For This REIT, Bank Status Is Worth the Tax

American Banker | Friday, January 2, 2009

CapitalSource Inc. enjoys a tax advantage as a real estate investment trust, but it is willing to give that up to accelerate loan growth, lower its funding costs, and gain access to a larger infusion of government capital.

The Chevy Chase, Md., commercial finance company entered the banking business when it established an industrial loan company in July, and it has been so pleased with the results that it wants to shed its REIT status and convert to a bank holding company.

CapitalSource is already flush with capital, but as a bank holding company it would have a platform to gather even more deposits, which it would use to lend more to middle-market businesses, said Tad Lowrey, the president and chief executive of CapitalSource Bank in Pasadena, Calif.

The conversion would also put the $19 billion-asset CapitalSource in better position to buy more banks.