Reply #26: Corus Bankshares' failure may be good

[Robbien]

Following the failure of Chicago's Corus Bankshares and its seizure by federal regulators, speculation Monday focused on the fate of the lender's $4 billion in commercial loans, a good quarter of them secured by condominium projects in South Florida.

FDIC spokeswoman LaJuan Williams-Dickerson said regulators would begin marketing the assets to potential buyers for a private placement transaction that is expected to be completed in about 30 days. She could not say whether the assets would be sold to a single buyer or in loan pools.

Corus was one of the largest condominium construction lenders in South Florida during the real estate boom, financing 34 projects in Miami-Dade, Broward and Palm Beach counties. It held more than $1 billion in South Florida loans at the time of its Friday seizure, most of which were nonperforming.

Much like a death after a long and painful illness, Corus' failure was met with a sense of closure and relief from some local real estate analysts and developers, who said now the condo market could hit the reset switch and begin moving forward.

``They made all the loans that shouldn't have been made right at the end of the cycle. They represented the largest portfolio of troubled projects, so, in that respect it's kind of like the last hurrah,'' said Jack Lowell, vice president of Coral Gables-based Flagler Real Estate Services.

Corus also controlled a large portion of the unsold condo units in the greater downtown Miami market. A new investor, who would not be fighting to minimize losses, would likely slash prices to quickly sell inventory.

. . .

MB Financial Bank assumed Corus' deposits and $3 billion in marketable securities, leaving $4 billion in mostly soured loans with the FDIC. Corus' failure will cost the federal insurance fund $1.7 billion, the FDIC said.

The size of the portfolio and the delinquent status of most of the loans could make it hard for the FDIC to place the assets, unless it offers them at a significant discount. Some analysts said it was doubtful a single enity could swallow the entire nugget, meaning a consortium of investors would likely coalesce to make an offer or the FDIC would have to sell the portfolio piecemeal.

``I'm not sure if there is any one group that has the wherewithal or expertise to take over the entire Corus portfolio,'' said Peter Zalewski, principal of Condo Vultures, a consultancy and brokerage firm specializing in distressed condo sales.

``It's going to be an extremely interesting negotiation,'' Lowell said. ``In addition to picking up assets, are going to want to have a very detailed understanding of how the resources are going to be provided to complete the projects.''

http://www.miamiherald.com/business/story/1234241.html


And the headline says the failure may be good. Good for the greedy investors perhaps but the luckless taxpayer will not be doing the happy dance any time soon.