RTC’s New Plan for Hard-to-Sell Assets : Thrifts: The bailout agency wants to set up land funds with private investors.

The thrift cleanup agency, saddled with about $20 billion in hard-to-sell land assets, said Monday it is working on a plan to set up government land funds jointly with private investors to get rid of these assets.

Under the proposal, the government would donate land to the funds while private investors would contribute cash and be responsible for selling or developing the land, or collecting debts.

The government would share in any profits.

The proposal differs markedly from the Land Bank that some members of Congress have proposed. Under that plan, the government would hold undeveloped land off the market until real estate prices strengthen.

Lamar Kelly, Resolution Trust Corp. senior vice president, outlined the plan at an RTC National Advisory Board meeting.

The idea is part of an overall RTC review of its strategies for hard-to-sell assets from failed thrifts.

They are the most stubborn problem facing the RTC as it starts to wind down its thrift cleanup operations, representing about 78% of the $111.5 billion in assets remaining on RTC books on May 31.

It already has sold $263 billion in assets, but most of these were highly marketable assets such as home mortgages.

In contrast, hard-to-sell assets include defaulted commercial loans, undeveloped land and partially constructed projects--many located in regions where real estate markets are severely depressed.

About half are in Texas, while California, Colorado, Arizona and Florida account for almost another 40%.

Kelly said the RTC is considering donating at least $500 million in raw land and construction loans per fund in return for a 75% passive stake in each entity, which might be a stock corporation or limited partnership, Kelly said.

Private investors would put up about 25% cash into each fund and would work out, sell or develop these assets, sharing any profits with RTC, he said.

Albert Casey, RTC president, told Congress last week that RTC has earmarked $2 billion to $4 billion worth of land loans and real estate that could be available for land sales funds.

Investors are very interested in the idea and RTC expects to have funds up and running by early next year, Casey said.

The RTC’s advisory board welcomed the land sales idea. “This is an ideal way to go. I think it is the only way to go,” said Layne Morrill, board member from Kimberling City, Mo.

Henry Berliner, board member for the East Coast region, said a Land Bank would only be profitable if real estate prices rose by 20% a year--an unlikely scenario in today’s market with five years of oversupply.