Crawford Development Co. and Southeast Bank of Texas

Darden Business Publishing Cases

ISSN: 2474-7890

Publication date: 20 January 2017

Abstract

In the early months of the 2007-08 financial crises, a loan manager faces a real estate financing decision. Should he approve a bullet structure three-year loan to a longstanding client, a legendary Texan developer? The developer, who near retirement downsized his business, is seeking financing for his only project: residential or commercial development on an attractive piece of land in suburban Houston. The loan manager considers the decision in light of the mortgage market turmoil, seeing commercial projects as safer, but also factoring that the residential market could bring higher returns if the market stabilizes soon. The manager collects the data and asks an analyst to assess the risks; that ultimately requires assessing the economics of both projects from both the bank's and the developer's perspectives. The bank could still change the interest rate on the loan to receive adequate compensation for the risk it carries, but the loan manager knows that doing so will change their long-term client willingness to take on the loan.

Keywords

Citation

Ovchinnikov, A. and Loutskina, E. (2017), "Crawford Development Co. and Southeast Bank of Texas", Darden Business Publishing Cases. https://doi.org/10.1108/case.darden.2016.000080

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Publisher

:

University of Virginia Darden School Foundation

Copyright © 2007 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.

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