It is not surprising that many are based out of South Florida – where signs of the real estate bubble burst first became apparent. Miami-based ARE Asset Management, for instance, has launched two offshore investment funds with $600 million in commitments. The firm plans to begin acquiring assets within the next 30 days.
ARE Asset Management will not be levering its capital. Other firms, though, plan to do so, delivering a multi-billion-dollar wave of purchasing into the market.
One example is Sky Development, which teamed with the principals of SunVest Communities -- a provider of condo conversions -- to launch a $300 million investment fund that will focus on residential and commercial properties. Called SkyVest Real Estate Opportunity Fund I, it will have $1 billion in purchasing power after leverage, according to Yizhak Toledano, founder and CEO of Sky Development.
"We anticipate that the bottom will hit in Q3 or Q4," he tells GlobeSt.com. Right now the firm is putting together legal documents and preparing a road-show for investors and asset targets. According to Toledano, the fund will invest in both residential and commercial assets. "We will go heavily after condos and completed [condo] buildings. The idea is to get control of the building or buy the majority of the units."After the fund has acquired hard assets, it plans to buy at least $100 million in distressed notes, he says. But the majority of the investment will be in actual properties, in cities and states where the market is soft – Nevada, Florida, parts of California, Texas, Atlanta and parts of New York. The exit strategy is timed for three to five years from now, after the properties have either been stabilized or the market has recovered enough for the investors to realize a sufficient return.
International Sales Group is another South Florida-based firm, founded in 1994 by Philip Spiegelman and Craig Studnicky. It recently launched International Realty Services LLC to buy up distressed properties nationwide. According to Studnicky, the fund will acquire properties from developers "that are financially and emotionally exhausted" as well as from construction lenders that have foreclosed on properties. "We will be buying units at 25% to 50% less than for what they appraised. More to the point, we will be buying them at one-third of their replacement value." When the real estate market eventually recovers, he tells GlobeSt.com, "We will have acquired these great assets at a price that is a third less than what it would have cost to build."
The fund's goal is to raise $100 million that will be levered into $1 billion. It will be investing in residential assets including condos, lofts and townhomes. The fund plans to begin acquiring assets in June or July. "It is our feeling that in 2009 we will see a bounce back in certain parts of the country and the markets will have become more liquid by then as well."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
