Wachovia' Big-Loan Executive is Leaving

One of the most zealous commercial real-estate lenders during the industry's boom is losing its most aggressive deal maker. Mr. Verrone helped vault the Charlotte, N.C., bank from an also-ran in lending to real-estate owners and developers to by far the biggest in the business, according to some measurements. Lately, though, Wachovia and other lenders have suffered steep losses on commercial real estate because they were stuck with billions of dollars of debt when the credit crunch hit last summer. Wachovia, the fifth-largest U.S. bank in stock-market value, has taken write-downs of about $1.6 billion related to commercial mortgages and sharply reduced its commercial real-estate exposure. Separately, Wachovia's woes deepened with its disclosure Tuesday that its previously announced first-quarter loss of $393 million will widen to $708 million as a result of write-downs related to life insurance for bank employees. Mr. Verrone, known for quoting lines from "The Godfather" while negotiating deals, also was a champion of the complex mortgage-backed securities that allowed banks to bundle loans, slice them into tranches and sell them to investors. He also helped popularize so-called mezzanine financing, which allowed borrowers to put less of their own money at risk and was a crucial component of many highly leveraged transactions that were a hallmark of the real-estate boom. Last year, Wachovia originated $23.6 billion of commercial mortgages that were packaged into securities, compared with $14.9 billion by its closest rival, Credit Suisse Group, according to Commercial Real Estate Direct. Wachovia's heft left it badly exposed when turmoil erupted in the credit markets last year. In the second half of 2007, the bank took roughly $1 billion in write-downs related to commercial mortgage-backed securities. Wachovia's glum first-quarter results included an additional CMBS write-down of $521 million. Those losses likely could have been much worse. Because of Wachovia's aggressive selling of commercial real-estate debt, overall commercial-loan exposure at the bank plunged to $3 billion as of March 31, after the effect of hedges, from $13 billion in last year's second quarter.