PE Firm Advantages & Strategic Alternatives
PE Firm Advantages
Private Equity firms have a lot of advantages when it comes to buying foreclosed homes compared to the small mom-and-pop investors. For example, the recent storm earlier this week in Atlanta not only ruined outdoor events, but exposed weaknesses in the state’s process for selling foreclosed homes. Many investors were scared off creating little competition and room for PE firms to move in and buy in bulk.
Colony American Homes, the single-family home-rental company run by Los Angeles private-equity firm Colony Capital, took advantage of the little competition and spent “big bucks” at the auction this week. Colony paid $16 million to buy 230 homes in one day, compared to the $9 million for 130 homes the month before. The less competition this week meant better prices for the investors that showed up.
“It was like catching fish in a stocked trout pond, as opposed to having to go out into nature,” said Arik Prawer, a senior executive at Colony.
“Bottom line was, more fish, fewer fishermen,” said Robbie Whelan
According to WSJ, when LNR’s owners were advised to sell it was considered a “strategic alternative.” LNR, the giant servicer of distressed commercial real-estate debt, is the country’s largest special servicer that deals with troubled commercial mortgage-backed securities loans. Business is expected to stay strong until 2017. LNR has been on the bidding blocks since this summer.
In the race to buy LNR Property LLC, there are only three bidders left, Lennar Corp’s Rialto Capital Management, Starwood Capital Group, and Cantor Fitzgerald. Out of the race, Andrew Farkas‘s C-III Capital Partners, one of LNR’s largest competitor. According to real estate executives who discussed matters with C-III, C-III Capital Partners pulled out of the bidding because it wasn’t getting as much information about LNR as it wanted.