Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 4, 1990 TAG: 9003013428
SECTION: BUSINESS PAGE: BUS4 EDITION: METRO
SOURCE: JOHN LEVIN LANDMARK NEWS SERVICE
DATELINE: NORFOLK LENGTH: Long
The 6-year-old unit is in Lakewood, a section of Chesapeake's massive Greenbrier subdivision. Wide belts of open space separate the rows of houses. And a canal with tame ducks gives the neighborhood a pastoral setting despite its dense development.
Like four others on the same street, the town house has a For Sale sign out front.
What makes this unit different is the seller. It's the Resolution Trust Corp., the federal agency established in August to sell foreclosed and repossessed real estate held by failed savings and loans.
For $58,000, a buyer of the two-bedroom Seabreeze Court house can do business with federal receivers now operating Benjamin Franklin Federal Savings Association of Houston.
The house has been vacant and for sale for about a year, competing in a market glutted with available town houses and condominiums. Its placement in the RTC catalog "has generated a lot of interest, but I can't say it's generated a lot of business," said Jack Valerius, real estate officer for the Houston thrift.
There's a similar situation at the Governors Inn hotel in Newport News. The 51-room, all-suite hotel is on the block for $1.9 million, payable to federal agents who in February stepped in to run Savers Saving Association of Little Rock, Ark.
When it will sell is "anybody's guess," said Grady L. Wahlquist, vice president and manager of repossessed real estate at Savers.
The Newport News hotel has received about 100 inquiries in the past two months, said Hal Mayfield, a Dallas broker whom Wahlquist hired to market the hotel along with four other Governors Inns elsewhere. But so far, no one has been willing to pay the asking price.
RTC's strict regulations and near unwillingness to negotiate on price is making it hard to sell off the inventory, said Mayfield, vice president and hotel specialist for Henry S. Miller Co./Grubb & Ellis.
Indeed, neither the fire-sale prices nor a flood of interest in the liquidated real estate has materialized. And brokers and agents predict the huge inventory of RTC real estate may prove difficult to sell.
The two properties are among 84 Hampton Roads listings in catalogs published recently by the RTC. In several cases, the local listings represent individual condominiums units, even though the thrifts are interested in selling only the entire complexes.
Most of the properties are held by out-of-state savings and loans, which acquired interest in them by buying original mortgages on the secondary loan market. When owners defaulted on mortgages, the thrifts foreclosed and took back the real estate.
Altogether, the four-volume, 3,000-page inventory lists 30,123 properties. They're located in all but five states - Maine, Vermont, West Virginia and the Dakotas. Most of the properties - 15,750 - are in Texas, where the RTC has taken over 90 bankrupt S&Ls.
There are a sprinkling of properties in Central and Southwest Virginia listed including a house in Roanoke and one in Martinsville and some property of a mobile home supply company in Coeburn.
The vast majority of the listings - 26,813 - are for residential properties, and 11,918 of those are single-family homes. More than half of the single-family homes - 6,259 - are in Texas.
It has been described as the largest real estate sale in history. Estimates are that the RTC will handle $300 billion to $500 billion worth of real estate.
The agency was created last August as part of the Financial Institutions Recovery, Reform and Enforcement Act of 1989, the $164 billion bailout of the ailing savings and loan industry.
Its new volumes are just the first listings. They will be updated every six months, as more savings institutions fall into federal hands and receivers sort out their assets.
"The next inventory will be well beyond what we had this time," said Kate Spears, an RTC spokeswoman. "It will include everything that's not been sold plus real estate held by institutions we've taken over since Sept. 30."
The sheer magnitude of the job, combined with bureaucratic regulation, means that it might not be a quick process.
Brokers and thrift officials disagree over how well RTC is handling the realty liquidation.
"What RTC is trying to do has never been done before," Valerius said. "They're not doing a bad job for a government agency."
But the process hinders the sort of dealing and negotiating common in real estate transactions, especially when buyers are investors rather than individual homeowners.
"We've got strenuous procedures to follow," said Ophelia Jones, managing agent for People's Savings and Loan Association in Hampton. "You can't just come in and say you want to make a deal. If it's for property affiliated with us, I tell them they have to make us an offer."
People's, the 17th largest black-owned thrift in the nation, was taken over by federal regulators last June. Although the firm reported assets of more than $25 million, regulators said it has depleted its regulatory net worth.
Jones is handling disposition of a 9,900-square-foot social hall in Newport News, as well as vacant industrial land and residential property on the Peninsula and in Norfolk.
"The decision process is painstakingly slow because there are so many levels of approval," Mayfield said. "I've waited six or seven weeks just to get a contract. I've had buyers who get nervous and go away. I've lost deals because the process takes so long."
Another restraining factor is the price the government wants for the properties, the brokers said.
RTC, a unit for the Federal Deposit Insurance Corp., has said it wants to sell the properties for 100 percent of their market values set by appraisals written in the past 12 months.
In six states that it considers distressed real estate markets - Arkansas, Colorado, Louisiana, New Mexico, Oklahoma and Texas - the agency will accept as little as 95 percent of the appraised values.
The reasoning is twofold, agents said. Proceeds from the sale go toward generating capital to bolster the shaky thrifts. As a result, the government has an interest in taking in as much cash as possible on each sale.
Also, the RTC is being careful to keep its selling prices at current market values. Below-market transactions could depress the value of surrounding properties and, in theory, set off more repossessions.
"We want to make sure we're not dumping properties in an already depressed market," Spears said.
Unless Congress puts pressure on the RTC to hasten the process, "there's not going to be any fire-sale prices on these properties," Valerius said. "If they do, then the homeowner who's been fighting to make his payments may see the value of his home drop and walk away, causing another wave of foreclosures."
"We want to sell it as quickly as possible to get funds as working capital," Jones said. "But we're not giving it away."
In some cases, however, the government is using appraisals that set market values above what buyers seem willing to pay - especially when other factors are considered, Mayfield said.
The Newport News Governors Inn, for example, has never been profitable as a hotel, he said. In January, its room occupancy averaged 39 percent at $40 a night, "well below what it needs to make it work."
Its New Orleans decor and glass-backed elevator in the atrium lobby evidently haven't impressed either guests or investors, he said.
Indeed, potential buyers have considered converting the hotel into a congregate care facility, a weight-loss center or an office building, he said.
As a result, though "there are plenty of buyers, they're not going to pay too much," he said.
May field probably won't be able to sell the Newport News hotel until the RTC orders a more realistic appraisal and feels some pressure to negotiate, he said.
By contrast, the Seabreeze Court townhouse, at $58,000, "is a tremendous value," said Bonnie Gallagher, director of relocation for GSH Real Estate Corp. in Virginia Beach, which has the listing contract. "But it's not a giveaway."
Another factor limiting sales is the lack of financing. The RTC wants cash sales, meaning the thrifts are reluctant to issue new mortgages on the properties they're discarding. Yet in many commercial transactions, such as hotels, investors commonly expect to do highly leveraged transactions.
Spears said there is no specific prohibition against the savings and loans issuing new mortgages when they sell property. But neither is there any provision to encourage financing in the regulations developed by the Office of Thrift Supervision, which actually assumes control over the institutions.
The lack of available mortgage money has also been a drawback to Jenny Myers, a Virginia Beach agent selling a house on Norfolk's Wyoming Avenue, which is owned by Southwest Federal Savings Association of Los Angeles.
She's had three offers for the seven-room house with its large corner lot. But the seller has rejected all of them, said Myers, an agent in the Virginia Beach office of Long & Foster Real Estate Inc.
The house is listed at $49,000, and her clients have told her they won't accept less than 90 percent of that price. Though there's evidence of termite damage, Myers said, the thrift didn't want to invest in any repairs beyond yard maintenance and draining the water pipes so they won't freeze in cold weather.
At a four-unit apartment building on Norfolk's Reservoir Avenue, Jones said, the savings and loan is deciding whether to renovate the building before it gets a new appraisal and sets an asking price. The RTC catalog says the property is in poor condition.
"Unfortunately, some of the properties are not the Taj Mahal," said an agent dealing in property repossessed by North Jersey Savings and Loan Association of Clifton, N.J. The condition or location of apartments it now owns in East Ocean View will make them tough to sell, said the agent, who declined to be quoted by name.
North Jersey Savings acquired its Hampton Roads real estate when it purchased mortgages from the now-defunct Landbank Equity Corp. of Virginia Beach.
Though the RTC has authorized repairs to preseve the property, such as patching a leaky roof, there is no impetus for more extensive renovations, the agent said.
by CNB