Failed lenders boost FDIC real-estate sales

The Federal Deposit Insurance Corp. (FDIC) has already sold the most real estate this year than in all of 1994 as the regulator takes over properties held by failed lenders.

The FDIC raised $727 million from building and land sales in the first nine months of 2009 compared with $1.16 billion in the whole of 1994, according to FDIC data. The agency sold 1,706 properties, according to its Web site, the highest number since 2,045 in 1996.

The failure of 148 lenders since 2007 is giving homebuyers and real-estate investors the chance to purchase office buildings, undeveloped land for houses and even gas stations from the FDIC. The agency may also have hundreds of millions of dollars in loans for sale from shuttered banks.

"It seems that they're a little understaffed and they're very busy trying to fold a bank a weekend or five banks a weekend," said Barry Sternlicht, the chairman and chief executive officer of Starwood Property Trust. The FDIC real-estate sales are helping companies including CB Richard Ellis Group and Prescient, which are brokering transactions, and J.P. King Auction, which has held FDIC auctions in Detroit and Atlanta.

More than 900 properties sold through Sept. 30 were in Georgia, by far the most of any state, according to FDIC data. Georgia also led in bank failures since 2007, with 27 lenders collapsing. Minnesota was second with 114 properties sold and California third with 112, according to FDIC data.

The FDIC's Web site lists more than 1,500 properties for sale, most at less than $1 million.

The largest sale this year was in October, when the former headquarters building of Downey Financial in Newport Beach, Calif., sold for $53 million. The U.S. Office of Thrift Supervision closed Downey Savings & Loan last year and appointed the FDIC as receiver. The property's market value was $59 million, according to the FDIC.

S.K. Hart Properties, based in Salt Lake City, paid cash for the building, which has space of 332,000 square feet and is 77 percent vacant.

More banks are expected to fail as they crumble under the weight of bad real-estate loans.

"There will be more banks taken down next year than there are this year," said Craig King, chief executive of J.P. King Auction, a Gadsden, Ala., company that auctions properties for the FDIC. "We're probably still early in this process."