8/3/09 - Well, things don't look good for Corus Bank and the Montage. I would have had this article up sooner as I follow Corus Bank on a weekly basis, but had to put one of my dogs to sleep this weekend which was pretty harsh.

So, Corus Bankshares suffered a preliminary net loss of $487.3 million in the second quarter that made it “critically undercapitalized." Corus reported. $3.1 billion of its $7.07 billion in assets are "nonperforming," which include loans more than 90 days past due and those not generating any interest income for the bank.

Federal regulators had required Corus Bank to achieve a Tier 1 capital ratio of at least 9 percent by June 18, which it failed to do. The bank sent regulators its plan to raise capital, but regulators rejected that plan in a May 28 letter, Corus Bank reported. The bank on June 27 gave regulators a plan to liquidate the assets of the bank over two-and-a-half years and sell the bank to a third-party investor at the end of that period. However, federal regulators rejected that plan on July 6.

So the rumor is the Feds could seize Corus Bank as soon as August 6. Meanwhile, Corus continues to acquire projects in the form of deed in lieu of forclosure. For example, Aventine Apartments in Florida. Aventine, on 14.2 acres at 1575 S.W. Eighth St., in Boynton Beach, is the second repossessed property held by Corus Bank in South Florida. Corus took back the Tao condominium in Sunrise and has a pending foreclosure action against the developer of the Onyx on the Bay in Miami.

So what does this mean for Corus? Well I'm speculating of course, but this could go a few different ways. First, the one of the rumored private-equity firms circling Corus Bank like Lubus Adler could put out a bid for Corus. If that happens, Corus' residential projects would simply have a new asset holder, whichever buys Corus. If Corus Bank is seized by the feds and goes into conservatorship, then the bank's assets would most likely be sold off to non-banking entities like private equity firms.

OR, the Corus could be seized by the feds, and all assets could be stuck in limbo for a while because they are so toxic no one would want them on their books.

So what does this mean for the Montage? Again, I am just using my prediction powers here. On the surface, and in the short term, I don't feel it will change the Montage's dire situation. Corus, or whoever the new deed holder would be, would still likely have the same goal - fill the building up, somehow. As rentals? MAYBE, but with the building's maintenance costs, rentals don't really pencil over the long term. Maybe an auction of individual units? Possibly, but I doubt it, because Corus' plan to auction off individual units at Tao condos in Miami last year failed miserably. Maybe as timeshares or a resort concept hybrid mixed with condos or rentals? Who knows. All I know is their units are not selling at the prices they are offering.

What does this mean for existing contract holders? I've heard existing contract holders fall into two basic classes; the ones who have wanted out of their contract and bought at the Montage purely as a speculative investment, and then those who truly want to live there but can't afford/can't get the loan in this economy. If someone new takes over the Montage, they just might get their wish and be able to get out of their contracts finally.

We'll see what happens! Thoughts?