Bloomberg News

Fannie Mae Sale of Florida Foreclosures Gets 96% of Value

September 10, 2012

Fannie Mae’s first auction of foreclosed homes to be managed as rentals sold for $78.1 million, or 96 percent of the properties’ estimated value, the Federal Housing Finance Agency said.

The purchase, of 699 homes in Florida, was the first to be completed in Fannie Mae’s auction of almost 2,500 repossessed properties in six states. The buyer was San Diego, California- based Pacifica Companies LLC, the FHFA said in a statement today. The homes had a total value of $81.5 million, including joint-venture financing from Fannie Mae, according to a transaction summary.

Investors are pouring money into single-family homes, seeking to capitalize on rising demand for rentals and real estate prices that have more than 30 percent from their July 2006 peak. Firms including Blackstone Group LP, Colony Capital LLC and Oaktree Capital Group LLC plan to spend about $8 billion buying foreclosed properties to rent, according to company statements and interviews.

“Seeing it traded at that high value means we’re probably going to see more pool sales coming,” Jim Warren, senior vice president of Tenant Access, a single-family rental management company based in Austin, Texas, said in a telephone interview. “Institutional money can aggregate a lot quicker. It’s easier to evaluate an entire pool than one property at a time.”

Deepak Israni, president of Pacifica, a property investment and management company that operates hotels and multifamily housing, didn’t immediately return a call seeking comment.

Winning Bidders

Fannie Mae, the government-sponsored mortgage company that owned 109,000 foreclosed properties as of June 30, offered the homes for auction in February. The other properties are in Georgia, Illinois, Arizona, California and Nevada.

The FHFA will announce the winning bidders of homes in other areas in the coming weeks after the transactions are completed, according to the statement. The 541 properties in Atlanta weren’t sold, the Washington-based agency said.

Colony, a Santa Monica, California-based investment fund headed by Tom Barrack, and Cogsville Group LLC, a New York-based company led by Don Cogsville, were the top bidders for other Fannie Mae portfolios, four people with knowledge of the transactions said in July.

Pacifica, which will manage the Florida properties, paid $12.3 million for its share in a joint-venture with Fannie Mae, which will get 90 percent of cash flow until it receives $49.3 million, according to the transaction summary. After that, Fannie Mae’s share will drop to 50 percent of cash flow. Pacifica will also receive 20 percent of gross rental income as a management fee. The deal restricts the value of the properties that can be sold to third parties for three years.

“The transaction is designed to promote home price stability, improve quality of housing stock and enhance rental inventory of markets by utilizing a rent-and-hold strategy,” according to the summary.

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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