by MARY ELLEN PODMOLIK
– October 2, 2012 –
$2.1M deal part of Fannie Mae pilot program
A New York-based private equity firm has purchased 94 homes in the Chicago area from Fannie Mae as part of a pilot program to sell foreclosed properties in bulk in hard-hit housing markets.
The Cogsville Group LLC, which focuses primarily on distressed real estate, paid approximately $2.1 million for its equity interest in the homes under a joint venture with the Federal Housing Finance Agency.
The 94 properties include 111 rental units, 68 of which are occupied and the remainder are vacant.
The firm’s first investment in the Chicago market was in 2010, when it bought 69 distressed real estate loans at auction from the Federal Deposit Insurance Corp.; most of the loans involved commercial properties. The company has much bigger plans for residential investing in the Chicago market beyond the 94 properties that stretch from the Wisconsin border to the south side of Chicago.
In fact, CEO Don Cogsville has his eye on amassing a portfolio of 1,000 Chicago-area properties.
“There’s definitely a business plan going forward to get to a point of critical mass,” he said. “You really want to develop scale to provide the services and get branded and do other things.”
During the next several weeks, tenants will be notified of changes in ownership and property management.
The total value of the joint-venture transaction with the FHFA is estimated at $11.8 million, or 86.2 percent of the appraised market value of the properties.
Earlier this year, housing analytics firm CoreLogic estimated that the foreclosure-to-rental market to be a $100 billion industry nationally this year, and Chicago was identified in particular as one of the best markets for investment because of the high number of foreclosures.
“We’re obviously in a historic displacement when it comes to housing,” said Cogsville, a former professional soccer player who started the firm six years ago to invest in distressed commercial real estate assets. “One of the areas we felt was best for us to participate was in some of the Midwest communities. Chicago is Chicago. It’s a stable, attractive, vibrant community (with) strong leadership (and) a variety of neighborhoods with different types of housing.”
In February, the FHFA announced the pilot program to divest 2,500 Fannie Mae-owned single-family foreclosures in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and Florida.
The agency previously announced that Pacifica Cos. LLC, purchased 699 Florida properties. No one bid on the more than 500 Atlanta homes offered for sale.