Keating’s ‘Dream’ Is Devalued : S&Ls;: RTC effort to sell planned-community project in Arizona draws bid worth less than 10 cents on the dollar.

The Resolution Trust Corp.’s prospects of recouping losses from Charles Keating Jr.’s biggest real estate venture faded Tuesday when the agency revealed that the 20,000-acre project has been valued at less than 10 cents on the dollar. The valuation comes during a critical phase of the RTC’s plan to dispose of the assets of failed savings and loans.

The planned-community project--dubbed Estrella--was the single largest parcel in a group of real estate properties and land loans from failed thrifts, including Keating’s Irvine-based Lincoln Savings & Loan, that the RTC is liquidating through its National Land Fund.

Under the land fund plan, companies vie for the right to manage and sell the failed thrifts’ assets--pooled in packages--by bidding what they believe to be the value of the package. The companies put 25% of their bid price into the fund. As partners in the fund, they will give the RTC 75% of the proceeds from sales and pocket the rest until the total bid price for the pool is recouped. Any sales over the bid price will be shared 50-50 between the agency and the selling groups.

In total, the assets in the fund had been valued at a total of $1.7 billion by the failed thrifts, but bids accepted by the RTC to sell those assets valued them at $346 million--an average of 21 cents on the dollar. The agency hopes that actual sales will recover more.

The high bid for Estrella--now just 200 houses and two man-made lakes in what was to be a planned community in the desert about 20 miles southwest of Phoenix--placed the value of the project at $28 million, or about 9.5 cents for every dollar invested. The winning bid was submitted by SunChase Land Fund, an investor-management group composed of SunChase Holdings Inc. in Roseville, Calif., and Sterling Pacific Assets in Phoenix.

Estrella was the centerpiece of Keating’s operation of Lincoln before the S&L; crashed four years ago and led to the nation’s costliest savings and loan bailout.

Keating envisioned that Estrella would become a planned community housing up to 60,000 people and would include businesses and schools and all the amenities of a small town.

Some houses were built after Lincoln put up about $80 million to build a 14-mile highway leading to the development. No paved roads lead into the southern part, known as Hidden Valley Ranch.

Sham loans to straw buyers of the Hidden Valley land were a key element leading to Keating’s convictions in both state and federal court. He is serving a 10-year prison term for his 1991 conviction in state court for securities fraud and is awaiting sentencing in federal court for his January conviction on racketeering, conspiracy and fraud charges.

Lincoln sunk $295 million--in land acquisition costs, development and loans--into Estrella before the S&L; collapsed. Despite criticism from regulators, the RTC sales pitch billed Estrella as “a Southwestern dream.”

SunChase put about $46 million into the fund to dispose of Estrella and properties in four other pools that the failed thrifts had valued at $1.28 billion. SunChase valued the portfolio at $181 million, or 14 cents on the dollar.

Colony Capital Inc., a Los Angeles asset management firm, paid about $41 million to sell assets in the final package of properties and loans in the land fund offering that the S&Ls; had valued at $469 million. Colony’s bid, however, put the value of those properties and loans at $165 million, or about 35 cents on the dollar.

The package includes 24 properties and 95 mortgages, most of them coming from failed Homefed Bank in San Diego.

“Obviously, we expect to sell the entire portfolio for more than $165 million,” said Robert Stetzl, a principal in Colony.

The RTC also expects that the value of the properties and loans will turn out to be greater than the winning bids.

“Our people are happy with the bids,” said Stephen Katsanos, an RTC spokesman. “The bids were comparable to what we typically get on raw land sales.”