Alternative urged to sale of real-estate loans

A team of state officials, real estate brokers and bank representatives chose an appropriate location Wednesday to discuss ways to deal with the commercial real estate loan crisis: the Trump International, named for a veteran of three real estate-related bankruptcies.

Atlantic City casinos once run by Donald Trump, have filed for bankruptcy three times, but the luxury hotel that bears his name in Las Vegas has not.

State Treasurer Kate Marshall, who held the meeting with a dozen real estate and banking professionals, has been serving as an informal liaison official for Nevada with top officials of the Federal Deposit Insurance Corp.

At the request of sconstituents, Marshall suggested FDIC consider an alternative to selling pools of real estate loans from failed banks. Instead, she asked the federal bank regulatory body to securitize the assets and sell them in tranches or slices, ranging from best to worst loans. That could result in better prices and speedier processing of the assets, she said.

Nonbank investors could compete to buy securitized tranches of the loans, she said. "The financial markets have money now."

Marshall said the securitized loan proposal was pulled from the FDIC board meeting agenda for April but hopes the board will consider it at a later meeting.

With support from Senate Majority Leader Harry Reid, D-Nev., Marshall persuaded the FDIC to establish an office with two staff workers in Las Vegas. The FDIC officials can help Nevadans seek resolutions to issues with particular loans.

In addition, the FDIC has started a pilot project in Nevada that allows limited liability companies to buy pooled assets from busted banks. The company contributes 80 percent of the price and the FDIC chips in 20 percent, she said.

FDIC Chairman Sheila Bair has come to Las Vegas to meet with local bankers and leaders to discuss loan problems in Nevada, and Marshall said Bair and her chief deputy have invited her to talk with them privately.

"What do you need me to do next?" Marshall asked bank and real estate brokers.

Participants suggested the FDIC provide relief from low appraisals which were suggested to be based on recent history, rather than prospects for the future.

Brad Bronkowski, a broker with Coldwell Banker Commercial in Carson City, said brokers like him give banks real estate value opinions that are forward looking. "If you want the real value of the asset, you call us," Bronkowski said.

"The regulators, as well as outside accountants, will not accept a brokers' opinion," said Diane Fearon, chief executive of Bank of George.

Bronkowski said that in Northern Nevada, commercial real estate prices are still dropping.

The 62-room Hardman House hotel in Carson City was foreclosed on a
$2.25 million loan and sold for $800,000 in cash, he said.

"That's the kind of deals we're really seeing come on the market. That's really setting prices," said Bill Uffelman, chief executive of the Nevada Bankers Association.

In some cases, appraisers must look to recent distressed sales prices because there have been no sales of comparable properties in recent years, Uffelman said.

Banks that participated in commercial real estate loans are stuck, because the FDIC as receiver now controls the loans, said Suzette La Grange, senior vice president of Colliers International.