by ALAN ZIBEL
– October 2, 2012 –
A private-equity firm has agreed to buy nearly 100 properties in the Chicago area from Fannie Mae as FNMA -1.37% part of a federal strategy to find buyers for large numbers of foreclosed properties.
The Cogsville Group, a New York-based firm led by former professional soccer player Donald Cogsville, reached an agreement to buy the properties from the government-controlled mortgage giant in a joint venture deal worth $11.8 million. The deal, announced Tuesday, is the second completed bulk sale of foreclosures held by the mortgage finance giant.
In an interview, Mr. Cogsville said the investment offered attractive returns in the form of rental income and the “opportunity to do some real investment in these homes.”
Mr. Cogsville’s firm has been a big investor in distressed real estate, buying loans and other assets from the Federal Deposit Insurance Corp.
Nearly 2,000 of Fannie Mae’s foreclosures are being sold off to investors under a bulk sales initiative encouraged by the Obama administration. Similar sales are pending for properties in Las Vegas, Los Angeles and Phoenix.
However, rising home prices have meant that Fannie is recovering more money through individual sales of foreclosures of late. As a result, Fannie is unlikely to expand the strategy to foreclosures that don’t already have tenants.
The terms are the same as Fannie’s first bulk foreclosure-sale deal, which was completed last month. Under the agreement with Mr. Cogsville’s firm, Fannie Mae will receive an up-front payment of $2.1 million. Profits will be split between the partners in the venture, with 90% going to Fannie until it collects $8.4 million. After that, profits will be split equally. The Cogsville Group will receive a fee worth 20% of rental income.
The sales a price is 14% discount off the estimated market value of $13.7 million, according to Fannie Mae. However, a person familiar with transaction said Fannie Mae got a better price for the deal than if the properties had been sold individually.
Of the 111 units in the properties, 68 are occupied by tenants and 43 are vacant. See the full terms of the deal here.