October 15, 2008 - Laketown Wharf, Panama City FL

In a sign of the trouble that awaits condominium lender Corus Bankshares Inc. in its quarterly financial results due at the end of October, the Chicago bank holding company has taken ownership of a 765-unit development in Panama City Beach, Fla., for which it lent $146 million.

The massive Laketown Wharf project, which is nearing completion, has sold just 65 condos, and attracted several lawsuits from contractors and buyers. The developer, Florida businessman Jerry Wallace, turned over ownership in September to a unit of Corus Bank. The Corus unit then filed for Chapter 11 bankruptcy protection.

Corus felt that the bankruptcy process was "the most efficient way to clean up the pending litigation from the previous management," said Keith Gibbons, a Corus Bank vice president who oversees the Laketown Wharf salvage effort. Mr. Wallace couldn't be reached for comment; his previous business numbers in Destin, Fla., were either out of order or had been disconnected.

The foreclosure on one of Corus's biggest loans is bound to add pressure to an expected second consecutive quarterly loss. Corus's loan portfolio has deteriorated in the past year because of its high exposure to condos and to Florida.

Original story - WSJ.com