RTC Will Test Investment Trusts As Sales Vehicle

WASHINGTON - Desperately seeking an asset-sales plan that will please Congress, the Resolution Trust Corp. on Tuesday cleared the way for marketing large blocks of properties as real estate investment trusts, or REITs.

The RTC board gave its staff the green light to structure a deal to offer 100 investors with $100,000 each a piece of a private placement.

Any such deal would ultimately need approval from the RTC board. If the experiment worked, the REITs might be packaged for smaller investors.

The RTC also authorized its staff to consider packaging $86 billion in illiquid real estate and mortgages in other investment vehicles, such as closed-end funds, partnerships, and master limited partnerships.

First Try Failed

The RTC's first attempt in August to make a bulk sale of real estate, to Patriot American Investors of Boston, has turned into a major embarrassment. Critics claim the RTC turned down higher bids on some properties to include them in that package. And Gerald Gutterman, a consultant to the buyer, is a convicted felon who has defaulted on millions of dollars in loans to thrifts in New York, according to Rep. Jim Leach, RIowa.

An investigation by Mr. Leach and Rep. Frank Annunzio, D-Ill., has stalled the Patriot deal.

"We're looking at a probability that there will be enough dissent in Congress that the legislators might pass a law later on to make us unwind any agreement," said RTC spokesman Stephen Katsanos. If Congress did that, it could have a chilling effect on other would-be buyers, he said.

The RTC said bulk sales are the only way to dispose of the properties quickly at the lowest cost to taxpayers.

Kalen Hochstader of Medill News Service contributed to this story.

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