Resolution Trust Corp. Calls S&L; Property Auction Successful
In a stronger-than-expected showing, the federal agency mopping up the nation’s savings and loan mess took in $106 million Thursday afternoon during its biggest-ever auction of commercial property.
The results bode well for the use of auctions to quickly get rid of the $21 billion in real estate taxpayers have inherited from failed thrifts. The highly publicized event, held at the Doubletree Resort near Palm Springs, was considered a barometer of the Resolution Trust Corp.’s ability to unload its huge real estate portfolio.
Before the auction, RTC officials privately said they hoped that the auction could raise more than $100 million, with some optimistic estimates reaching $140 million. The proceeds come to about half of the book value of the properties--the worth of a property as carried on a thrift’s financial statement--and 28% above the minimum bids.
Still, RTC officials said they were pleased with the proceeds, which could rise to $112 million if a bid on a Kansas City, Mo., office building can be worked out. Only one of the 16 properties, another Kansas City commercial complex, failed to attract the minimum price the RTC was willing to accept with no strings attached.
RTC Chief Executive Albert V. Casey in a statement called it a success and subtly challenged the agency’s many critics to find fault with the results.
“In this auction, the competition was indisputable. Anyone truly interested had an opportunity to bid. The market has established the best prices for taxpayers,” Casey said.
The auction attracted 800 people and 150 bidders. An overflow crowd sat in a room near the ballroom--where the main auction was held--to watch on a big-screen television.
The project attracting the most attention was the 289-room Doubletree itself, which sold for $18.1 million to Los Angeles investor Charles Lee, slightly more than half of the hotel’s $34.9-million book value and nearly double the minimum price the RTC was willing to take.
Lee declined comment after the auction. RTC officials said they were ecstatic at the price they got.
Several other bidders expressed surprise at the price Lee was willing to pay, with one, who declined to give his name, suggesting that it could take as long as 10 years for the investment to pay off at that price.
The hotel, which the RTC inherited in the failure of Gibraltar Savings in Simi Valley, has been hurt by a glut of hotel rooms in the Palm Springs area that stems from overbuilding in the 1980s. In addition, the RTC, because of a clause in the homeowner rules of condominium owners on the property, is being forced to give the homeowners 90 days to come up with about $5 million to buy 18 holes of the 27-hole golf course as well as the clubhouse. If the homeowners succeed, Lee can cancel his bid and accept a $100,000 fee for his trouble.
Lee had some competition for the hotel. Sukamto Holding Corp. in Honolulu offered $17.9 million before dropping out of the bidding. Sumitro Sukamto, vice president of the company, said the firm originally planned to bid only $15 million based on its financial analysis of the property, but decided to go higher at the last minute.
Bidders and observers said they had expected lower prices in the bidding.
“It was no giveaway,” said Asif Yusuf, a Chicago investor who agreed to pay $7.6 million to buy three Kansas City office buildings for a family-owned company. If the economy softens more, he said, “people will laugh at us. But if things pick up, they’ll say we made a great buy.”
Laurence Heninger, a real estate investor and retiree who lives near the hotel, said he was surprised by the prices bidders were willing to pay.
“Nobody can tell me there’s a bad recession on now. This is the way to market it,” he said.
