STARWOOD, TPG SCRAMBLE TO BUY DISTRESSED ASSETS

       Starwood Capital Group and TPG's agreement to buy US$4.5 billion (Bt150 billion) of Corus Bankshares' real estate assets shows investors are ready to bet on distressed property - as long as the US helps finance the deals.
       The private-equity firms led a group that won the auction for loans and properties of the failed Chicago lender, offering $554 million, the Federal Deposit Insurance Corp said last week.
       They will take a 40-per-cent stake and manage the portfolio, while the FDIC keeps 60 per cent and lends the buyers as much as $2.39 billion to complete the sale.
       The investors, who are paying about 60 cents on the dollar, beat out seven other bidders.
       The losers, including Colony Capital and Related Co, will have more chances to acquirs distressed mortgages.
       As many as 1,000 US banks may fail by 2011, according to John Duffy, chief executive officer of KBW Inc, a New York-based firm that advises financial institutions.
       "There are going to be hundreds of banks that are going to be seized and we're just getting started," said James Corl, managing director of Sigular Guff, a New York-based firm that manages about $9 billion.
       "Auctions of non-performing bank loans are going to comprise the next wave of opportunities for distress-oriented real estate investors."
       The FDIC will provide the Starwood-TPG group with $1.39 billion of zero-coupon debt to help pay for the purchase and as much as $1 billion in working capital.
       Similar financing was included by the agency in deals involving IndyMac Federal Bank and BankUnited Financial.
       The government will have to continue offering such low-cost debt to persuade investors to absorb troubled bank lains and real estate, according to John Grayken, founder of Lone Star Funds, a Dallas-based firm that buys distressed assets including mortgages.
       "Unless the seller is willing to finance, you have to do these deals with all equity," Grayken said.
       The FDIC probably will make similar arrangements in future sales, Chairman Sheila Bair said.
       "I think we will use this structure again, absolutely," Bair said October 6. "We're pleased with the results."
       Corus Bank, taken over by regulators on September 11, was a 51-yeard-old Chicago lender crippled by construction loans for condominiums after the housing market slumped and the credit crisis worsened.
       It was one of 98 banks seized this year as lenders fail at the fastest pace in almost two decade. Corus' $7 billion in deposits and 11 branches were sold to Chicago-based MB Financial.
       Starwood, based in Greenwich, Connecticut, is run by Barry Sternlicht, who was chairman of Starwood Hotels from 1997 to 2005.
       Fort Worth, Texas-based TPG's investments include casino owner Harrah's Entertainment and Neiman Marcus Group, a luxury retailer.
       Their partners in the deal are Perry Capital, a New York-based hedge-fund firm with about $7 billion in assets, and WLR LeFrak, a joint venture of the real estate firm LeFrak Organisation of New York and WL Ross and, a unit of Atlanta- based Invesco that is run by billionaire Wilbur Ross.
       Investment managers are raising between $118 billion and $138 billion to buy properties and real estate secutiries, according to surveys by Institutional Real Estate Inc of San Ramon, California, and Real Estate Alert, an industry newsletter in Hoboken, New Jersey.
       Lone Star is seeking $20 billion for two new funds.
       Distressed assets including residential and commerical mortgages and bonds backed by such loans will be sold over the next several years as banks go into receivership or seek to strengthen their balance sheets. Commercial and investment banks together hold about 80 per cent of the devalued assets that will change hands, according to the Lone Star presentation.
       About $524 billion of commercial mortgages held by US banks and thrifts are scheduled to come due before 2012, half of which probably would not quality for refinancing because they exceed 90 per cent of the property's value, accoridng to Lone Star.
       At least $410 billion, or two-thirds, of commercial mortgages bundled and sold as bonds coming due by 2018 will have difficulty refinancing, according to data from Frankfurt-based Deutsche Bank.
       The Washington-based FDIC used partnerships with private investment firms two decades ago to sell the assets of savings and loans that failed amid plunging oil prices and real estate speculation.
       The government formed the Resolution Trust in 1989 to merge or liquidate insolvent thrifts, and by 1995 the RTC had handled 747 thrifts, eventually recovering about $395 billion of assets with a book value of about $452 billion, and limiting losses to taxpayers.

       The investors, who are paying about 60 cents on the dollar, beat out seven other bidders.