MNC,s reluctant real estate mogul wants to liquidate empire fast

October 27, 1991|By Peter H. Frank

Everything about it is immense. The numbers. The task. The risk. The financial disasters that gave it birth.

It is a nearly $2 billion pile of repossessed properties, scuttled projects, bad loans, empty buildings and abandoned hopes. And everyone -- especially Peter L. Gartman -- wants it to disappear.

"I think that's an understatement," said the 42-year-old vice chairman and chief financial officer of MNC Financial Inc.

As MNC's newly appointed chief liquidator, Mr. Gartman is building a team of about 300 people to dispose of these bad

assets as quickly and for as much as possible. Their aim: to shed about half of the unwanted holdings by the end of next year and eventually be rid of them all. "We view it as the best people in this company working themselves out of a job," he said.

For MNC, the stakes are as big as the problem.

Maryland's largest banking company, parent of Maryland National Bank and American Security Bank of Washington, must push these troubled loans and foreclosed properties off its books or risk suffering continued losses. More than 10 percent of MNC's $18.4 billion in assets were either owned by its banks or not generating income as of Sept. 30.

Some analysts estimate that MNC, which lost $59 million in the third quarter, could be missing out on more than $100 million a year in potential earnings because of the foreclosed properties. Without the extra management and legal costs, the lost interest income and the assets' slowly eroding value, MNC might be nearing a profit now instead of waiting for next year.

That could boost MNC's stock price and give the company access once again to capital markets. It also might trigger growth in employment at MNC, which has pared 1,100 jobs since March.

Before that can happen, however, MNC must shed this albatross that the banking world calls non-performers.

That is the chore of Mr. Gartman, a baby-faced executive who spent the bulk of the '80s reviving troubled companies or making deals. In his three years at Emerson Electric Co. in St. Louis, he was involved in buying or sell ing 39 separate divisions. Later, as a workout specialist in Los Angeles, he headed up an electronics company and a furniture rental concern.

He also is familiar with the local terrain. An Army brat whose father retired out of Fort Meade, Mr. Gartman worked at USF&G Corp. and Black & Decker Corp. after earning an MBA at Loyola College in 1970. He joined MNC two years ago.

Analysts give him high marks, mostly for his role in working the company out of a funding crunch at the end of last year. "The best dealmaker over there is probably Gartman," said David S. Penn, a banking analyst with Legg Mason Inc.

For Mr. Gartman, however, it was an unexpected challenge.

"I didn't come to MNC with the knowledge that we'd be working on turn-arounds, but that happens to be what my background is," he said.

Indeed, in 1989, the future of Mr. Gartman's new employer looked far different. After absorbing American Security two years earlier, MNC was about to launch a crosstown merger with the Equitable Bancorporation when Mr. Gartman showed up. Together, the two banking companies would be a $26 billion powerhouse, solidifying MNC's position as No. 1 in Maryland and providing the kind of increased earnings that shareholders had come to expect.

but were heading into trouble and did not include about $400 million in already-soured loans to businesses.

Now, the Special Assets Bank has oversight for it all, though MNC officials aren't saying what the total amount is these days.

South Charles is sticking to real estate. Made up of former real estate executives, accountants and others familiar with the industry, the division is responsible for managing and selling just those properties that MNC has foreclosed upon. There are about $140 million worth of assets and about 75 employees in that group, Mr. Gartman said.

But their job is likely to grow. Another $500 million worth of properties is in the foreclosure pipeline and could wind up in the lap of South Charles before long.

The remaining problems fall into two camps: troubled real estate loans and troubled commercial loans. About 225 people in the special group are responsible for renegotiating, reworking or refinancing those loans -- virtually anything that might return them to health without giving away the store. The relative size of those two loan groups won't be known until the end of this week, Mr. Gartman said, but the breakdown is probably two-thirds real estate and one-third commercial.

The goal of all these people, housed in offices in Baltimore, Greenbelt and Washington, is to get rid of the problems.

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