FDIC Faces Mountain of Surplus Real Estate. Emerald Forest saga hints at rough time for regulators hoping to solve S&L crisis. BANK AND THRIFT BAILOUTS

IN June 1987, the Dallas tax assessor figured the Emerald Forest apartment complex was worth $9,616,420 - about how much a Texas ``wheeler and dealer,'' Don Walker, reportedly agreed to pay for it before his real estate empire collapsed. Today, the Federal Deposit Insurance Corporation (FDIC), the current owner, hopes to realize between $2 million and $2.6 million for the apartments when they are auctioned on March 9 at Christie's.

Disposing of such property is becoming a major problem for the government and its two insurance funds - the FDIC, the insurance fund for deposits at commercial banks, and the Federal Savings & Loan Insurance Corporation (FSLIC), which insures deposits at thrifts.

The FDIC, faced with a record number of commercial bank failures, is trying to liquidate $10 billion in assets, while the FSLIC is trying to sell $9.5 billion in assets. These figures are likely to swell. According to conservative estimates, for example, FSLIC has $25.7 billion in nonperforming real estate assets. Industry specialists say the volume of troubled loans is much higher.

``The regulators are on the horns of a dilemma,'' says Jim Croft, executive vice-president for risk and property management at the Federal Home Loan Mortgage Corporation. Holding the real estate loans, Mr. Croft says, is gambling that the real estate will increase in value more than the cost of holding it. ``The public nature of a government entity is that they are not into gambling,'' Croft says.

On the other hand, selling the real estate poses risks as well. ``The danger is that the government unloads on real estate markets already damaged. You don't want to depress the markets any further,'' says John Tuccillo, chief economist at the National Association of Realtors.

In its real estate market forecast for 1989, Landauer Associates, real estate consultants, complained, ``Foreclosures, see-through buildings and ill-managed properties depress more than a few markets.'' Among the weakest markets Landauer figures are Miami, St. Louis, Kansas City, Oklahoma City, New Orleans, Minneapolis, Dallas, and Denver.

Not surprisingly, banks in many of these same areas have had problems. The government enters the picture when a bank is declared insolvent and the regulators appoint an overseer. One of the options for the government is to merge the ailing bank with a healthy bank. But often the government gets saddled with bad loans in such mergers.

This was the case with the Emerald Forest apartments, which were built on a financial foundation but eventually became a ``house of cards.''

What the FDIC inherited was a 342-unit garden apartment complex, only half full, in a ``transitional'' neighborhood. The history of the financial structure was complicated.

EMES Management in New York originally purchased the property in 1978 shortly after it was built. It is unclear how much EMES paid for the parcel, then called the Depot Apartments.

In 1981, EMES says, it sold the property to Nelson Hunt and Frank Andrade, two California syndicators. Andrade Associates put down a sizable down payment and EMES accepted a ``wrap mortgage'' of about $5 million, secured by the property. A wrap-around mortgage is when a seller continues to pay the underlying financing while a still larger debt is placed around the property.

Two years later, a limited partnership, whose general partner was Donald Walker, put down about $2.7 million in cash and Andrade and Hunt accepted a wrap mortgage for $6.5 million more. When Mr. Walker's real estate partnerships got into trouble, he put Emerald Forest into bankruptcy. The property reverted to Andrade and Hunt, who likewise declared bankruptcy. EMES, still owing money on the property, also defaulted.

The property eventually dropped to the first lien holder - Goldome, a Buffalo bank that had acquired the loan when it bought the troubled Union Dime Savings Bank. Union Dime, a New York bank, had made a 10-year loan at 9.75 percent. When the borrower defaulted on the loan, the approximate balance on the principal was $3.5 million. Goldome had the right to give the loan to the government owing to guarantees by the FDIC.

EMES Management and Andrade Associates had no comment about the failed loans. Don Walker could not be reached.

The complexity of the Emerald Forest apartments deal is not unusual. It becomes another problem for the government. Typically, many real estate deals involve ``wrap loans,'' as sellers merely pile debt on top of debt.

Government regulators will increasingly find such loans as they shut down insolvent thrifts. ``The FDIC's biggest problem will be getting a handle on how significant each bank's nonperforming loans are,'' says Joel Zegart, president of JBS & Associates, a national real estate consulting and auction firm based in Chicago. Mr. Zegart predicts the government will turn increasingly to auctions - selling up to 10 percent of its troubled real estate loans in this manner.

Faced with the prospect of unloading the distressed real estate, the FDIC says its policy is to find buyers of the insolvent thrifts who will acquire all the assets - good or bad. ``Winning bidders will be people who require the least aid from us,'' says Alan Whitney, an FDIC spokesman.