Florida-based private equity firm Transcendent Investments Management (TIM) is partnering with brokers around the country to purchase bank-owned single-family properties as part of a new investment fund it’s raising.
The fund, which launched its capitalization campaign last year, will be the firm’s second distressed property-focused fund and is looking to raise $250 million, said Jordan Kavana, TIM’s director. The first fund, implemented in 2008 with a two-phase capitalization of $100 million, was involved with Freddie Mac’s HomeSteps program, he said.
The original fund invested in about 1,000 real estate owned (REO) properties that had been foreclosed on and repossessed by lenders, and either fixed and flipped them or converted them to rentals in markets across the country, including Miami; Atlanta; Boulder, Colo.; Las Vegas; and Southern California, among other areas.
About 90 percent of the homes in the first fund were developed as rentals, Kavana said. In 2011, TIM focused investment in the fund solely on rentals after determining that price points had reached a profitable enough level, making returns targeted at 15 to 20 percent a viable goal, he said.
All of the properties in the second fund will be developed as rentals and held for a period of at least five years, Kavana said. The second fund will participate in the Federal Housing Finance Agency (which oversees Fannie Mae and Freddie Mac) initiative, announced in February, that facilitates the purchase of pools of bank-owned properties for conversion into rentals by investors.
TIM maintains a national network of registered brokers it partners with in purchasing REO homes, Kavana said. The company rates the brokers and works with those who are responsive and facilitate purchases smoothly, he said.
Other investors are looking at the REO-to-rental opportunity. In Oakland, Calif., a public-private investment partnership has plans to invest in 100 REO homes in struggling neighborhoods this fall and convert them to rentals.