Friday, February 29, 2008
Investor plans $150M land shopping spree
D.R. Stephens forms distressed-land fund to pick up bargains
Sacramento Business Journal - by Michael Shaw
http://sacramento.bizjournals.com/sa...03/story1.html
In 2003, San Francisco real estate investor Donald Stephens said he was finished buying land in Sacramento because prices had climbed too high and he was content to sell off his holdings.
"If the land market ever falls off in Sacramento, we'd buy more," he said.
Guess who's back?
D.R. Stephens & Co. is putting together a $150 million distressed-land fund that will concentrate primarily in and around Greater Sacramento, Stephens said this week. He runs the company with his son Lane, and they plan to partner with Wall Street backers rather than institutional investors. They're tracking possible deals through Sacramento brokers, Stephens said.
Stephens said he expects to have secured full funding by this summer but would not name his potential partners.
If the fundraising is successful, he won't be alone among those hoping to pick up land on the cheap from owners who ran into financial trouble.
Dave Jarrette, principal of appraisal firm Jarrette Co. LLC, said the talk of the industry has been the likelihood that deep-pocketed investors will pounce on wounded landholders in the down market.
Jim Radler, a senior marketing consultant with Park Place Partners Inc. in Roseville, said the Wall Street money already looking at Sacramento is likely to be "very aggressive" and that there has been some bidding among those seeking to buy land. Competition would be welcome among the developers and homebuilders looking to raise cash.
But questions remain about how many of these deals could happen in Sacramento.
Chris Ksidakis, owner of land brokerage The Gateway Co., said he doesn't believe we'll see the distressed-land sellers that others are predicting.
"Everybody says you're going to be able to steal land, but I haven't seen it happen yet," he said.
Jarrette noted that the region's largest landholders, such as Angelo K. Tsakopoulos' AKT Investments Inc., aren't distressed and won't be looking to sell.
D.R. Stephens' effort to form a Wall Street-backed fund seems like a departure for a company that has been primarily investing in industrial and research-and-development properties around the Bay Area, where it owns 5 million square feet. But since its founding in 1973, the company has become well-diversified through investments in offices, apartment buildings, condo conversions and land.
Last summer, an affiliate of the company, Stephens & Stephens LLC, created a joint venture with Inland Real Estate Group of Oak Brook, Ill., to buy $300 million in Bay Area industrial and R&D buildings over the next two to three years. It plans to maximize property values, then sell.
Donald Stephens is a lawyer and one of the founders of the Bank of San Francisco. He spent part of his youth in Sacramento, attending El Camino High School.
His company sold all of its Sacramento holdings during the boom, though one property "came back" to the company, Stephens said. The buyer in that case was Sacramento's troubled Reynen & Bardis Communities Inc., which had expected to close on the 140-acre property near Elverta that Stephens bought in 1989 for $30,000 an acre, or about $4.3 million.
Reynen & Bardis had optioned the land at $175,000 per acre, but the company ran into problems after over-extending itself during the housing boom and did not exercise its option to buy. Stephens said he's now seeking entitlements for that property.
As for the timing of his venture, Stephens said he's not concerned that others are already in the market.
"If they're smart, they're not ready to pull the trigger yet anyway," he said.
Prev
Linear Mode
