CHICAGO—The aftermath of the recession left a lot of property in the hands of banks, but as the economy has improved, banks have also gotten more aggressive in pricing this hodge-podge of buildings and vacant land, leading to an increase in sales, experts say.
“We’re seeing it all across the Chicago area,” John R. Homsher, a principal at Podolsky|Circle CORFAC International, tells GlobeSt.com. Although a lot of people jumped into selling bank-owned properties in the last few years, Riverwoods, IL-based Podolsky|Circle has made it a specialty since 1986, and whenever the markets crash, “we get called on a lot. Currently, we’re working pretty actively with four or five regional banks.”
“It was around 2010 when all of these properties started hitting the market,” Homsher says. During the crash and just after, the FDIC took over failing banks and had to convince healthier ones to assume control. And the latter now had the responsibility to work through these new portfolios and dispose of the assets. Banks typically don’t want to lease these properties like a typical landlord, but instead, “they want to set a price and move them off their books.”
But many banks are running up to a deadline. The FDIC typically reimburses 80% of losses incurred by the acquirer on these assets, with the bank absorbing 20%. These loss-sharing agreements last five years and many are set to expire. “It’s not changing how many properties are out there for sale, but the banks are getting more aggressive in their pricing,” Homsher says, attracting more buyers.
Podolsky|Circle has sold a diverse set of bank-owned properties recently. For example, 1932 15th Ave. in suburban Melrose Park, a 26,183-square-foot manufacturing building, was sold to MNS Warehouse LLC; 600 N. IL Rte. 31 in Crystal Lake, a 5,280-square-foot single story multi-tenant office building, was sold to the Blackhawk Area Council of the Boy Scouts of America; 2000 W. Hubbard St. in Chicago, a 6,768-square-foot infill land site, was sold to a private individual who bought the property as an investment to satisfy a 1031 exchange; and 3209-3215 N. Elston Ave. in Chicago, a 12,000-square-foot land site in the Avondale neighborhood, was sold to Dolyva Development, LLC. Dolyva plans to build a multi-story residential building on the site. Homsher, Adam J. Tarantur, principal and Randy D. Podolsky, managing principal, all with Podolsky|Circle, represented the seller in the transactions.
Homsher says the boost in sales is not just the result of banks cutting prices as the FDIC deadlines approach. He also attributes it to the general improvement in the economy and the fact that “banks are lending again; you don’t have to pay cash for these assets anymore.” Sometimes, in fact, these properties can sell for healthy amounts.
For example, Podolsky|Circle recently sold two gravel lots totaling 28,744-square-feet at 1809-1835 W. Devon Ave. in Chicago. “It’s a small site, but we had quite a bit of interest from self-storage companies,” says Homsher. It was listed for $1.3 million, but according to Cook County property records, ultimately sold for $1.6 million. The buyer, Banner Acquisitions, plans to develop a self-storage facility on the site. Banner was represented by Wayne Caplan of Sperry Van Ness, LLC.
“There were four or five self-storage companies interested in the site,” Homsher adds. “I was able to create a little bit of an auction.”