Redwood Real Estate Partners,
Inc said on Wednesday it launched a fund to buy up to $500
million in distressed residential real estate amid an expected
surge in bank-owned properties.
The Rancho Santa Margarita, California, real estate company
will focus on bulk sales of homes weighing on bank balance
sheets, currently selling at 60 cents to 85 cents on the
dollar, said Carl Chang, Redwood's chief executive officer.
Financial distress, and lack of liquidity (have created)
some large buying opportunities that I hadn't even seen in the
late 1980s and early 1990s when real estate markets were under
stress, Chang said.
Redwood's recent $44 million investment in bank REO (real
estate owned) produced up to 35 percent returns, he said.
Bank-owned properties have soared as falling home prices,
risky mortgages and the economic recession boost foreclosures
to record highs. The foreclosure rate hit a record in April --
up 32 percent from a year earlier -- after moratoriums expired.
That will probably result in a corresponding spike in REO,
according to RealtyTrac.
In the meantime, mortgage companies are stepping up sales
of REO by slashing prices, Thomas Lawler, founder of Lawler
Economic & Housing Consulting, wrote in a client note.
Fannie Mae, the largest provider of funding for U.S. home
mortgages, this month said its inventory of properties owned
through foreclosure fell last quarter to 62,371 from 63,538 in
December, even as new acquisitions jumped.
The new Redwood fund, the Occasio Distressed Residential
Fund, will be led by John Duden.