due for a downturn over the next few years—will likely make finding new commercial projects to finance tricky.

Expanding BMO’s lending portfolio through a downswing requires recognizing and avoiding threats, said Liautaud, who has led commercial lending teams at BMO Harris for the past five years.

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In the retail sector, for example, the firm plans to steer clear of big-box stores that face formidable competition from online retail giants like Amazon and instead focus on grocery store-anchored and entertainment-based retail properties. Liautaud is also bullish on industrial properties—such as distribution centers that are beneficiaries of the online retail boom—and plans to focus on categories like health care and homebuilding real estate over the next few years to offset some of the slowdown in deal volume.

“We do happen to believe real estate is not an industry you can paint with a broad brush,” she said. “There are going to be winners and losers in the downturn. So we’re trying to pick our spots.”

The Edwardsville native and Illinois State University graduate—and sister-in-law of Jimmy John’s founder Jimmy John Liautaud—officially takes the commercial lending reins next week at BMO Harris from John Petrovski, who dramatically expanded the bank’s commercial lending practice during his three-plus years on the job. Buoyed by a strong economy and low interest rates that have fueled a lot of action among investors, the bank’s commercial lending portfolio grew almost 60 percent since the beginning of 2014.

Liautaud predicts the oncoming economic downturn will be nowhere near as drastic as the previous one, because both lenders are borrowers are more wary about becoming overleveraged or underwater on properties.

An apartment building developer in 2006, for example, might have gotten a construction loan for 75 to 80 percent of their total budget, she said. Today, the same developer would probably get 65 percent and, if they’re lucky, could push a lender up to 70 percent.

“Banks are smarter and borrowers are smarter, too,” Liautaud said. “There were a lot of lessons learned in the last downturn. That, I think, is the most material one.”

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