Unstructured Finance

The dollars keep rolling in for foreclosed home funds

February 20, 2013

By Matthew Goldstein

Today, The Wall Street Journal reports that foreign investors have caught the gold rush mentality that surrounds the market for foreclosed homes in the U.S. But domestic-based firms are still doing quite well themselves in raising big dollars to buy-up foreclosed homes with an eye to renting them out before eventually selling them.

A foreclosed home fund managed by Tom Barrack’s Colony Capital recently disclosed in a regulatory filing that it had raised $536.7 million from 54 “accredited” investors. The fund relied on JPMorgan Chase’s wealth management team to do some of the selling.

Colony, along with private equity giant Blackstone Group and Malibu, Calif. based American Homes 4 Rent, have emerged as the three biggest buyers of foreclosed homes over the past year. Blackstone has spent well over $1 billion on buying up roughly 16,000 homes, and American Homes, backed by $600 million from the Alaska Permanent Fund, isn’t far behind.

But smaller funds with interesting pedigrees are also raking in cash, as yield starved investors look for some place to put their money as the Federal Reserve keeps trying to push down rates on mortgage securities and Treasuries.

Home Place Partners, a fund sponsored by bond firm TCW, just reported it has raised $105 million. The fund is still looking to raise another $145 million.

Fundamental REO, a fund led by former Goldman Sachs executive Don Mullen, has raised at least $150 million. Goldman’s wealth management team is selling that fund to its investors.

Still for every foreclosed fund led by a big name firm or former Wall Street titan, there are plenty of other funds just scraping by and struggling to raise cash.

Just as the big institutional players have driven the mom-and-pop investor for the foreclosed home market. The big Wall Street-backed funds seem to be soaking up much of the money that is pouring into this new asset class.

 

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