Questions raised over property's valuation, fixed asset designation
May 02, 2012
Great Florida Bank shareholders are questioning the accuracy of the $28 million value that the bank put on an office building in West Palm Beach, Florida, the South Florida Business Journal reports.
The bank's valuation of the repossessed Courthouse Commons is significantly different to real estate professionals' estimate of at least $12 million less. Additionally, Great Florida's valuation puts the building - which it seized in 2009 - under the umbrella of a fixed asset
, rather than other real estate owned. This raises concerns about undercapitalization.
"Reporting a very large property as a fixed asset instead of other real estate reduces the level of troubled assets, which makes the bank look healthier and better capitalized than it might actually be," explained Jonathan Hullick, president of a local consulting firm and a former senior regulator with the FDIC, as quoted by the news source.
According to the FDIC, a bank can designate repossessed property as a fixed asset if it intends to inhabit it. At the time the building was seized, the bank announced its intentions of doing so, but this has not yet occurred.
Great Florida was founded in 2004 as a state-chartered commercial bank, according to its website.