ING plans to buy bank real estate

April 07, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

NationsBank Corp. is working on a deal to sell roughly $150 million in troubled and foreclosed real estate assets to Internationale Nederlanden Groep NV (ING), the same investment bank that last month bought Britain's Barings Bank PLC in the wake of a trading scandal.

An ING purchase would breathe new life into South Charles Realty Corp., the real estate holding entity established in 1990 by NationsBank predecessor MNC Financial Inc. in the wake of the regional collapse of the commercial real estate industry.

At its height, South Charles was one of the largest real estate firms in the region, with more than 200 employees and assets valued at $1.8 billion -- nearly as much as the Rouse Co. at the time. NationsBank had previously expected to eliminate the subsidiary once its holdings were sold off.

The transaction, which sources who've recently had discussions with South Charles executives said could be completed within the next two weeks, would represent one of the largest bulk sales of real estate by a U.S. bank in the past year.

"While we're always considering opportunities to maximize the value of assets held by South Charles, we've reached no definitive agreement and it would be premature to comment," said Beth Ulinger, a NationsBank spokeswoman.

ING is expected to retain much of South Charles' 50-member staff -- including President Turner B. Smith -- to continue developing planned communities such as Milestone in Germantown and similar ventures in Northern Virginia.

In the past year, South Charles has been working through joint ventures to develop the communities on behalf of the Charlotte-based NationsBank, which completed a $1.4 billion acquisition of MNC Financial in 1993.

For ING, which declined to comment on the talks, the South Charles assets would represent a substantial base from which to develop a large real estate portfolio.

ING, Europe's seventh-largest financial institution, has $11 billion in shareholders' equity and total assets of $175 billion.

Last month, ING acquired the assets and liabilities of Barings Bank PLC for a modest $1.63 after the 233-year-old British financial institution suffered losses in futures trading in Asia. ING has pledged to invest about $1.5 billion into Barings to maintain its solvency.

A NationsBank sale of South Charles would occur at a time when most lenders with heavy real estate exposure -- including Chemical Banking Corp., Citicorp and Chase Manhattan Bank -- have sold underperforming and nonperforming real estate to vulture funds and investors who gambled correctly that the industry would eventually make a comeback.

South Charles has disposed of much of its once enormous holdings through individual sales to investors, pension fund advisers and developers, who often bought properties for a fraction of the amount originally lent, according to public records.

In late 1991, MNC Financial terminated its own plan to sell South Charles in its entirety, after New York investment house Goldman Sachs & Co. was unable to raise necessary investor interest in a bond sale backed by South Charles holdings.

NationsBank is no stranger to bulk real estate sales, however: In late 1992, it disposed of $500 million worth of C&S/Sovran Corp. loans and real estate to an affiliate of Lincoln Property Co. of Dallas.

South Charles, which obtained its assets through loan workout agreements and foreclosure auctions held by MNC Financial subsidiaries Maryland National Bank and American Security Bank, had assets ranging from hotels to shopping centers from Georgia to Maryland. Locally, South Charles' holdings included the Dulaney Center office and hotel complex in Towson, the former Carrolltowne Mall in Eldersburg and office projects like the 303 International Circle building in Hunt Valley.

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