Los Angeles-based real estate investment manager Concord Companies is shifting away from multifamily acquisitions toward more non-performing loans transactions as the current market downturn presents rare, distressed opportunities to investors with this appetite.
Reuben Robin, founder and chief executive, said the company started to shed multifamily assets in the Sun Belt region in 2021, understanding that a run-up in prices in Texas and other Sunbelt states were affecting the attractiveness of yields.
“[We] didn’t see the fundamentals supporting what the pricing became, so we made some really exciting, nice exits for ourselves and our investors,” Robin said.
Robin’s move to pivot toward distressed opportunities stems from his experience in the years following the global financial crisis, when quick-thinking investors were able to acquire and manage non-performing debt. While Robin’s focus following that period was more on acquisitions, a series of interest rate hikes and a murkier market outlook in the second half of 2022 had the firm thinking differently.
“As we were closing our last major assets, we decided that we were going to look at non-performing loans heavily,” Robin said.
Because Concord Companies is not currently dealing with buyers or any legacy asset management issues, the firm will be able to commit to this window of opportunity over the next 18 to 24 months. “Our plan is to do some mass acquisitions in the non-performing loans space, probably this year,” he added.
The firm’s first NPL deal is close to closing, with Robin citing the acquisition of a $45 million loan backed by a portfolio of office, retail and apartment buildings in Los Angeles. The purchase price presents a significant discount to the loan’s original value of $68 million.
“California [is] the most interesting for me simply because it’s my backyard. And the process of foreclosure is a whole lot easier than most states,” said Robin.
The firm is looking for distressed loan acquisition opportunities in Dallas, as well. As Concord sees more potential distress in the multifamily sector, the firm is looking to acquire defaulted loans backed by multifamily properties across markets.
Samuel Landman, who joined Concord Companies last July as chief investment officer, noted non-performing loan acquisition opportunities typically are sourced through existing relationships.
“The highest source of deal flow in the NPL space comes directly from relationship within the capital markets community. The moment a loan goes nonperforming, it’s ready for a sale.” said Landman.
Managing an NPL is an intensive process, with Robin noting Concord Companies will communicate with the receiver and actively oversee the asset management to make sure collections are happening and that the process is running smoothly.
Prior to the current period of volatility, Concord Companies joined forces with Jonathan Fhima, founder and chief executive of Los Angeles-headquartered private equity firm F2, to launch Concord’s debt platform.
“We’re completely vertically integrated, so we do everything from acquisition to sale, the asset management and construction, the maintenance [and] the property management… The one thing we were lacking was debt,” Robin said.
The expansion of the firm’s debt business is part of a longer-term strategy, Robin added.
“The debt side is heavily relationship based. Of the 16 deals we closed since we launched the business, 15 of them are repeating clients of ours,” said Fhima, adding that the company hasn’t done deals that were brokered by external brokers.
He continued: “We’re seeing this macro secular trend whereby people on a personal level, or on a corporate level [and even] on a commercial level, with all asset classes, are going to start transitioning toward private banking as opposed to commercial banking.”