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Make no mistake.
But there are similarities and lessons to be learned as the government prepares to take in and dispense with a trillion dollars of God knows what.
The Resolution Trust Corp. sold off assets accumulated by the government when federally insured savings and loans failed two decades ago and resulted in what has been called the greatest transfer of wealth in modern times.
We, the people, didn't ask to become owners of raw land, empty apartment complexes, see-through office buildings and ghost-town strip shopping centers. The RTC made sure we didn't stay landlords too long. The RTC priced them to head 'em up and move 'em out, Rawhide.
It wasn't so much that the government sold too cheaply in the late '80s -- it got the limited amount that the market could afford. But winners and losers will tell you the feds sold too soon.
This haste cost the American people $140 billion.
At the same time, the Federal Deposit Insurance Corp. set up "bad banks" to get rid of foreclosed property taken in by FirstRepublic and MCorp.
Hundreds of billions in real estate hit the market at a time when few had access to money or credit, resulting in a massive fire sale that most could only watch with envy.
"It wasn't that you didn't know that it was a once-in-a-lifetime opportunity," says developer Henry Billingsley, who made two RTC deals but was too illiquid to bite off more. "When I saw this situation with [U.S. Treasury Secretary Henry] Paulson, I said, 'There is a God in heaven. I'm going to get a second bite at the apple.' "
To show just how good these deals were for the takers -- and not for the citizenry -- he shares the details of a deal involving the Carrollton property that Billingsley Co. headquarters sits on today.
Mr. Billingsley, who loved flipping land in the early '80s, bought a large tract of agricultural land in 1980, had part of it rezoned commercial, put in streets and utilities, and sold it for $4.50 a square foot in 1982.
In less than six months, that guy sold it for $8 a foot to a guy who lined up a deal for $12 a foot. But "the world came to an end" before he could close the sale.
The RTC wound up with the property and sold it back to Mr. Billingsley for an average of 65 cents a square foot. Within two years, Mr. Billingsley says, he could have sold it for $4.50 to $6 a square foot. Instead, he and his wife, Lucy Billingsley, built their headquarters and five office buildings and sold 25 acres to a church.
"So if the government had held on to property like mine and sold it in an orderly manner, it would have made money instead of losing $140 billion," he says.
Practicing patience
The trillion-dollar question this time is whether to package these assets (nobody really knows what to call them) and price them to sell, as the RTC did, or hold on for a bigger payback, says Jim Gardner, who headed Deposit Insurance Bridge Bank when MBank Dallas went under and was vice chairman of Bank One Texas after it acquired the MCorp corpse. Mr. Gardner witnessed the government fire sale He hopes it learned some lessons.
"In most cases, if they hold on to this stuff, it will pay off or substantially pay off over time," he says. "If they try to sell it, there may not be any buyers, and they'll get a fire-sale price."
Mr. Billingsley agrees.
"If the government buys this stuff at 25 cents on the dollar -- which they will -- and holds it to maturity, they'll make a ton of money. But if they buy it at 25 cents on the dollar and package it and resell it, then they'll end up like the RTC."
The investors who swooped in the last time were called vultures as they feasted on the carcasses of dead real estate and broke banks.
This go-round, would-be investors are labeling themselves "opportunity funds" -- a much more appetizing moniker.
Both are appropriate, though, depending on which end of the deal you happen to be on.
Vultures -- both the winged variety and the two-footed version -- are opportunists who serve a vital cleanup function in the ecosystem.
Return from road kill
No one knows this better than billionaire developer Craig Hall, who was dead broke and part of the road kill last time. The chairman of Hall Financial Group expects additional financial institutional failures to lead to the creation of an RTC-esque clone.
He and Herb Weitzman, founder of the Weitzman Group, the state's largest retail brokerage company, have joined forces to take advantage of any deals that crop up.
"I was a participant on the wrong side last time," Mr. Hall says. "I want to be on the right side this time."
Retired banker Ron Steinhart says he's interested in those who "buy in this type of environment."
"They're opportunistic investors," he says. "They're ones with capital and staying power. They're ones who have faith that things will get back to normalcy. They bring liquidity to the market.
"People talk about a 20 percent to 40 percent discount [with the RTC], but that's hindsight accounting."
Some RTC wheeler-dealers are no longer on the real estate scene today. They succumbed to their next wave of greed.
"They got easy money, the property went through the roof in value, but then they mismanaged it and they went bust," says Mr. Billingsley. "They ended up getting on third base real easy, but then they got thrown out trying to steal home."
To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com. Copyright (c) 2008, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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