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Originally published Friday, September 14, 2012 at 8:00 PM

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Fannie Mae sells 700 repossessed homes in bulk auction

California firm pays $78 million to turn foreclosed homes into rentals in Florida.

Bloomberg News

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Fannie Mae's first auction of foreclosed homes to be managed as rentals sold for $78.1 million, or 96 percent of the properties' estimated value, the Federal Housing Finance Agency (FHFA) said.

The purchase, of 699 homes in Florida, was the first to be completed in Fannie Mae's auction of almost 2,500 repossessed properties in six states. The buyer was San Diego, Calif.-based Pacifica Companies. The homes had a total value of $81.5 million, including joint-venture financing from Fannie Mae, according to a transaction summary.

Investors are pouring money into single-family homes, seeking to capitalize on rising demand for rentals and real-estate prices that have fallen more than 30 percent from their July 2006 peak.

Firms including Blackstone Group, Colony Capital and Oaktree Capital Group plan to spend about $8 billion buying foreclosed properties to rent, according to company statements and interviews.

"Seeing it traded at that high value means we're probably going to see more pool sales coming," said Jim Warren, senior vice president of Tenant Access, a single-family rental-management company in Austin, Texas. "Institutional money can aggregate a lot quicker. It's easier to evaluate an entire pool than one property at a time."

Deepak Israni, president of Pacifica, a property-investment and management company that operates hotels and multifamily housing, didn't return a call seeking comment.

Fannie Mae, the government-sponsored mortgage company that owned 109,000 foreclosed properties as of June 30, offered the homes for auction in February. The other properties are in Georgia, Illinois, Arizona, California and Nevada.

The FHFA will announce the winning bidders of homes in other areas in the coming weeks after the transactions are completed, according to the statement. The 541 properties in Atlanta weren't sold, the agency said.

Colony, a Santa Monica, Calif.-based investment fund headed by Tom Barrack, and Cogsville Group, a New York-based company led by Don Cogsville, were the top bidders for other Fannie Mae portfolios, four people with knowledge of the transactions said in July.

Pacifica, which will manage the Florida properties, paid $12.3 million for its share in a joint venture with Fannie Mae, which will get 90 percent of cash flow until it receives $49.3 million, according to the transaction summary. After that, Fannie Mae's share will drop to 50 percent of cash flow.

Pacifica will also receive 20 percent of gross rental income as a management fee.


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