Bank Failures in the U.S.

Commercial Real Estate Is Next Bubble to Burst: Tishman

September 21, 2009

CNBC - Commercial real estate is the "second shoe" to drop in hurting the economy, Daniel Tishman, chairman and CEO of the Tishman Construction Corporation told CNBC.

"We're getting through the single housing real estate market OK but the numbers involved in commercial real estate in all sectors are staggering," Tishman said. "Trillions of dollars are involved in commercial loans. The roll over of those loans in the next 5-7 years is going to happen and the money just isn't there for refinancing."

Tishman, whose company is one of the oldest construction firms in the US, said the industry needs government help.

"The TALF (Trouble Asset Loan Facility) program is about to end and it needs to be extended," Tishman said. "The government needs to come up with some creative programs to help out the industry."

Tishman said there's a total amount of $3.4 trillion in commercial loans that needs refinancing, and many local banks are holding those loans.

"I think they (banks) are very exposed," said Tishman. "There are huge numbers of banks that could have problems (and face closings) going forward because of carrying these commercial loans."

Tishman said REITs, or real estate investment trusts, are not in as much trouble.

"Most of the current REITs are doing well," said Tishman. "They own a lot of the commercial loans but they have the ability to raise money. That will help them defer any losses."

Tishman said the commercial real estate bubble was created by an over-eagerness of lending.

"One property being acquired and then being lent on and lent, created this," said Tishman. "Multiple levels of returns were required and that caused the problem. I don't see values for commercial real estate coming back for two to three years."

Chicago-Based Bank Seized in Fourth-Largest U.S. Bank Failure This Year

September 12, 2009

Reuters - US regulators have seized Corus Bank in the fourth-largest bank failure this year and sold its deposits to MB Financial Bank.

Long controlled by the Glickman family, Chicago-based Corus Bank crumbled under the pressure of bad loans on commercial real estate and condominium developments in Arizona, southern California, southern Florida and Nevada. It was the 90th US bank to fail this year...

The Federal Deposit Insurance Corp said MB will assume all of the deposits of Corus Bank and about $US3 billion of its assets, leaving about $US4 billion in other assets that the agency hopes to later sell in a private placement.

Corus, the depository bank unit of Corus Bankshares Inc, had $US7 billion in assets and about $US7 billion in deposits as of June 30, the FDIC said. The agency had spent weeks running separate sales of the deposits and other assets of Corus Bank, a lender specializing in condominium, office, hotel and apartment projects.

Sources familiar with the matter said on Friday that the FDIC has extended the bid deadline for the assets by a couple of weeks to September 22. The FDIC said in its statement that it plans to complete the sale in the next 30 days.

Real estate developer Stephen Ross has received preliminary approval to start a bank, while his firm, Related Companies, is separately eyeing the assets of Corus Bank, the sources said. Related has teamed with several partners including real estate investment firm Lubert-Adler Partners to bid on Corus Bank's assets, while private equity firm Lone Star Funds and real estate investment firm Colony Capital LLC are also considering bids, the sources said. Barry Sternlicht's Starwood Capital Group is also considering a bid for the assets, the Wall Street Journal reported. The FDIC, Related, Colony, Starwood and Lone Star declined to comment on the auction for the assets. The sources asked not to be named because the talks are private...

The FDIC said the closing of Corus will cost its insurance fund about $US1.7 billion...

A dramatic increase in failures of banks -- which are still grappling with deteriorating loans, many tied to commercial real estate -- has put pressure on the agency's insurance fund that safeguards bank deposits. The insurance fund's balance dipped to $US10.4 billion at the end of the second quarter, but that level does not include the additional $US32 billion that the FDIC has set aside to cover the cost of bank failures over the next year...