The government agency that safeguards bank deposits is in the hotel and restaurant business. It’s the phantom landlord of several office towers, shopping centers, polo grounds and a sewage plant.
What does the Federal Deposit Insurance Corp. know about changing bed sheets, flipping hot cakes, treating sludge or saddling horses? Nothing.
The FDIC inherited these properties after rescuing a spate of insolvent banks over the years, and it is now auctioning them off en masse to investors worldwide.
Banking experts say the agency could be involved in many more of these auctions in the not-so-distant future if President Bush’s plan for solving the nation’s savings and loan crisis proceeds as planned.
Bush proposes to restructure the thrift regulatory system by giving the FDIC the added responsibility of insuring S&Ls;, currently the job of the Federal Savings and Loan Insurance Corp. The change would pass on to the FDIC the authority of handling repossessed thrift assets, including real estate.
The Federal Asset Disposition Assn., a subsidiary of FSLIC, says it alone manages 2,400 FSLIC property assets in 33 states with an appraised value of $3.8 billion--most the result of bad loans made by hundreds of failed thrifts over the years, half of which were in the Southwest. Among the properties: a 497-acre safari park in Branson, Mo.
For now, though, the FDIC has its own white-elephant properties to contend with.
About $84 million worth, or 20% of the FDIC’s current real estate portfolio, will be sold today in a venture with the auctioneer Christie’s and the real estate firm Cushman & Wakefield.
The event marks the first large-scale real estate auction for the FDIC and only the second real estate auction for Christie’s, which is better known for pitching multimillion-dollar art collections and rare jewels, not empty motels.
Arthur F. Lorentzen Jr., assistant director of the FDIC’s Division of Liquidations, said the agency previously had disposed of real estate holdings through smaller regional auctions or sealed-bids sales. He said the Christie’s auction exposes the select properties to a wider range of potential investors.
On the block are 25 of the FDIC’s largest properties, located in Alaska, Florida, New Mexico, California, Tennessee and Texas, where bank failures have been increasing.
The auction targets range in value from a Houston apartment complex worth around $650,000 to a 23-story office tower in Knoxville, Tenn., worth around $24 million.
A few had been owned directly by the problem banks while others were turned over to them as a result of loan defaults, Lorentzen said.
When banks fail, the FDIC steps in to protect the deposits, then tries to sell some or all of the assets to a healthy institution. Sometimes it ends up with properties it doesn’t want.
A record 217 banks failed in 1988, up from 184 the previous year, with many of them victims of depressed economies in the agricultural and Sun Belt regions. Some of the properties inherited by the FDIC remain shut down, such as the 172-room Skyway Motel in St. Petersburg, Fla., which the FDIC received after local Park Bank failed on Feb. 14, 1986.
Others remain open for business, such as the 192-room Howard Johnson’s motel and restaurant in Knoxville, Tenn., once the responsibility of City and County Bank, which failed May 27, 1983.
“We don’t run them ourselves,” Lorentzen said. “We hire people to do that.
“Anything we have, it’s our goal to put it back in the private sector. Our main function is to insure deposits.”
The upcoming auction list includes about a dozen land parcels, 3 motels, 2 shopping centers, 10 apartment complexes and 5 office buildings. Earl Reiss, executive vice president for Cushman and Wakefield, said that domestic response has been good so far but interest from foreign investors hasn’t been as strong.
Among the more unusual items:
The Retama Polo Center and adjacent tract, located on 596 acres in Selma, Tex. The parcel includes 16 polo fields, a 3,776-seat grandstand, horse stables, a veterinarian’s clinic and apartments. Valued at between $7.5 million and $10.5 million.
The 23-story Riverview Tower, one of the biggest buildings in Knoxville, Tenn. Valued at between $20 million and $24 million.
Sarasota International Trade Center, a water and waste-water treatment plant in Sarasota, Fla., valued at between $900,000 and $1.3 million.