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FDIC unloading local property as agency seeks to recover losses
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FDIC unloading local property as agency seeks to recover losses

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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.

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