Magazine article American Banker

Chemical Gets 80 Cents on the Dollar for Seized Alabama Mall

Magazine article American Banker

Chemical Gets 80 Cents on the Dollar for Seized Alabama Mall

Article excerpt

In another sign of strength for banks burdened with bad real estate assets, Chemical Banking Corp. on Friday said it sold one of its biggest pieces of foreclosed real estate at 80% of book value.

The nation's third-largest bank company said it sold a 725,800-square-foot shopping mall in Montgomery, Ala., to Heitman Financial Services Ltd., a Chicago-based investor group, for more than $40 million.

The Montgomery Mall was the largest piece of retail property held on Chemical's books.

By recovering 80% of book value, Chemical significantly bettered recent recovery rates ranging around 50 cents to 55 cents on the dollar, according to real estate liquidation experts.

Though the strong sales price reflected particular interest in regional malls and strength in the Southeast, it also signified that liquidity has returned in general to the real estate market.

40 Cents on Dollar a Year Ago

One year ago, with little liquidity in the market, banks were selling property for an average of 37 cents to 40 cents on the dollar, said Philip N. Duff, a managing director in bank mergers and acquisitions at Morgan Stanley & Co.

Excluding the Alabama deal, Chemical has sold $402 million of foreclosed real estate over the past five quarters at prices averaging about 60% of original loan value, said Joseph A. DeLuca, the bank's executive vice president in charge of real estate.

"There's a wide variation, ranging from 30 cents to 90 cents on the dollar," said Mr. …

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