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RTC setting stage for package sales.

During the past few months at least 12 institutions have started to market large fund packages in an effort to sell off billions of dollars of problem real estate.

Some of the packages are similar to the Resolution Trust Corporation's (RTC) National Land Fund, which pools together distressed real estate assets into a series of limited partnerships between the government and private investors to develop or sell off parcels of land.

According to Gordon M. Alpert, a real estate partner at the New York law firm Rosenman & Colin, who structured the National Land Fund for the RTC, "The RTC is setting the stage for financial institutions looking to unload their undervalued real estate. By structuring a fund similar to the National Land Fund, banks and insurers who do not see a turnaround for the real estate market in the foreseeable future will be able to team up with private investors and give them a chance to maximize the recovery value."

Some of the private lenders who have already liquidated assets with a total book value of $11.4 billion include BankAmerica Corp., Fleet Financial Group, Inc., Mellon Bank, First Chicago Corp. Another dozen financial institutions are expected to offer $8 billion of problems real estate assets by the end of the year.

The National Land Fund's assets include commercial loans, undeveloped land and partially constructed projects - primarily located in Arizona, California, Colorado, Florida and Texas with an approximate book value of $1.8 billion. The RTC recently announced that West Coast Equity, L.P., Los Angeles, California, and SunChase Land Fund, Roseville, California, were the bid winners for the National Land Fund's auction of six regional pools.

The land, which the RTC wfil contribute to the National Land Fund, represents its 75 percent passive stake in the partnership. The private investor group will contribute the other 25 percent of the pool's book value, acting as the general partner responsible for selling or developing the land or collecting debts and the RTC will act as a limited partner. RTC and private investors will share all proceeds recovered proportionately until each recovers an amount equal to its initial investment. Cash flows will be divided 50/50 at that point.
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Title Annotation:Resolution Trust Corporation pools distressed real estate assets into limited partnerships to develop or sell land parcels
Publication:Real Estate Weekly
Date:Jun 2, 1993
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