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Pacifica Companies, a real estate conglomerate based in San Diego (US) and Ahmedabad (India), said it has won the bid for 700 foreclosed homes put up on auction by Fannie Mae, the largest government-sponsored mortgage company in the US, for $12 million.
This signals the US housing market’s return to “good health” as these assets are now expected to yield returns, according to Rocky Israni, Managing Director, Pacifica Companies, India. Talking to reporters here, he said Pacifica has purchased a managing interest in the 700 Fannie Mae-owned residential properties throughout Florida, near or at market value, according to an announcement made recently by the Federal Housing Finance Agency. The deal closed on September 6 when Fannie Mae sold the equity cash-flows of a newly created LLC, which held the 700 single-family units, to Pacifica and made it the managing member.
He said Pacifica paid over $12 million for the managing member interest, representing a rough transaction valuation of $78 million for Fannie Mae and a third party valuation of $81.5 million. However, Fannie Mae will retain an interest in the LLC’s equity cash-flows. Its stake entitles it to receive 90 per cent of distributions until around $50 million is received. At this point, Fannie Mae will split distributions with Pacifica evenly at 50 per cent, he said.
Rental income
Israni said Pacifica will also receive 20 per cent of gross rental income collected from the properties as a management fee. At an average rent of $800 a month a unit, the company expects to recover its $12 million in the next five years. Fannie Mae had, for the first time, bid to find partners to turn its assets around. “We would also be bidding for the next round, to be held in Nevada, US,” he added.
Pacifica currently owns over 4,500 residential units in 40 states across the US, with majority being in California, Florida, Nevada, Arizona and Washington. Over the last 30 years, the company has invested $7.5 billion in the commercial and residential real estate sector. Currently it owns $2.6 billion in real estate assets. In India, the company is developing $2 billion worth of real estate projects in Ahmedabad, Pune, NCFR, Chennai, Bangalore, Vadodara and Hyderabad.
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