By Steve Webb
Managing Editor

Big acquisitions shook up the lending industry in 2000, as New York giants Chase Manhattan Corp. and J.P. Morgan & Co. joined forces to form J.P. Morgan Chase & Co., and New York-based Credit Suisse First Boston gobbled up Donaldson, Lufkin & Jenrette Inc.
The consolidation trend in the lending arena shows no sign of abating in 2001. The most high-profile merger story is the bitter battle between Charlotte, N.C.-based First Union Corp. and Atlanta-based SunTrust Banks Inc. over Wachovia Corp. In April, Wachovia's board of directors approved a $13.77 billion offer from First Union, but SunTrust countered with a $14.23 billion hostile bid. First Union responded with a lawsuit against SunTrust that claimed its rival wrongly interfered with the merger. Shareholders of the Winston-Salem, N.C.-based bank are expected to vote on the two offers this August.

Consolidation wasn't the only big news in 2000. Huge transactions also grabbed the spotlight, including the $1.3 billion in financing Horsham, Pa.-based GMAC Commercial Mortgage Corp. provided for Columbus Centre, a 2.1 million sq. ft. mixed-use tower in Manhattan that will be the headquarters for AOL-Time Warner. The transaction moved GMAC from No. 2 in 1999 to No. 1 in NREI's 10th Annual Top Lender Survey. Lehman Brothers, New York, dropped from No. 1 to No. 3.

GMAC may be the frontrunner to hold on the top spot in the 2001 thanks to the loan of approximately $700 million it provided New York-based Silverstein Properties as part of the $3.2 billion lease of the 110-floor World Trade Center towers in Manhattan. That loan was expected to close July 16. Silverstein teamed up with Westfield America to sign the 99-year lease, which has been dubbed the richest real estate prize in New York's history.


The poor state of the economy has been the biggest financial story so far this year. However, William Green, director of corporate real estate and asset finance for First Union, believes the capital markets are healthy. "I would say that the markets are reasonably healthy, and that has allowed for any number of borrowers to get attractive financing and long-term financing prior to what is probably a recession," he said.

During this economic tailspin, Green said debt is likely to play an increasingly important role in the capital markets. "If we're in a recession, debt is typically a safe haven. I think you can see a measure of greater demand for debt instruments versus equity," he said.

The Federal Reserve has lowered interest rates several times this year in an attempt to spur the economy. Although the lower rates have yet to revive the economy, Green said there is no doubt that they help borrowers. "What lower interest rates are allowing people to do is possibly postpone certain permanent mortgage activity," he said. "But more importantly, what it's letting them do is get a measure of savings and excess cash flow that might tide them over for some temporary disruptions."


The $29.5 billion merger between Chase Manhattan and J.P. Morgan was the biggest merger in 2000. In another sizeable deal, Credit Suisse First Boston acquired Donaldson, Lufkin & Jenrette for $13.6 billion. Those mergers were part of an M&A trend that resulted in a 30% decrease in the number of banks operating in the U.S. since 1990. Between 1990 and 1998, the number of bank mergers and acquisitions averaged 510, up from 345 per year from 1980 to 1989.