HOUSTON–Clay Sublett, the new Southwest Regional Manager of KeyBank Real Estate Capital is charged with overseeing bank originations throughout the region including Houston, Dallas, Denver, Los Angeles and Phoenix. In this exclusive interview, GlobeSt.com caught up with Sublett to get his take on the Southwest market and his new role. This is the second part of a two-part interview.

GlobeSt.com: Is there a particular city that you are watching with particular interest? Why?

Sublett: That would be Houston. Over the last 2 or 3 decades that market has been the poster child for boom and bust. At the present time the amount of job growth, population growth and real estate development taking place in that market is something that reminds me of the oil boom days of the late ’70s and early 80′s. Whenever you see tremendous growth in any economy you have to ask yourself, is it is sustainable? Is it a bubble and if so when will it burst? Certainly, the talk in Houston is that “the party is just starting” and that the next decade is very rosy for this market but we have heard that before. One of the most significant challenges in the real estate finance business is knowing when to back away – timing is crucial. The discipline necessary to avoid the mistakes of the last cycle is very difficult. At Key, we don’t want to repeat the mistakes of the last cycle but we clearly want to be there for our good client.

GlobeSt.com: With the current incredible market in Texas a number of people are looking back at the last downward spiral and watching lending very carefully – do you see that as a potential weak point in the current cycle?

Sublett: Absolutely. The greater the cycle swings the greater the need to time your entry and exit. It is very challenging to be that good as either a lender, developer or owner of real estate. As a rule, the greater the temptation of tremendous upside, the greater the pain is on the downside. I have been hearing first hand about the rent growth and value creation in some of the Texas markets and the concerns about cycle swings and overbuilding are very real.

GlobeSt.com: What are you see as the most active markets and property types?

Sublett: Clearly, the multifamily sector has been the most active for several reasons. Job growth, population growth, availability of both debt and equity have been and continue to drive the multifamily sector. We have been seeing acquisition and renovation opportunities as well as ground up construction in nearly all markets in the southwest.

The most active markets have been Houston and Southern California. The energy play in Houston is well documented. The sheer size of the southern California economy creates tremendous finance opportunities. The amount of the population that lives in the greater Southern California market and the real estate that is necessary to support that population is on a scale that is unlike anything else in the country.

GlobeSt.com: What’s one of the major challenges of this industry?

Sublett: In the finance industry you are providing the most fungible commodity there is, “money.” The challenge is how to make that fungible asset less of a commodity by being relevant to select clients that value what you bring to them. In a cyclical business, we have a propensity to throw money at borrowers in the good times and struggle to get it back in the tough times. Striking a balance in any cyclical business is a challenge. One of the ways to meet this challenge is discipline in the selection of your clients. The relationship between borrower and lender is something that should not be missed in the real estate finance business and is a primary determinant in how successful you will be.