The site of a failed hotel project in Clayton. Empty houses in
St. Charles. And hundreds of acres of undeveloped lots throughout
the St. Louis area. All placed on the market by a very eager seller
— Uncle Sam.
They’re part of the thousands of properties nationwide amassed
by the Federal Deposit Insurance Corp. The federal agency was stuck
with these unrealized and broken dreams after the closure of more
than 300 failed banks in the past three years.
When a bank fails, the FDIC typically finds another bank that
will buy the bulk of the assets, such as securities, mortgages and
foreclosed properties.
Some assets, however, are harder to unload. Now FDIC wants to
quicken the pace of real estate sales in Missouri, which is
currently the state with the third largest number of properties for
sale held by the independent agency.
It has been aggressively advertising the real estate online and
even plans to hold auctions next week in Columbia, Mo., and St.
Louis for residential and commercial properties still unsold.
The auctions are two of more than a dozen auctions the FDIC is
holding across the country this year to get rid of properties it
took over.
“The FDIC is a willing seller, and the goal is to move the
property immediately,” Victor Robert, the solutions and closing
manager for the FDIC’s Division of Resolutions and Receiverships,
said of the properties for sale.
The agency first attempts to sell the real estate on the open
market, and resorts to an auction if they don’t sell. The
properties up for auction have probably been on the market for more
than a year, Robert said.
Billboards with bright neon letters went up along area highways
in recent weeks to attract potential buyers to attend the local
auction. That attention has already sparked some interest in the
FDIC’s properties, which has resulted in some sales prior to the
auction’s date.
Several of the properties once headed for auction have been put
under contract after the FDIC received offers, including a
two-story office building property in Clayton that was to be the
site of a new Westin hotel. The hotel project ultimately was
scrapped in the throes of the recession before it ever broke
ground.
However, if the deals fall through, those properties will face
the auction block.
The proceeds will go toward reimbursing the FDIC’s Deposit
Insurance Fund, which insures depositors in the event of a bank
failure. Banks pay into the fund to insure depositors for
$250,000.
So far, the FDIC plans to unload nearly 40 houses, apartment
buildings, subdivision lots and commercial properties at auctions
to be held at the Hilton Garden Inn in Columbia on Aug. 26 and the
St. Louis Airport Marriott hotel the following day. The residential
lots will be packaged and sold in bulk, versus being sold lot by
lot.
It’s the first time in recent years that the FDIC has held a
property auction in Missouri, according to FDIC officials. As of
June 30, FDIC had 73 properties for sale in Missouri, which had the
third highest number of FDIC-owned properties for sale in the
country.
Of course, that figure is small compared with No. 1 Georgia
(108) and No. 2 Florida (106), where bank failures spiked in the
recession’s wake. Nationwide, the FDIC owned 1,617 properties, down
from a peak of 3,861 in May 2010.
Dallas-based Hudson Marshall is holding the auctions in
Missouri in partnership with Los Angeles-based real estate firm CB
Richard Ellis Group.
Crystal Wright, a spokeswoman for Hudson Marshall, said an
average of 70 percent of the properties put up for each of its
auctions ultimately close. On some of the deals, the seller has the
option to reject or make a counteroffer. Others are listed as
‘absolute’ sales, where the highest bid gets the property.
“Everyone’s goal is to bring in new homeowners to these
properties so they don’t bring down the neighborhood,” Wright
said.
MORE IN THE PIPELINE
So far this year, 64 banks have failed nationwide, meaning more
auctions will be on the horizon.
In Missouri, several banks have failed in recent years,
including Gateway Bank of St. Louis, Chesterfield-based WestBridge
Bank and Trust Co. and Jefferson City-based Premier Bank.
Often, the properties the FDIC owns represent a domino of
failures.
When St. Louis-based development company Pyramid Cos. shut down
its operations in April 2008, some of the properties Pyramid owned
were taken over by the banks that lent it money for
construction.
Premier Bank, one of Pyramid’s former lenders, took ownership of
several condos in the Dorsa Lofts building at 1015 Washington
Avenue in downtown St. Louis. When Premier Bank failed last year,
the unsold condos came under FDIC ownership. Five of the Dorsa
condos, with a combined market value of $810,000, were set to be up
for auction but have been put under contract and sold in recent
weeks.
Some condo owners in the Dorsa are looking forward to having the
vacant units sell to help build up reserves for the condo
association, which collects deposits and fees.
“It’s absolutely nicer to have the building full,” said real
estate agent Chris Grus, who owns a unit in the Dorsa building.
A bulk of the FDIC-owned properties up for auction in St. Louis
were formerly owned by Premier Bank, which is expected to be
Missouri’s most costly bank failure.
Premier Bank had four branches in the St. Louis area before
government regulators closed it last October. The closure is
estimated to cost the FDIC’s Deposit Insurance Fund $405 million.
Premier’s assets were acquired by Providence Bank of Columbia last
fall, but its bad loans and the properties tied to the loans were
transferred to the FDIC.
Among the transferred properties was a 3-bedroom, two-story
brick house at 5218 Enright Avenue in the Central West End
neighborhood.
The house, which will be on auction block, was rehabbed in 2007
at a cost of more than $100,000, according to building permits
filed with St. Louis. But when the real estate market tanked,
buyers vanished. Vacant for years, one of the bathrooms was never
completed and lacks a sink. Rainstorms in April also caused some
roof damage, which has been repaired.
The house, which has a market value estimated at $84,000, will
be a good deal for the successful bidder, said Gary Wasylenko, a
real estate agent with Coldwell Banker Premier Group in Maplewood
and the listing agent for the house.
“People are going to get some bargains” in next week’s auction,
Wasylenko added.