Oil-Rich Fund Eyeing Foreclosed U.S. Homes
August 10th, 2008Is this a nonsense story to trick people on the sidelines into flinching and buying? Or is it real? I don’t know.
I have to wonder, because the next phase, the Alt-A and prime phase is just getting started. You’d think the people with billions of dollars burning holes in their pockets would know better—but maybe not.
Via: New York Post:
There’s a new land grab starting in America.
Foreign money, which up to now has focused its attention on investing in iconic commercial real estate – like Barneys New York and the Chrysler Building – is now moving to scoop up tens of thousands of discounted foreclosed homes across the country.
One sovereign fund, said to have earmarked $29 billion to purchase foreclosed residential real estate, recently hired a West Coast mortgage broker and is starting to search for bargains, The Post has learned.
The search, which is being carried out, in part, by Field Check Group mortgage consultant Mark Hanson, who was retained by the broker, Steve Iversen, is concentrating on single- and multi-family REO (real estate owned) homes, or homes that have already been taken over by the mortgagee.
Neither Iversen nor Hanson would disclose the name of the client, but sources told The Post it’s a sovereign fund.
The unidentified fund joins individual US investors, hedge funds and Wall Street banks in kicking the tires of REO homes, which have fallen in value so much that they are now tempting investments.
A sovereign fund would have two distinct advantages over other investors – the depressed value of the US dollar makes the homes a bargain, and sovereign funds have deeper pockets.
The sovereign fund of Abu Dhabi, for example, has a reported $875 billion in assets, while Norway has $391 billion, Singapore has $303 billion and Kuwait has $264 billion in their sovereign funds, which are funded by proceeds from oil sales.
The Abu Dhabi Investment Authority is expected to announce next month what type of US distressed assets they will be investing in and real estate is at the top of the list, according to a report in Financial Times last week.
ADIA did not respond to an e-mail question about REO investments.
So far, prices on bulk sales of REO properties vary based on location and are selling from 60 cents to 80 cents on the dollar. Hanson started out offering 40 cents on the dollar for about $2.5 billion worth of California properties owned by IndyMac and Washington Mutual but was turned down. The banks refused to comment.
Hanson is now willing to pay 50 cents to 60 cents on the dollar for a collection of California REOs worth at least $500 million.
In fact, this week Hanson’s team negotiated a $2 billion package mixed with homes across the country for 31 cents on the dollar. While progress seems slow, Hanson reminds us this is only a nine-month old industry.
The challenge those sovereign funds are facing is how to get rid of their soon-to-be-worthless dollar reserves. At least those houses – as opposed to the dollar – have some intrinsic value. Read Catherine Austin Fitts on how lucrative buying up foreclosed homes can be…
http://www.dunwalke.com/gideon/q301.pdf
I can’t fill in the details, but I find it very tempting to think this is a long term investment for them (thus they’re willing to hold out thru the “short-term” dark days ahead); and for “us” (Americans), it means we will have even less chance of steering the country according to the People’s will, as said country will be owned by foreign powers not under American jurisdiction.
That last sentence is a laugh.
Remember what happened with gold back in the last oil shock? Arab petrodollars seem to be cajoled into bad investments as a matter of course.