Bailout Agency’s Auction Given a Second Chance : Thrifts: The Resolution Trust Corp. hopes Thursday’s sale will get past the opening gavel, unlike last year’s fiasco.
The last time the federal Resolution Trust Corp. tried to hold a big publicized auction to rid itself of some of its best commercial real estate, the event unraveled before the first gavel slammed.
That was last fall when a Miami auction company, hired by the thrift cleanup agency to run a splashy, televised selloff, failed to come up with promotion money as promised. The event proved an embarrassing fiasco for RTC officials, who were hoping that it would attract the worldwide attention of investors eager to inspect the agency’s bloated real estate inventory.
Wiser from that experience, RTC executives will try again Thursday afternoon from a ballroom at the Doubletree Resort in Cathedral City, just outside Palm Springs.
The auction, which involves selling 14 of its more attractive properties in six states, is considerably less ambitious than the last effort, but important nevertheless. RTC executives, under pressure to sell the assets quickly that they inherited from failed thrifts, acknowledge that the auction may prove a bellwether on its use of open public sales.
“It could be very indicative of the path to follow. If all goes well, we can do more and more,” RTC Chief Executive Albert V. Casey said.
Although the agency has held several small auctions over the past few months, Thursday’s high-profile effort is the RTC’s biggest auction ever--in terms of the value of the properties--and the first of what it calls “premier” commercial properties.
Offered for sale is a “corporate campus” in Miami, a storage center in Los Angeles, a Florida shopping center, a senior citizens home in Ohio and the Doubletree itself, which the agency inherited in the failure of the now-defunct Gibraltar Savings in Simi Valley.
No matter how the bids go, nearly all of the properties are expected to sell at a steep discount from their stated “book values,” the worth of an asset as carried on a thrift’s financial statement. RTC officials note that the values were often inflated by thrifts that failed.
The total book value of the 14 properties is more than $210 million. By contrast, the minimum bids the RTC will accept with no strings attached total about $89 million. The minimum bid with no strings attached for the Doubletree is $9.1 million, compared to its book value of $34.9 million.
The auction has already developed at least one glitch stemming from the kind of messy legal problems that the RTC frequently inherits when it takes over troubled real estate.
The Doubletree, a showcase part of Thursday’s auction, is being put up for sale even though owners of condominiums on the resort property are suing to enforce a clause in their homeowner rules giving them the right of first refusal to buy 18 of the 27 holes on the resort’s golf course, as well as the course clubhouse. The homeowners have expressed a number of concerns about a sale, including whether a new owner will limit their access to the golf course and whether the course under a new owner will be inundated with hotel guests or new members of the golf course.
The RTC is hoping that a new buyer can resolve the problems with the homeowners, but also will give the homeowners 90 days to put together their own deal after it reaches a sale agreement. If they succeed in buying the chunk of the golf course, the buyer can back out of the deal and collect a $100,000 fee for the trouble.
“If we didn’t offer the homeowners the right of first refusal, we would never be able to sell it,” said J. Penny Larson, the RTC’s national auction marketing specialist and chief coordinator of the auction.
To make sure the auction goes more smoothly than the one last year, RTC officials this time hired the more-experienced Kennedy-Wilson in Santa Monica, an auctioneer whose business in Southern California is growing rapidly in seemingly direct proportion to the softening of the state’s real estate market.
RTC officials say they have reason to be optimistic:
* More than 6,000 catalogues have been requested by potential bidders.
* 740 detailed packages have been sent to prospective buyers.
* Inquiries have come from potential buyers in Switzerland, Taiwan and Hong Kong.
For his part, Casey, the RTC chief executive, is a fan of auctions. One reason: The agency’s many congressional critics can’t criticize the sales for being uncompetitive.
RTC Clearance Sale
These are five of the 14 commercial properties the federal Resolution Trust Corp. will auction on Thursday at a site near Palm Springs. In most cases, the reserve price--or the minimum price the agency will accept with no strings attached--is a fraction of each project’s stated value. Figures are in millions.
Property Location Book Value Reserve Price Doubletree Resort Cathedral City $34.9 $ 9.1 Los Feliz Storage Los Angeles 13.3 13.8 Western Plaza Los Angeles 5.2 2.7 Sun State Building Phoenix 9.3 5.1 Cottingham Retirement Center Sharonville, Ohio 10.7 5.9
Source: Resolution Trust Corp.
