Resolution Trust Corporation: Evaluations Needed to Identify the Most
Effective Land Sales Methods (Letter Report, 04/13/95, GAO/GGD-95-43).

The Resolution Trust Corporation (RTC) classifies land as hard-to-sell
when the following factors come into play: weak demand for undeveloped
land, lack of financing sources, and property generating a negative cash
flow.  In many cases, brokers are more inclined to include developed
real estate in multiple listings because they have greater confidence
that such real estate sells more quickly than undeveloped land.  As a
result, fewer brokers get involved trying to sell raw land.  In January
1993, RTC had about $17.5 billion, in book value, in land and loans
secured by land under its control.  At that time, RTC began to intensify
its efforts to sell these assets.  This report (1) reviews RTC's land
disposition efforts and how the agency has dealt with the challenges
posed by those assets and (2) discusses RTC's strategy for disposing of
its land assets and whether RTC had assessed the results of its land
sales to identify the most cost-effective disposition methods and best
practices.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-95-43
     TITLE:  Resolution Trust Corporation: Evaluations Needed to 
             Identify the Most Effective Land Sales Methods
      DATE:  04/13/95
   SUBJECT:  Marketing
             Real property
             Property disposal
             Data collection operations
             Government sponsored enterprises
             Strategic planning
             Evaluation methods
             Real estate sales
             Federal property management
             Cost effectiveness analysis

             
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Cover
================================================================ COVER


Report to the Deputy and Acting Chief Executive Officer, Resolution
Trust Corporation

April 1995

RESOLUTION TRUST CORPORATION -
EVALUATIONS NEEDED TO IDENTIFY THE
MOST EFFECTIVE LAND SALES METHODS

GAO/GGD-95-43

Land Sales Methods

(247099)


Abbreviations
=============================================================== ABBREV

  FDIC - Federal Deposit Insurance Corporation
  FMS - Financial Management System
  RTC - Resolution Trust Corporation

Letter
=============================================================== LETTER


B-259496

April 13, 1995

Mr.  John E.  Ryan
Deputy and Acting
Chief Executive Officer
Resolution Trust Corporation

Dear Mr.  Ryan: 

As you know, the Resolution Trust Corporation (RTC) classifies land
as a hard-to-sell asset because of certain barriers to disposition,
such as weak demand for undeveloped land, lack of financing sources,
and negative cash flow generated by many of these assets.  Also,
compared to real estate that has been developed and has buildings on
it, there is less market demand for undeveloped land.  In many cases,
brokers are more inclined to include developed real estate in
multiple listings because they have more confidence that such real
estate sells more easily and quickly than undeveloped land.  As a
result, not as many brokers get involved with trying to sell
undeveloped land compared with those selling developed real estate. 

In January 1993, RTC had about $17.5 billion, in book value, in land
and loans secured by land under its control.  At about that time, RTC
began to intensify its efforts to sell these assets.  As part of our
continuing oversight of RTC, we reviewed its land disposition
activities to find out how it was dealing with the challenges posed
by these assets.  We wanted to determine whether RTC had developed
and implemented a strategy for disposing of its land assets and if it
had assessed the results of its land sales initiatives to identify
the most cost-effective disposition methods and best practices. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

RTC adopted a land disposition strategy in May 1992.  To develop this
strategy, it formed a land task force to analyze its land inventory
and propose a strategy for disposing of the remaining land assets. 
During the 18-month period between January 1993 and June 1994, using
a variety of disposition methods included in this strategy, RTC
disposed of about $16 billion (book value) in land and loans secured
by land.  As of February 1995, RTC had about $850 million in these
types of assets remaining in its unsold inventory. 

RTC's directive implementing its land sales strategy stated that each
sales initiative would be evaluated by the land task force to
identify the most effective methods of land disposition.  However,
even though RTC prepared budgets for the individual land sales
initiatives and had the mechanism in place to capture the actual
expense data, it did not (1) develop a formal procedure to collect
all the actual expense data related to each sales initiative and (2)
establish a standard methodology for evaluating the results of
individual land sales initiatives.  Consequently, RTC could neither
compute net recoveries nor identify the most cost-effective sales
initiatives and best practices, nor could it analyze expense
variations and use the results of such analyses to better manage
future land sales initiatives.  Without analyzing variations in
expenses, RTC could not determine which marketing techniques yielded
the best return for the lowest expense given the characteristics of
the assets being offered for sale. 

The required evaluations were not done to analyze results of each
land sales initiative or to compare results between or among
initiatives.  Furthermore, RTC did not use its annual program
compliance review process, through which it normally assesses
compliance with policies and procedural requirements, to determine
whether the required evaluations were being prepared.  Had this been
done, RTC would likely have recognized that there were procedural
deficiencies that were preventing the implementation of the
evaluation requirement. 

In June 1994, we briefed RTC management on the results of our review
of their land sales activities.  In August 1994, in response to this
briefing and our prior recommendation,\1 RTC issued a directive
requiring that the budgeted and actual sales expenses for each
multiasset sales initiative be documented.  The directive requires
(1) a sales budget to be prepared for each multiasset sales
initiative, including initiatives to sell land assets, and that this
budget be included in the case memorandum requesting authority to
proceed with the sales initiative; and (2) actual sales expenses to
be compiled and entered onto a copy of the original budget no later
than 90 days after the sale closing.  These procedures, if properly
implemented, should capture the data RTC needs to evaluate the cost
effectiveness of different sales methods and monitor sales expenses
to identify the most effective marketing and sales techniques and
best practices. 


--------------------
\1 In Resolution Trust Corporation:  Data Limitations Impaired
Analysis of Sales Methods (GAO/GGD-93-139, Sept.  27, 1993), we
recommended that RTC improve its methods for collecting and
summarizing sales and financial data. 


   BACKGROUND
------------------------------------------------------------ Letter :2

RTC's sales centers planned and carried out land sales initiatives. 
Asset marketing specialists at the National Sales Center and in
regional sales centers developed disposition plans, identified the
assets to be offered for sale in the initiatives, and obtained
approval from RTC management to carry out the sales initiatives. 
Initiatives offering assets with a combined book value in excess of
$250 million required RTC headquarters approval.  Field offices were
permitted to approve their own sales initiatives when the book value
of the assets being offered totaled $250 million or less. 

In December 1993, RTC issued its business plan.  In developing the
plan, RTC used a standard methodology to comparatively evaluate the
net recoveries from similar asset types sold through different
disposition methods.  Similar expense data, but not all expense data,
were gathered for relevant transactions and, according to RTC,
standard methodologies were used to evaluate all types of equity
partnerships, large sealed bids/portfolio sales, and auctions,
respectively.  However, at the time these evaluations were done, the
most significant land sales initiatives using alternative disposition
methods, such as the Multiple Investor Fund and equity partnership
structures, had not yet closed.  Therefore, land was not included in
the business plan analysis as a separate asset type.  In 1993, RTC
decided to test the equity partnership structure for land (Land Fund
I).  It then became more important for RTC to assess relative
recoveries of distinct disposition methods. 

Also, in December 1993, the RTC Completion Act of 1993 established
various requirements for the disposition of real property, including
land and nonperforming loans secured by real estate.  The act
required that before such assets are offered in a bulk transaction,
RTC must determine in writing that a bulk transfer would maximize the
net recovery to RTC while providing an opportunity for broad
participation by qualified bidders, including minority- and
women-owned businesses.\2 The required written justifications are to
be included in the case submitted to RTC management to obtain
approval for each land sales initiative. 


--------------------
\2 The RTC Completion Act specifically exempted the following assets
from this requirement:  (l) real property with a book value of not
more than $400,000, (2) nonperforming real estate loans with a book
value of not more than $1 million, and (3) assets included in certain
thrift resolution transactions. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

We reviewed RTC's land disposition activities to determine how RTC
was dealing with its land assets inventory.  Our objectives were to
determine whether RTC had (1) developed and implemented a strategy
for disposing of its land assets and (2) assessed the results of its
land sales initiatives to identify the most cost- effective
disposition methods and best practices. 

To accomplish our first objective, we reviewed the November 1991 Land
Task Force strategy paper and RTC's directive implementing the land
disposition strategy.  We interviewed the head of the task force to
discuss the (1) basis for RTC's strategy, (2) results of the land
inventory evaluations done by the task force, and (3) land sales
initiatives RTC planned to implement in 1993.  We also interviewed
RTC headquarters officials in Washington, D.C.; and contacted field
office officials in Atlanta; Dallas; Denver; Kansas City; Newport
Beach, CA; and Valley Forge, PA.  We obtained information on the
implementation of RTC's land disposition policy and related policies
and procedures, inventories of land and loans secured by land, land
sales initiatives and their results, and land sales initiatives in
the planning stage. 

To accomplish our second objective, we reviewed 6 of the 13 land
sales initiatives RTC's National Sales Center planned to implement in
1993.  These initiatives were judgmentally selected to represent a
cross-section of the types of land sales strategies used by RTC, the
ways RTC pooled assets for land sales initiatives, and size of
initiatives in terms of number of assets offered for sale.  The
selected initiatives included five different sales strategies and
five different ways to pool the assets.  The size of the initiatives
ranged from 35 to 410 assets.  (App.  I lists the 1993 National Sales
Center initiatives and identifies those we reviewed.) We also
reviewed an auction--the Pride of Texas--planned by the Dallas field
office.  We selected this initiative because it provided an example
of a field office initiative involving land assets located in a local
area with national advertising. 

For each of the seven land sales initiatives we selected for review,
we interviewed the RTC asset marketing specialists in Washington,
D.C., and one in Dallas who planned and executed the selected
initiatives.  These individuals provided documents relating to each
initiative, including case approvals and listings of assets reserved
for the initiatives.  In these interviews, we also discussed the
availability and sources of sales expense data for the initiatives we
reviewed and obtained copies of all expense data that these asset
marketing specialists had in their files. 

We focused on direct costs associated with the initiatives and not on
other costs incurred by RTC, such as indirect overhead and asset
management and disposition fees, because RTC would have incurred
these costs even if the bulk sales had not been implemented.  The
costs we attempted to determine are listed in appendix II. 

We also attempted to obtain cost data that RTC could not provide from
the contractors it had hired to carry out the initiatives we
reviewed.  We contacted 11 RTC contractors providing financial
advisory, due diligence, and auctioneer services for the selected
land sales initiatives to get information about the services they
provided and the fees they billed to RTC for these services.  We also
contacted RTC's Office of Inspector General to discuss work done on
contractor billings for services provided on two of the initiatives
we reviewed. 

Finally, we interviewed RTC headquarters officials from the National
Sales Center, Office of Contract Operations, Management Information
Division, and Department of Corporate Finance, as well as field
office officials in Dallas, to determine whether the results of
individual land sale initiatives were evaluated. 

We also reviewed reports on the results of 1992, 1993, and 1994
program compliance reviews to determine whether reviewing officials
were assessing compliance with the land sales initiative policy
directive. 

On February 6, 1995, we met with RTC's Vice President for Asset
Marketing, RTC officials representing the National Sales Center, the
Office of Contracts, and the Chief Financial Officer to discuss a
draft of this report.  Their comments were considered and have been
incorporated into the report where appropriate.  On March 3, 1995,
RTC provided written comments on a draft of this report, which are
evaluated in the agency comments section and elsewhere in the report
where appropriate.  RTC's written comments are reprinted in appendix
IV. 

We did our work between January 1993 and December 1994 in accordance
with generally accepted government auditing standards. 


   LAND SALES STRATEGY DEVELOPMENT
   AND IMPLEMENTATION
------------------------------------------------------------ Letter :4

Until the summer of 1991, RTC did not place a high priority on the
disposition of land assets.  Instead, priority was given to other
asset categories that could be disposed of quickly, such as
securities and residential mortgages--of which RTC had a large
inventory--and commercial and residential real estate that had
greater holding costs.  The experience RTC gained through the
disposition of other types of hard-to-sell assets, such as
nonperforming commercial real estate loans, paved the way for
structuring of land sales. 

Recognizing the challenge posed by land assets, RTC formed a land
task force in the summer of 1991 to analyze its land inventory and
develop a strategy for disposing of these assets.\3 The task force
estimated that, continuing at RTC's then average annual rate of land
sales, it would take RTC over 16 years to dispose of its remaining
land assets.  Initially, land was offered on a sealed bid or auction
basis, and later in various forms of equity partnerships.  RTC had
not yet tested the market for equity partnerships when the Land Task
Force issued its strategy paper. 

In its November 1991 strategy paper, the task force recommended that
RTC use specific types of sales methods to dispose of land assets and
select assets for initiatives that were similar in size, type, and
location to respond to investor preferences.  The specific sales
methods recommended by the task force included (1) auctions for land
assets with book values under $1 million, (2) local promotional
campaigns for land assets with book values ranging from $1 million to
$5 million, (3) sealed bid offerings for land assets with book values
over $5 million, and (4) solicited proposals from qualified investors
for portfolios of large land assets with an aggregate book value in
excess of $100 million.\4

In May 1992, RTC issued its land sales directive, Circular 10300.23
entitled Land Sales Strategies and Programs.  This directive
incorporated the task force's recommendations into RTC's guidelines
for establishing and implementing land sales strategies.  In
implementing the task force's recommendation to solicit proposals
from investors, the directive specified two possible initiatives: 
(1) multiple investor funds for pools of land assets ranging from $1
billion to $2 billion in total book value and (2) competitive
solicitations of qualified individual investors for large portfolios
of land assets with an aggregate book value of less than $1 billion. 

The directive required RTC field offices to identify available land
assets and develop plans for their disposition.  These plans were to
include (1) an analysis of available land assets, (2) a list of the
land sale initiatives planned or in process and their sales goals,
and (3) a separate marketing plan for each individual land asset with
a book value of $5 million or more.  The directive emphasized the
importance of ensuring that land assets be carefully evaluated before
being included in a specific sales initiative to ensure that the
proper sales method is selected. 

In choosing a sales method for an initiative, the offices were to
select the one that was most appropriate for the types of land assets
to be offered for sale.  The directive also required that the sales
method selected satisfy RTC's mandate to achieve the highest net
recovery on the sale of assets while avoiding disruptions in local
real estate markets.  Finally, the directive required the land task
force to (1) review field office initiative plans for consistency and
compliance with recommended land policies and sales methods and (2)
evaluate the results of land sales initiatives at the completion of
each initiative and identify which sales methods are most effective. 

Using the various sales methods set forth in the land sales strategy
directive, RTC disposed of about $16 billion (book value) in land and
loans secured by land during 1993 and the first half of 1994.  RTC
figures showed that it had about $4.6 billion (book value) in land
and nonperforming loans secured by land remaining in its asset
inventory as of April 30, 1994.\5 By the end of February 1995, RTC
indicated that it had reduced its inventory of these types of assets
to about $850 million. 

RTC has until December 31, 1995, to complete any land sales
initiatives it undertakes.  The RTC Completion Act of 1993 set this
date for RTC to cease its operations.  Any assets remaining in RTC's
inventory at that time will be transferred to the Federal Deposit
Insurance Corporation (FDIC) for disposition.  As part of the
planning process for transitioning to FDIC, RTC is to identify its
best practices, which should be considered for use by FDIC.  RTC
believes that the recovery analysis it is doing on the various
disposition methods it uses will help it accomplish this task.  In
addition, RTC believes this analysis should help FDIC as it considers
alternate disposition methods for its own inventory of land and other
assets and for similar assets it inherits from RTC in December 1995. 


--------------------
\3 This analysis did not include loans secured by land because RTC
lacked a reliable consolidated inventory. 

\4 Qualified investors are those that have the financial resources,
knowledge, and ability to handle these large transactions. 

\5 The $4.6 billion figure, which was the latest available at the
time we finished our fieldwork, included unsold assets of these types
that were placed under RTC's control during 1993 and the first 4
months of 1994, in addition to those that were in the inventory
before the beginning of 1993. 


   RESULTS OF LAND SALES
   INITIATIVES WERE NOT EVALUATED
------------------------------------------------------------ Letter :5

RTC policy required the results of land sales initiatives to be
evaluated.  However, RTC did not (1) establish a standard methodology
for making the required evaluations, (2) perform the evaluations, or
(3) take adequate steps to ensure that these evaluations were done. 
Also, RTC did not develop a formal procedure to capture the expense
data needed to calculate the net recoveries on the sale of land
assets.  As a result, RTC could not assess the relative cost
effectiveness of the various sales methods it used.  Relative cost
effectiveness was a key component to be used in the required
evaluations since they were meant to identify the most effective
methods.  RTC also did not have the data needed to analyze expense
variations and thus could not use this information to better manage
future land sales initiatives. 


      EVALUATION METHODOLOGY WAS
      NOT DEVELOPED
---------------------------------------------------------- Letter :5.1

In its May 1992 directive on land sales strategies, RTC underscored
the importance of sales initiative evaluations in satisfying its
mandate to maximize net recoveries on the sale of assets under its
control.  It required that the results of land sales initiatives be
evaluated at the completion of each initiative to identify the most
effective sales methods.  Nevertheless, a standard methodology to
evaluate initiative results was not developed by either the land task
force, which was to do the required evaluations, or other units
within RTC.  A standard methodology is necessary to ensure that RTC
collects and considers similar data for each initiative to
consistently assess the results of the initiatives to identify the
most cost- effective sales techniques and best practices. 
Furthermore, no evaluations were done by RTC staff to comply with the
land sales directive requirement. 

RTC normally uses its program compliance reviews to evaluate the
various RTC offices' compliance with RTC policies and procedural
requirements in executing the Corporation's various business
functions.  One of the purposes of the program compliance review
process is to identify procedural deficiencies that hamper or prevent
the implementation of policy requirement.  However, our review of the
program compliance reports showed that these reviews, which have been
done at least annually since RTC's inception, were not used to
determine whether the land sales initiative evaluation requirement
was being implemented throughout RTC. 


      ACTUAL EXPENSE DATA WERE NOT
      BEING COLLECTED
---------------------------------------------------------- Letter :5.2

Expense data are needed, by definition, to compute net recoveries
from the land sales initiatives and evaluate the results of these
initiatives compared to other disposition methods.  While RTC
management acknowledged the importance of evaluating sales initiative
results, they did not establish adequate policies and procedures to
ensure that all essential actual expense data needed to make the net
recovery calculations were collected.\6

As a result, RTC did not compute the net recoveries for the land
sales initiatives, identify the most cost-effective initiatives and
best practices, refine its land disposition strategies, or analyze
expense variations to better manage future land sales initiatives. 

Because RTC procedures did not require them to do so, asset marketing
specialists generally did not monitor total sales initiative expenses
or use the land sales initiative budgets to control costs and
identify costly practices.  Also, RTC's systems could not generate
expense reports on the individual land sales initiatives.  RTC's
Financial Management System (FMS), except for auctions, lacked codes
needed to sort expense data by sales initiative.  RTC expanded the
list of FMS codes in 1994; however, codes were not set up for all
sales initiatives planned for 1994 and 1995.  The lack of (1) FMS
codes and (2) formal compilation of actual sales initiative expenses
prevented RTC and us from getting data by sales initiative to
evaluate and compare the results between and among sales initiatives. 

Two of the five asset marketing specialists who managed the National
Sales Center initiatives we reviewed provided partial expense data
obtained from a portfolio sales adviser and other contractors hired
to help carry out the initiatives.  However, the three other
specialists were not able to provide similar data.  The National
Sales Center maintained a system with some expense data, including
contracted financial sales advisory and due diligence services and
some marketing expenses.  However, this system did not capture data
for other expenses, such as legal services and advertising. 

Because RTC did not collect complete data for all the expenses
incurred to implement individual land sales initiatives, we attempted
to obtain the missing data from other sources for the land sales
initiatives we reviewed.  We identified, primarily from contractor
records, almost $49 million in expenses incurred on the seven land
sales initiatives we reviewed.  However, we were unable to locate
complete data for all of the expenses for each of the initiatives. 
Mainly, we located data on contracting fees incurred to carry out the
initiatives as well as certain other sales initiative expenses
incurred for legal services, advertising, and the facilities used to
conduct the sale. 

We included all amounts invoiced by RTC's contractors that we
located.  Some of the due diligence fees, totaling millions of
dollars, for several initiatives were being disputed by RTC at the
time of our review; and we were not certain how the fees dispute
would be resolved.  For the East Coast Land Sale, we were unable to
break out invoiced expenses for due diligence services between that
initiative and other initiatives commingled in the billing.  For
three of the seven initiatives, data we located lacked the detail
needed to identify amounts for several expense categories, such as
marketing brochures, asset information packages, the due diligence
library, and travel, due to commingling of expenses. 

We identified expense data for most of the expense categories for
five of the seven land sale initiatives we reviewed.  For these five
initiatives, there were large variations in the amounts spent within
the various expense categories as well as in the total expenses RTC
incurred.  Some of the variation within the expense categories and
among sales initiatives can be attributed to differences in the
numbers, locations, and quality of assets included in the
initiatives.  However, because RTC did not do comparative analyses,
explicit reasons for most of the variations were not determined. 


--------------------
\6 In February 1994, RTC issued policies and procedures requiring
data on marketing expenses and commissions for auctions to be
collected.  However, these policies and procedures (1) did not
require data on other auctions' expenses to be collected and (2) were
not applicable to other types of sales initiatives. 


   WE PREVIOUSLY REPORTED A LACK
   OF ADEQUATE PROGRAM EVALUATIONS
------------------------------------------------------------ Letter :6

In September 1993, we reported on RTC's lack of adequate evaluation
of sales program results and its failure to collect essential cost
data needed to measure program effectiveness.\7

We said that if RTC had accurate information on asset
characteristics, revenues, expenses, holding periods, gross and net
proceeds, and sales methods by asset type, it could more effectively
manage its disposition program and evaluate the results of its
various sales methods.  We concluded that data limitations impaired
RTC's analysis of the sales methods it used and recommended that RTC
improve its methods for collecting and summarizing asset sales and
financial data to maximize recoveries on its hard-to-sell assets. 

We also reported, in December 1993, that there were substantial
variations in fees paid for similar loan servicing services.\8

We concluded that without information on all the costs under its loan
servicing contracts, RTC could not effectively monitor the fees
charged by contractors or establish cost-effective fee structures. 
We recommended that RTC routinely collect the information needed to
monitor loan servicing fees and expenses and use this information to
develop cost-effective compensation structures in future contracts. 
RTC has implemented the recommendations we made in that report.  It
is monitoring its loan servicing fees and expenses and using this
information in awarding new contracts. 


--------------------
\7 GAO/GGD-93-139, Sept.  27, 1993. 

\8 Resolution Trust Corporation:  Better Information Could Enhance
Controls Over Loan Servicing Costs (GAO/GGD-94-41, Dec.  22, 1993). 


   RTC HAS TAKEN ACTIONS TO
   COLLECT DATA NEEDED TO EVALUATE
   SALES INITIATIVES
------------------------------------------------------------ Letter :7

On June 28, 1994, we briefed RTC management on the results of our
work on land sales initiatives.  In response to this briefing and our
September 1993 data limitations report recommendation that RTC
improve its methods for collecting and summarizing asset sales and
financial data, RTC took actions to address the concerns we raised. 
RTC acknowledged that although information regarding the amount of
gross sales proceeds from past multiasset sales transactions was
readily available, the amount of corresponding sales expenses can
only be determined after substantial research.  It also acknowledged
that documentation of estimated and actual sales expenses for each
multiasset sale would be useful in determining the effectiveness of
different sales methods and for monitoring sales expense data. 

On August 15, 1994, RTC issued a directive, Circular 10300.39
entitled Multi-Asset Sales Transactions Budgets, to establish
procedures for tracking multiasset sales expenses.  This directive
applies to all multiasset sales initiatives, regardless of type,
developed by RTC or any of its contractors for the disposition of
loans, real estate, or other assets. 

The procedures in the new directive, which became effective for all
relevant sales cases approved after July 31, 1994, require (1) a
sales budget to be prepared for each multiasset sales initiative that
must be submitted with the case memorandum requesting authority to
proceed with the initiative and (2) actual sales expenses to be
compiled and entered onto a copy of the original budget no later than
90 days after the sale closing (transfer of title).  To ensure
consistency, a standard multiasset sales transaction budget format
(see app.  III) was developed that must be used to record budget and
expense information. 

The directive assigns responsibility for ensuring that the sales
budget is completed and updated to the individual responsible for
managing the initiative.  This individual is to coordinate with
legal, contracting, and other parties as needed to obtain estimated
and final sales-related expense data. 


   CONCLUSIONS
------------------------------------------------------------ Letter :8

RTC has developed a strategy for disposing of its remaining land
assets, and during 1993 it implemented a variety of land sales
initiatives to dispose of these assets.  Although RTC required each
land sales initiative to be evaluated, it did not develop a standard
methodology for these evaluations, nor were the required evaluations
done.  Consequently, RTC could not assess the relative cost
effectiveness of the various land sales methods it used. 
Furthermore, RTC did not assess the implementation of the evaluation
requirement through its program compliance reviews to ensure that
policies and procedural requirements were being executed properly and
consistently.  Had RTC used these reviews, it likely would have
recognized that there were procedural deficiencies that were
preventing the implementation of the land sales initiative evaluation
requirement. 

Until August 1994, RTC did not have adequate policies and procedures
to collect the essential expense data needed to compute the net
recoveries from individual land sales initiatives.  As a result, RTC
could not identify the most cost- effective initiatives, refine its
land disposition strategies based on results, or analyze expense
variations to better manage future land sales initiatives.  We
believe it is important that RTC evaluate its land sales initiatives
because they would provide valuable best practices information that
would be of interest to FDIC as it decides which, if any, RTC asset
disposition strategies it may want to adopt as RTC's operations
transition into FDIC. 

In August 1994, RTC issued procedures requiring sales budgets to be
prepared and data to be collected on actual sales expenses.  These
procedures, if properly implemented, should provide the data RTC
needs to evaluate the results of land sales initiatives, including
those focused specifically on land and nonperforming loans secured by
land.  The original sales budget should enable RTC to better
determine the appropriate delegated authority approval level for the
sales initiatives.  The actual sales expense data, along with other
relevant information, should enable RTC to evaluate the effectiveness
of different sales initiatives and monitor sales-related expenses to
identify the most effective marketing and sales techniques.  However,
RTC still needs to develop a standard evaluation methodology to
consistently assess the results of land sales initiatives at the
completion of each land sales initiative to identify the most
cost-effective sales techniques and best practices. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :9

We recommend that RTC's Deputy and Acting Chief Executive Officer
direct the Vice President of Asset Sales and Management to

  -- develop an appropriate standard methodology for evaluating the
     results of land sales initiatives, and

  -- ensure that required evaluations are done at the completion of
     each land sales initiative to identify the best sales methods,
     most effective marketing techniques, and promote their use on
     future land sale initiatives. 


   AGENCY COMMENTS
----------------------------------------------------------- Letter :10

On February 6, 1995, we met with RTC's Vice President for Asset
Marketing, RTC officials representing the National Sales Center, the
Office of Contracts, and the Chief Financial Officer to discuss a
draft of this report.  In summary, they said that they generally
concurred with the findings and conclusions as presented in the
report.  They offered various suggestions to clarify the discussion
of their use of sales initiative budgets and their inability to
compile all the actual expense data needed to do the required
evaluations of individual land sales initiatives.  Their comments
were considered and have been incorporated into the report where
appropriate. 

On March 3, 1995, RTC provided written comments (see app.  IV) on the
draft of this report.  In this response, RTC agreed with our
recommendations, described the actions being taken to implement them,
and offered some general comments on RTC's land disposition methods. 
RTC said that it has implemented (1) a standard methodology, which is
being updated, for evaluating the results of all major sales
initiatives and (2) a system in which the results of sales are being
captured for a quarterly formal comparative recovery rate analysis
report.  If the sales data are not submitted after the sale, RTC said
a follow-up request is sent to the staff conducting the sale.  In
addition, RTC said that it will evaluate enhancing its internal
control review process to test for compliance with the evaluation
requirement.  If effectively implemented, we believe that the actions
taken and planned by RTC should address the issues discussed in this
report. 

In its general comments, RTC said that while the actual results of
equity partnership structures will not be known with accuracy for
years, its estimates made after transaction closings suggest that
equity partnerships generally will exceed recoveries from other
disposition methods.  We are not in a position to comment on whether,
in the long term, using equity partnerships will maximize the
recoveries from asset sales. 


--------------------------------------------------------- Letter :10.1

Because RTC was created as a mixed-ownership government corporation,
it is not required by 31 U.S.C.  720 to submit a written statement on
actions taken on these recommendations to the Senate Committee on
Governmental Affairs, the House Committee on Government Operations,
and the House and Senate Committees on Appropriations.  However, we
would appreciate receiving such a statement within 60 days of the
date of this letter to assist in our follow-up actions and to enable
us to keep the appropriate congressional committees informed of RTC
activities. 

We are sending copies of this report to interested congressional
members and committees and the Chairmen of the Thrift Depositor
Protection Oversight Board and the Federal Deposit Insurance
Corporation.  We will also make copies available to others upon
request. 

Major contributors to this report are listed in appendix V.  If you
or your staff have any questions concerning this report, please call
me on (202) 736-0479. 

Sincerely yours,

Gaston L.  Gianni, Jr.
Associate Director, Government
  Business Operations Issues


RTC NATIONAL SALES CENTER
1993 LAND SALES INITIATIVES
=========================================================== Appendix I

Name                      Type
------------------------  --------------------------------------------
Bell Federal Savings      Sealed bid for asset portfolios

California land loan      Sealed bid for land loan portfolios
sale

East coast land sale\a    Sealed bid for asset portfolios

Enviro II                 Sealed bid for asset portfolios

Great American Land II    Sealed bid for asset portfolios

Land Fund I\a             Joint venture partnership

Landmark I\a              Auction of individual assets

Local featured sale\a     Negotiated sale of individual assets using
                          financial advisors and asset management
                          contractors

Maco III                  Joint venture partnership

National sealed bid       Sealed bid for individual assets
sale\a

San Jacinto II-A          Sealed bid for asset portfolios of land
                          loans and other real estate secured loans

Southwest I and II\a      Sealed bid for asset portfolios

Texas land competitive    Sealed bid for asset portfolios
solicitation
----------------------------------------------------------------------
\a Initiatives we selected for review. 

Source:  RTC National Sales Center. 


EXPENSES GAO ATTEMPTED TO
DETERMINE
========================================================== Appendix II


   MARKETING
-------------------------------------------------------- Appendix II:1

Financial advisory services fees and commissions
Portfolio advisory services fees and commissions
Auctioneers' fees and commissions
Advertising (e.g., newsprint, radio) expenses
Marketing brochure expenses


   ASSET PREPARATION
-------------------------------------------------------- Appendix II:2

Due diligence services fees
Due diligence quality assurance services fees
Legal due diligence (land use) fees
Asset information package expenses


   MISCELLANEOUS
-------------------------------------------------------- Appendix II:3

Auction facilities
Due diligence library facilities
Future servicing
Other legal services
Seminar facilities
Travel
Miscellaneous




(See figure in printed edition.)Appendix III
RTC DATA COLLECTION FORM FOR SALES
INITIATIVE BUDGET AND EXPENSE DATA
========================================================== Appendix II




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE RESOLUTION TRUST
CORPORATION
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Carolyn S.  Ikeda
Thelma A.  Jones
Ronald L.  King
Abraham L.  Logan
Eugene M.  Smith
Carolyn M.  Taylor

DENVER FIELD OFFICE

Richard Y.  Horiuchi
Peggy A.  Stott


*** End of document. ***