Corus Bank, the large financier of condo developments, was finally taken off life support yesterday. After struggling for months, the Comptroller of the Currency stepped in and appointed the FDIC as receiver, which in turn entered into a purchase and assumption agreement with MB Financial of Chicago to assume all Corus' deposits. Calculated Risk has a good rundown here and here.
Corus financed high rise condo developments around the country, many that are now struggling. Here is an article from Wednesday's New York Times on a few of Corus' South Florida loan projects. Here are a couple of outtakes:
Whatever the outcome, Corus will go down as the great enabler of condo madness, and its travails are a harbinger of the pain yet to come in the troubled world of commercial real estate. More than any other condo lender, Corus epitomized the easy lending and lax oversight of the go-go years — and the pain of the ensuing bust. Its share price, which was nearly $13 in February of 2008, has plummeted into the land of penny stocks, closing at 25 cents Wednesday.Corus barreled into hot markets like California, Florida and Nevada and then kept lending as those markets boiled over. Rather than diversify, it concentrated its lending bets by financing only a handful of big, risky projects. And it poured its idle cash into a small group of other banks and financial companies that were upended when the crisis struck.
This passage is not a shock:
Corus was not always so condo crazy. It used to be a sleepy family-run affair known as River Forest Bancorp. Then, in 1984, Robert J. Glickman took over from his father, Joseph C. Glickman, and began transforming the bank into a powerhouse in construction loans. Corus shut its student lending business, its trust operations and all but a handful of its Chicago area branches. It began catering to condo developers across the nation, offering developers quick loan approvals and attractive interest rates. Corus soon fanned out into hot markets like Atlanta, Las Vegas, Los Angeles and Miami. As the property market exploded, so did Corus. Its assets reached nearly $10 billion in 2006. But almost all the loans were tied to the condo market, and nearly 40 percent were for more than $100 million.Robert Glickman kept reaching for more. Just off the Las Vegas Strip, Corus single-handedly financed a $108.2 million luxury development called Streamline Tower.
Then, of course, the bottom fell out. By late 2007, the share price of Corus was under attack on Wall Street. But Robert Glickman, whose family then controlled nearly half of Corus, rebuffed offers to sell the bank. Instead, Corus paid a special dividend that netted the Glickman family about $25 million, even though the payout ate into the bank’s reserves. By mid-2008, Corus was losing money and stopped making loans altogether.The Times article points out that many big name real estate investors, including Barry Sternlicht and Stephen Ross, have been eyeing Corus for months, I suspect in hopes of getting its defaulted loans so they can buy the high rise projects at deep discounts. I am not sure how this plays out now, but I imagine those assets will be in play with MB Financial taking the deposits. This is one story that is not over.