Don't Let The Bad Economy Get You Down!
Sep 21, 2009 6:25 pm US/Eastern
Bank Failure Means Big Changes In Miami Market
MIAMI (CBS4) ―
One of the biggest banks backing South Florida's real estate boom has officially gone under. The FDIC has shut down Chicago's Corus Bank.
The 96-year-old bank was holding notes on nearly a dozen high-end, brand-new buildings in Miami-Dade County alone. During South Florida's boom, when developers were pitching plans to build high-rises across the skyline, Corus Bank was all over the idea. They loaned money on more than a dozen buildings, from simple designs like Mint, Ivy, and Infinity along the Miami River to the extravagant Jade Ocean on Sunny Isles Beach.
More than a year ago, realtor and blogger Lucas Lechuga predicted on his blog that Corus would fail. "They were the largest by far. There was a few banks out there that had a handful of condo developments down here. They definitely had the most," Lechuga told
CBS4's David Sutta.
On September 11, the prediction finally came true. Lechuga believed it was a matter of timing. "I think a lot of people saw this coming from a mile away. Corus Bank was over leveraged and coincided, the over-leveraged in the Miami market and it coincided with the downturn in the real estate market."
MB Financial Bank has purchased $3 billion of Corus's deposits and securities. That leaves the FDIC holding $4 billion in assets. In that $4 billion is a portfolio of South Florida's failed overpriced condos. The ultra luxury Paramount Bay was presold at $600 to $800 a square foot. Lucas said he believes today it may move at "realistically, I think $350 a square foot."
It seems that the vultures are circling. This week is the deadline for investors to bid on Corus' portfolio. The FDIC plans to sell the assets, insiders believe in its entirety, next month. The sale of these loans ultimately will have a large impact on South Florida real estate prices.
Lechuga predicted, "If an investment group comes in buys these assets, buys the notes, and turns around, rents these units out, it will have an impact on the rental prices. But I think more likely be a buy and flip."
These are just the loans investors would be buying. They would still have to foreclose on the developer. The FDIC estimates Corus Bank's failure will cost them about $1.7 billion.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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