June 30, 1991 - From the June, 1991 issue

Resolution Trust Corporation Explains its Activities

Established through Congres­sional mandate in August 1989 by the Financial Institutions Reform Recov­ery and Enforcement Act, or “FIRREA”, the Resolution Trust Corporation’s (“RTC”) sole purpose is the timely resolution of failed thrift institutions and the efficient disposi­tion of the assets of these institutions. 

Today, some 20 months after its birth, the organization has a staff ex­ceeding 5,000 employees spread among its national office (Washing­ton, D.C.), four regional offices (At­lanta, Kansas City, Denver, Dallas), and fifteen consolidated site offices located throughout the nation. The RTC, even as it struggled to create an infrastructure, has succeeded in col­lecting and disposing of an unprec­edented volume of assets. Micah J. Leslie, Deputy Director for the Resolution Trust Corporation's Coastal Consolidated Office in Costa Mesa, goes onto detail the RTC's nationwide inventory, the RTC in Los Angeles, and more. 

Of paramount concern to the real estate and financial industries, the RTC has become a “market maker”, setting and establishing real estate prices in cities where the agency’s assets proliferate. The RTC’s pricing policies have been closely scrutinized by all, criticized by many, and misun­derstood by most.

The agency has been mandated by legislation to dispose of all assets, particularly real estate assets, in a manner that:

  • maximizes return to taxpayers;

  • minimizes impact on local real estate and financial markets;

  • maximizes availability and affordability of residential property for low-and moderate-income indi­viduals.

The proceeds from the sale of assets comprise part of the funds needed to resolve insolvent thrifts. 

To speed the resolution process, the RTC is striving to increase the pace of asset dispositions. Until only very recently, the RTC was legisla­tively required to negotiate a purchase price not less than 90%, (95% in identified distressed states), of the currently appraised value of the prop­erty.

The RTC’s Inventory

At the close of the first quarter 1991, the RTC had 744 thrifts in conservatorship and receivership and $158.8 billion in mortgages, securi­ties, real estate and other assets, making it the country’s largest single financial institution. Real estate ­owned holdings accounted for approximately $18.4 billion of the asset pool. 

Nationwide, the RTC had in ex­cess of 45,172 real estate properties, consisting of 34% land, 51 % 1-4 family residential, 12% commercial and 2% other residential. However, by dollar book value contribution, the percentages change dramatically, with land representing 43%, l-4 residential 9%, commercial 45%, and other residential 3%. 

The majority of RTC;s real estate assets are located in those metropolitan communities that were tied to the fortunes of a single industry which experienced substantial or continu­ing decline. As an example, the in­ventory for the metropolitan areas of Dallas/Ft. Worth and Phoenix have over 2,000 properties in each city. 

The RTC in Los Angeles 

Los Angeles, on the other hand, has only 33 properties; 13 residential, 18 commercial, and two land proper­ties. Throughout the major metropolitan areas, over-building of com­mercial product is said to be most prevalent in the traditional, mature submarkets such as the local markets of downtown and West Los Angeles. However, unlike the other metropoli­tan areas, the RTC will not be a major contributor to the overabundance of property in the Los Angeles County area. 

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The thirteen residential properties, 12 of which are located within the Los Angeles city limits, primarily range in value from $49,000 to $200,000; however, one, located at 24683 Pluma Road, Los Angeles, currently has an asking price of $2,700,000. The two land parcels, both located within the city limits, are presently valued at $1,800,000 and $18,000,000, respec­tively. 

The eighteen commercial proper­ties include one recreation/athletic club, seven office complexes of vary­ing size, one office condominium, three mini-warehouses, two retail centers, two mixed-use projects (multi-family residential/retails) and two multi-family apartment buildings. They are, for the most part, located within the Los Angeles city limits. 

Not all of the Los Angeles County properties are managed and offered for sale by the local Coastal Consolidated Office located in Costa Mesa, California. The various regions, and the consolidated offices assigned thereto, are charged with the disposi­tion of assets held by the various insolvent financial institutions located within their geographic assignment. The real estate owned and/or managed by the failed institutions are located throughout the nation. 

The Coastal Consolidated Office, one of the fifteen consolidated site offices, responsible for the disposition of assets held by California insolvent saving associations had approximately 2,300 real estate properties totalling in excess of $1.5 billion in its inven­tory as of February. 

Obtaining Property Information 

RTC’s real estate portfolio is ever­changing, with new conservatorships created weekly, and properties fore­closed upon or sold daily. RTC’s first attempt at publishing a real estate property listing in December 1989 produced substantial criticism for its inaccuracies and inadequacies. However, substantial progress, albeit not perfection, has been achieved. The agency now produces a number of computer-based products in addi­tion to its real estate asset specific inquiry program (REASIP). 

To order brochures containing information on RTC computer based products, including diskette, magnetic tape, CD-ROM and modem accessible RTCNet, contact 1-800-RTC-2990. REASIP is a customized service de­signed for individuals who are inter­ested in a relatively short list of prop­erties in a hard copy report format. The properties are identified based upon the investors’ personal invest­ment criteria including property type and geographic location. The pro­spective purchaser can telephone 1-800-RTC-3006 to obtain a real estate specific inquiry listing.

Hampered by its reputation for delays and bureaucratic red-tape, the RTC is attempting to bridge the cred­ibility gap to the real estate commu­nity and investors alike. A 15-day offer response policy (reduced from 30 days), has been mandated and four primary disposition strategies have been identified. These strategies em­ploy private-sector real estate industry expertise to effect the sale of the properties through individual listing agreements, multi-property auctions, sealed bid offerings, and portfolio sales. Due to the lack of concentrated inventory, real estate auctions within the state of California are not imme­diately foreseeable. 

However, portfolio sales are presently being assembled, in pack­age sizes up to several hundred mil­lion dollars. The portfolio sales pack­ages are anticipated to include either like-product of real estate properties, or a combination of real estate prod­uct with like non-performing loan product.

Meeting the Challenge 

The RTC must be many things to many people. Most criticism has arisen from premature expectations of an organization in its first year. While the RTC has made substantial progress, the need for improved com­munication, sophisticated inventory tracking systems, and creative mar­keting disposition strategies contin­ues. 

To meet this marketing challenge of the century, the RTC has estab­lished sixteen Sales Centers at the national, regional, and local levels. The staff has been retained, inventory identified, and the pricing initiative and seller financing programs ap­proved; the public now has the right to expect and to hold RTC accountable to professional performance. The challenge shall be met.

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