Jan. 10--Bank of America Corp. has received permission from federal bank regulators to build a planned Ritz-Carlton Hotel next to its Charlotte headquarters, stirring concern that banks could expand their role in the real estate business.
The bank needed approval because a national bank is only allowed to buy and hold real estate for "the transaction of its business." Ritz-Carlton will operate the 150-room luxury hotel, but Bank of America will own it.
Although banks are known for prominent buildings housing their own operations, regulators want them mostly providing capital to outside businesses and developers. They also don't want banks engaging in real estate speculation.
The bank told the Office of the Comptroller of the Currency it should be allowed to develop the $60 million hotel because it plans to use more than 50 percent of the occupied rooms for lodging out-of-town employees, directors, vendors and others, according to postings on the OCC's Web site.
The 15-story hotel will reduce lodging expenses and provide a better visitor experience, the bank said.
The agency approved the Bank of America project in an "interpretive letter" dated Dec. 5, citing the hotel's use by bank visitors.
On the same day, the OCC also approved Pittsburgh-based PNC Financial Services Group Inc.'s involvement in a $170 million office/hotel complex.
OCC spokesman Kevin Mukri said banks often seek similar approvals on a variety of issues. The rulings "won't lead to an expansion of national bank real-estate powers," he said, noting the letters spoke to "specific fact situations."
Bank of America spokesman Terry Francisco declined to comment about the ruling beyond the letter.
The rulings, however, worry the real estate industry, which has long opposed banks treading on its turf.
Steve Cook, a spokesman for the National Association of Realtors, said the projects were the largest to receive such approvals.
"We're very concerned about regulatory permission that allows federally chartered banks to engage in activities not previously allowed," he said. "Our concern is this is a very short step into real estate brokerage and property management."
The industry fears unfair competition from banks and the increased mixing of commerce and finance, Cook said.
Since 2001, the association has successfully fought proposed Treasury Department rules that would allow banks to enter the real estate brokerage business.
Bert Ely, a banking consultant based in Alexandria, Va., said national banks are big enough to handle the risk of large projects and are experienced in commercial real estate lending. But he expects regulators to watch the issue closely.
"You may see more (projects), but I don't think it will come quickly," Ely said.
Bank of America plans to break ground on the hotel at the corner of North College and East Trade Streets in late spring or early summer, with completion expected in the fall of 2008, Francisco said. The bank has not named a contractor.
Wachovia Corp., Charlotte's other big bank, also is in the midst of developing a big uptown real estate project, which includes an office tower, condominiums and arts facilities.
A Wachovia spokeswoman said she could not immediately comment on whether OCC approval was needed but noted the planned arts facilities would ultimately be owned by the city of Charlotte.
The OCC declined to comment.
(Charlotte Observer, The (NC) (KRT) -- 01/11/06)