A consortium of banks that do business in Spokane and North Idaho is being formed to finance construction of speculative commercial buildings to boost economic development here and in North Idaho.


Nine banks in Spokane, three in North Idaho, and the Spokane-based Northwest Business Development Association have agreed to participate in the consortium thus far, says Frank Tombari, a vice president in commercial lending here with Farmers & Merchants Bank and a member of the Spokane Area Economic Development Councils board.


Those institutions together have agreed to lend $5 million over the next 12 months to finance construction of the kind of Class A structures sought by employers that provide todays family-wage jobs, says Tombari.


The value of having such space available was illustrated last week when Travelers Property Casualty Corp. said it would beef up employment at its national sales center here, Tombari says. Travelers, of Hanford, Conn., said it will employ 800 here by the year 2000, up from the 500 announced previously, and will expand its operations in the Crescent Court into space that had been vacated by the Student Loan Marketing Association, which is known as Sallie Mae.


I dont know if wed have landed them if wed have had to do a build-to-suit project in a different location, partly because of the time it would have taken to gain approval of and construct such a project, Tombari says.


In the Spokane area, Washington Trust Bank, U.S. Bank, Seafirst Bank, Sterling Savings Bank, Wells Fargo Bank, Inland Northwest Bank, United Security Bank, Farmers & Merchants, and Western Bank, which is Washington Mutual Inc.s commercial lending subsidiary, have agreed to participate in the consortium, Tombari says. In North Idaho, Idaho Independent Bank, FirstBank Northwest, and Mountain West Bank also have signed on.


Based on their size, the banks will provide different amounts of capital for consortium loans and assume different levels of risk, Tombari says.


Tom Quigley, a vice president with Kiemle & Hagood Co., a Spokane commercial real estate firm, says that as economic-development officials have worked to attract new employers, Some of the best successes weve had have been when weve had someplace to put somebody. That was true a decade ago, when Seafirst Bank opened its credit card processing center here in the vacant Firemans Fund building, and its still true today, says Quigley, who worked with Tombari to set up the consortium.


For years, economic-development officials here have said that their efforts to recruit new employers have been hampered by a lack of first-class speculative commercial buildings available to show out-of-town companies. When site-selection teams from such companies visit, they can see that facility that they want in their minds eyebut they usually cant find such a building here because there are no unoccupied Class A structures, says Mark Turner, president of the EDC. In other cities, however, such buildings often are available, he says.


Particularly in larger markets, there is (Class A) inventory being constructed all the time, says Eric Davis, executive vice president and manager of the commercial division of Washington Trust, which will act as the consortiums lead bank and handle its loan documentation work. Davis also is a member of the EDCs board.


Tombari says the consortium set its commitment level, of lending $5 million during the next 12 months, by first estimating that construction of 150,000 square feet of Class A space likely would meet the needs of the family-wage employers that would seek space during that period. With building costs at an estimated $50 a square foot to construct structures to the point that theyre completed shells, building that much space would cost $7.5 million. To finance 75 percent of that much construction, as the consortium intends to do, would entail loans totaling roughly $5 million.


The consortium doesnt intend to make loans to developers who have projects that qualify for conventional bank financing, Tombari says. For projects that dont qualify for such financing, but that could attract a desirable employer, the consortium could, on a case-by-case basis, waive requirements banks usually insist on developers meeting.


For instance, Tombari says, banks customarily require developers to obtain signed, long-term leases for much of the space in a building before they will lend money to finance construction of the structure. They also frequently want the developer or another high-net worth individual whos involved in the project to guarantee the loan by giving the bank recourse against his or her personal assets if the loan isnt repaid.


In addition to waiving such requirements to enable projects to go ahead, the consortium also plans to be open to suggestions from the development community that it back a project when a certain type of needed commercial building isnt available in the marketplace, Tombari says.


The group is ready to look at any situation, he says. We want to remain flexible.


A critical next step is a meeting between the consortium and the development community, which will be held shortly, Tombari says. He says the consortium needs developers to buy into the program. The real estate community is very important, because not all of the clients come through EDCs.


While the consortium hopes to bolster economic development, the projects will be handled as business deals, from which the consortiums members expect to make money, he says. These are loans, Tombari says.


We expect them to be paid back, echoes Washington Trusts Davis. He says that loan applications will be reviewed by a committee of seasoned commercial real estate loan officers who work for the consortiums members. The loans will be made at market interest rates.


The EDC will promote the program in the Spokane area, and Jobs Plus, the Coeur dAlene economic-development organization, will promote the program in North Idaho, Turner says. Jobs Plus President Bob Potter supports the program, and it will be truly regional in nature, Tombari says. The consortium, however, doesnt have a name yet.


The idea for the consortium sprang up a year ago in July, when an outside company considered opening a business operation in Spokane, then decided to go elsewhere, says Tombari. To improve the EDCs chances of landing such employers in the future, Tombari and other EDC leaders, including Quigley, took a look at what the EDC could have done better in its failed effort.


The company that spurned Spokane, which the EDC still declines to name, needed specialized tenant improvements and faced other important real estate-related issues. Tombari and Quigley met to discuss whether a consortium of banks could share risk in making real estate loans for building projects that would meet the needs of such employers. Right away, Tombari says, the idea had a good reception from the banks.


The consortium will finance projects through participation lending, which banks do when they join forces to make loans, Tombari says. Asked whether such joint lending might raise antitrust issues, he says, Not really, because the participation stuff happens all the time. When the consortium makes a loan, the participation documents will be the same as in any other participation loan, he says.


The consortium could lend money for a remodeling, rather than just for new construction, Tombari says. It could be for a rehab of a building that works for a good tenant.


Efforts might be made to fund economic development here in other ways, such as by setting up a revolving loan fund to help companies meet the cost of equipment expansions, Tombari says.


Theres other components in this tool chest that Mark (Turner) needs, he says.