Falling real estate prices have made Ladera Ranch? G8 Capital LLC a hungry buyer.
The company, which was founded and is run by Evan Gentry, recently bought its 15th portfolio of homes from large investors and is on target to see 20%-plus returns, Gentry said.
Since going into business in 2007, G8 has spent about $200 million for 600 homes. It plans to sink another $100 million into the market by the end of the year.
? think there will be another big wave of foreclosures to hit the market,?said Gentry, president and chief executive. ?ut in this industry who knows what the year will bring.?
Many large lenders, including Fannie Mae, Freddie Mac and national banks, agreed last fall to put foreclosures on hold to let the government put a program together to help borrowers.
It wasn? until March that the lenders started up the foreclosure process again, which by that time had created a backlog of loans to be processed. So it still may be a few months before those pent-up foreclosures hit the market. And Gentry isn? sure how many homes will flood the market.
?t? a lot,?he said. ? think there? a little bit of false confidence that the market has bottomed out. But I think things could recover next year.?
All of the homes bought by Gentry?nd his 20 local investors who each put in $1 million to $5 million?ere considered distressed, he said.
Investors have seen annualized returns of 20% to 25%, he said.
G8 has flipped or sold the majority of the homes it bought for a quick profit.
But during the past couple of months it? begun to hold on to some assets as long-term investments in case the market? prices have nearly bottomed out.
Eventually G8 wants to hold about 5,000 homes and serve as a landlord, Gentry said.
The homes are being bought by the bundle from some of the biggest lenders in the country who are looking to get them off their hands.
?ecause we?e buying in bulk, we?e getting a discount,?he said.
But Gentry doesn? expect to pay much less for future purchases than what he has been paying, which has been 35% to 40% off current market values.
A home that was bought for $300,000 and currently has a market value of $140,000 might be bought for about $85,000 by G8, according to Gentry.
For a time, the banks stopped selling by the bulk, hoping the government would pick them up at better prices. But that never happened.
G8 employs eight people and outsources its management and repairs for its homes.
The company? purchases have been made all over the country, with many of them in Orange County.
?e want to buy in California, preferably?Gentry said.
It has a handful of competitors its size looking at the same deals, he said.
?n one hand you have large institutions like BlackRock looking to buy, and on the other it? small mom-and-pop-type operations,?Gentry said.
The company is looking to buy distressed commercial properties next, he said.
Gentry started G8 after selling Irvine-based MoneyLine Lending Services Inc., a business that handled the processing and underwriting on loans for about 50 banks that originated them.
He ran the business for 10 years after starting it with two friends while in college at Brigham Young University in Provo, Utah.
One of the original founders went on to become a teacher while the other remains in the lending business, he said.
The business was sold in 2006 for an undisclosed price to the financing unit of General Electric Co., GE Capital? Genpact Ltd., and renamed Genpact Mortgage Services Inc.
? saw on the horizon what was happening with values,?he said. ?? fortunate to have timed things right.?
Gentry ran the business for a year after he sold it. Genpact was eventually spun off in an initial public offering.
