Duo Targets Sour Multi-Family Loans
Source: Real Estate Alert (www.realert.com) November 3, 2010
A joint venture that has $250 million of equity to invest in nonperforming multi-family loans has made its first acquisition. The partnership, managed by Bridge Partners of Walnut Creek, Calif., recently acquired a $13 million defaulted loan on a Pensacola, Fla., apartment complex from a bank for about $10 million. It is now moving to foreclose on the 184-unit complex, which is 95% occupied. The partnership was set up early this year. An unidentified institutional investor put up 95% of the equity, with Bridge kicking in the rest. With leverage, the duo could invest $750 million. The goal is to commit about one third of that amount over the next year, but Bridge is finding it hard to identify suitable investments. The strategy is to seek a 15% return by acquiring nonperforming mortgages on multi-family complexes nationwide, with an emphasis on core markets. Most investments are likely to range from $15 million to $20 million. The partnership, called Bridge Partners U.S. Housing Fund, will seek to take control of the collateral properties, stabilize them over 2-3 years and then sell. Up to 70% of the purchase price can be financed with debt. Bridge hopes to build relationships with lenders by closing on purchases quickly in cash, waiting to arrange debt financing until foreclosure occurs. Bridge was founded in 1990 by Steve Klein and Ken Beall. Klein was formerly a Los Angeles-based project manager for developer Trammell Crow of Dallas. Beall was a vice president at Birtcher Development and Investments of Irvine, Calif. Bridge’s portfolio now includes some 6,000 apartment units. The company has previously invested via a series of partnerships with institutional backers.