Barry Sternlicht, one of the busiest buyers during the economic downturn, plans to transform the 47-story Paramount Bay condominium in Miami into a haven for wealthy buyers, the New York Times reported. Though the condo is in need of serious repairs, Sternlicht — best known for creating Starwood Hotels & Resorts, which he built into a public company with $6 billion in annual revenue — is not deterred. In the last year and a half, his private equity firm, Starwood Capital, has raised more than $3 billion. He recently acquired the $4.5 billion real estate loan portfolio of Corus Bankshares, the nation’s largest condominium construction lender until it failed last September because it had financed too many projects like Paramount Bay. The following month, Sternlicht and a group of investors won the loans in an auction run by the Federal Deposit Insurance Corporation, paying $554 million for 40 percent of the package. The FDIC holds the remaining 60 percent. Sternlicht now hopes to foreclose on many of Corus’ errant borrowers, restyle their buildings and sell units for a significant profit once the real estate market recovers. Though some are skeptical about his prospects, others believe Sternlicht will succeed, though it may take several months to see the results. [NYT]

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Business folks, especially members of the real estate community, are zealous to engage in new business endeavors. Real estate leaders who have had ownership interests in savings and commercial banks have included Howard Milstein, Richard LeFrak, Stanley Stahl, Moses Marx, Charles Kushner, Ruby Schron, Ben Fishoff, and Fred Gould. But running a bank is far different than operating commercial and residential real estate. A bank is constantly in need of a review of its assets and liabilities and is under security from governmental oversight entities including the Comptroller of the Currency, New York State Banking Department, Office of Thrift Supervision and the Federal Deposit Insurance Corporation. On March 11 and March 12, two very active real estate investors lost part or all of their investments in the ownership and operation of commercial banks. [more]

Dallas REIT Behringer Harvard has purchased the senior mortgage debt of the 408-unit Palms of Monterrey, a Fort Myers apartment complex comprised of three 17-story buildings. The company paid $25.4 million, or roughly $62,000 per unit, to the Federal Deposit Insurance Corporation, which acted as a receiver for Corus Bank. The previous owner, Fort Myers-based BTS Monterrey Holdings, took out a $69 million mortgage in 2006. [GlobeSt]

An investment group headed by Starwood Capital Group beat out the Related Companies, Lone Star Funds and Colony Capital to win a 40 percent stake in a company created by bank regulators to contain the assets of Corus Bank. The bank was seized last month by the Federal Deposit Insurance Corporation, and has a $4.5 billion loan portfolio that includes many failed South Florida condominium projects. The winning consortium includes TPG Capital (formerly Texas Pacific Group), Perry Capital and WLR LeFrak, a venture that involves investor Wilbur Ross and real estate company the LeFrak Organization. The winning bidder got the assets for a roughly 40 percent discount in a cash and debt deal.

Simply put, values of real estate, stocks, companies, individuals, and most everything were artificially increased by 100 percent or more the first half of this decade primarily due to increases in real estate values from speculation fueled by leverage and debt. The painful result of deleveraging is well under way, as the process of devaluation and riddance of debt continues. Seventy percent of the U.S. gross domestic product is generated by American consumers. I’ve recently heard some pundits say that a “consumer-less recovery” was under way. There is no such thing.

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The vulture investors circling Corus Bank probably won’t hang onto their $4 billion commercial real estate loan portfolio for long once they take it out of receivership. The Federal Deposit Insurance Corporation, which seized the Chicago bank Sept. 11 and turned banking operations over to MB Financial, is considering selling off the loan portfolio, which includes mortgages on many foreclosed South Florida condominium developments. Potential buyers of the loans include Miami Dolphins owner Stephen Ross and his New York-based Related Companies, though nothing has been disclosed officially by the federal agency.

Source: Federal Deposit Insurance Corp.

Potentially shaky real estate loans held by Miami community banks more
than doubled in the last year, according to the Federal Deposit
Insurance Corporation, the agency responsible for maintaining stability
in the nation’s banks. A review of financial statements for 25 community banks in Miami shows
that they had $841 million of real estate loans that are classified as non-accrual, or unprofitable, as of June
30. That’s 139 percent more than a year earlier. Some Miami banks have reported much faster growth in their non-accrual
real estate loans. At U.S. Century Bank in Miami, for example,
non-accruing real estate loans ballooned to $82 million on June 30 from
$14 million a year earlier, a 585 percent increase. [more]

Miami banking consultant Ken Thomas said depositors and borrowers at
Colonial Bank will fare better under North Carolina-based BB&T,
which took over the bank. The Federal Deposit Insurance Corp. closed
Alabama-based Colonial and sold it to BB&T last week after a
criminal probe. It was the biggest bank failure since the September
collapse of Washington Mutual. Colonial had twice as many Florida
branches as BB&T, including 46 in Miami-Dade and Broward counties.
The government investigated the alleged accounting irregularities at
Colonial’s mortgage warehouse lending unit in Orlando, as well as its bid
for federal bailout funds and its accounting for loan loss reserves. [more]

The Office of Thrift Supervision seized a pair of Florida banks, as
well as one in Oregon. After the seizure, First State Bank and Community
National Bank of Sarasota County, both based in Sarasota, were taken
over by Stearns Bank of St. Cloud, Minn., which has assumed control of
other failed banks under the auspices of the Federal Deposit Insurance
Corporation. Florida has the fourth-highest number of bank failures in
the country behind Georgia, Illinois and California. Troubled real
estate loans are a cause of the bank failures. [more]

The Federal Deposit Insurance Corp. closed bids for Coral Gables-based
BankUnited, which must either raise capital or find a buyer. It’s the
largest Florida-based bank, and it was devastated by bad real estate
loans. Bidders are thought to include TD Bank, with the assistance of
Goldman Sachs; the combination of W.L. Ross, Carlyle Group and
Blackstone Group; and the J.C. Flowers & Co. hedge fund. [more]