It’s good to see deal flow out there even if it has to come from a private auction held by the FDIC. The Starwood / Corus Bank deal has been widely reported on over the last few weeks.

Barry Sternlicht’s Starwood Capital Group has a relatively straightforward game plan for the distressed condo assets of Corus Bank that he is set to buy in a closely watched federal auction: wait until the market recovers.

The deal, announced Tuesday evening by the Federal Deposit Insurance Corp., hands Starwood and its investor partners the Corus portfolio of 112 construction loans, more than two-thirds of which are in default or are in foreclosure. Starwood will have to decide how to deal with the troubled projects and their developers as well as those headed for default.

What’s more interesting to me is the huge volume of opportunity that is coming through the 3,800 banks that are reporting distressed construction projects, broken condo deals, and abandoned commercial real estate developments. The BankProspector shows that there are nearly 3,800 banks in the U.S. that are struggling with or otherwise processing defaulting or defaulted construction projects. Most of these are failed subdivisions, partially sold “broken condo” deals and the like, but more frequently now we’re hearing about lenders pulling the plug on spec commercial developments that are failing to attract tenants.

Corus Bank had the second highest reported amount of nonaccrual construction loans in the U.S. as of the most recent (Q2 2009) reporting. Bank of America as you might expect was number one. Some of the list players that fall in the top ten banks with defaulting construction loans however is surprising.

Many lenders are reporting construction default rates in the mid teens. Corus Bank last reported non-current construction loans at 71%…wow. Corus Bank was headquartered in Chicago, Illinois but with its far flung condo deals became very much a national lender.