Before it was seized earlier this month, First Constitution Bank had received an offer for $240 million in real estate assets.

The deal would have been the biggest bulk sale of real estate by a bank.

But the offer, for 50 cents on the dollar, came too late. The New Haven, Conn., bank could not afford the writedown. Besides, regulators had already decided to close it down.

The bid for the portfolio of nonperforming loans and foreclosed assets came from Clifford Cos., a New York property manager. It would have surpassed the record $108 million NationsBank Corp. reportedly got for a sale of hotel loans last year.

FDIC Perspective

Officials at the Federal Deposit Insurance Corp. said First Constitution's inability to complete the sale illustrated why the government will soon start closing banks when their tangible capital drops to 2% of assets.

"There does come a point in the life of a bank where it is unable to do sensible things," such as a bulk sale, said Harrison Young, director of resolutions at the FDIC.

While noting the FDIC had "no opinion" on the adequacy of Clifford's offer, the official said banks on the verge of failure might tend to accept less for the assets than the FDIC could get.

Although Clifford's bid went ignored, the bank paid the firm a $100,000 fee for conducting a due-diligence review of the asset Clifford had agreed to allow the bank to show its report to other investors and use it in shopping for a better bid.

This arrangement eliminated the risk to Clifford of incurring the expense off doing a due diligence investigation, only to see the bank closed before it could make a bid. It also put pressure on Clifford to bid aggressively.

The aborted sale was part of a recapitalization plan that was being conducted with the Federal Deposit Insurance Corp.'s knowledge. But the agency did not order the sale.

"We were aware they were going to try to bulk-sale their assets," John Lane, regional director in the FDIC Boston office, said. "We were not aware how they were going to do it."

Once the recapitalization was shelved and the regulators put the institution on the market, bidders for the franchise were shown the data Clifford had complied.

The three bidders -- Webster Financial Corp., Fleet Financial Group, and Centerbank -- had about a week to go over the company's financial statements.

Ultimately, some of the real estate assets were sold with the franchise to Webster Financial, which is based in Waterbury, Conn., under a loss-sharing arrangement with the government.

Regulator's Options

The FDIC assumed about $160 million of foreclosed property and nonperfoming loans.

The FDIC could sell the assets to Clifford or another buyer, but it may hold onto them in the hope of earning a return on them until the market improves.

Mr. Young said the FDIC's division of liquidation was aware that "someday might be prepared to make a pretty good bid" for the First Constitution assets.

Clifford had estimated it could earn about an 15% annual return on an investment in the assets over five years, said Stephen Mann, a managing director of the firm. But he said the large return would depend on aggressive management of undeveloped land in the portfolio.

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