By Peter Ricci
New York-based Cogsville Group has been selected by the Federal Housing Finance Agency (FHFA) as the second winning bidder in its REO pilot initiative, the ambitious plan to convert thousands of government-owned distressed homes into affordable rental units.
For its bid, The Cogsville Group will purchase 94 Fannie Mae-owned properties in Chicago, or, 111 total units, 68 of which are occupied. All the properties were sold near or above market value, and a third party valuation has priced the properties at $13.7 million.
FHFA REO Pilot Initiative & Cogsville Group
The Cogsville Group is no stranger to distressed property transactions with the federal government. In 2010 and 2011, according to HousingWire, it purchased$3 billion of distressed assets from the FDIC, and its total portfolio includes 3,900 loans in 49 states.
“With the shifting fundamentals in the housing markets, single family residential is fast becoming an important asset class,” said Donald Cogsville, the Chief Executive of Cogsville Group.
In September, the FHFA announced Pacifica Companies as the first winning bidder in its REO pilot initiative, selling the firm 699 Fannie-owned properties in Florida, another hotbed for distressed property. Since announcing the program earlier this year, numerous investors have entered the FHFA’s bidding process, and demand proved so high that the agency had to extend the initial deadline for bids.
Interestingly, the REO pilot initiative only covers distressed properties owned by Fannie Mae; Freddie Mac, the other major GSE in housing, has announced its intentions to develop an REO-to-rental program of its own.
Pilot Initiative – Good for Housing Market?
As we’ve covered before, decreasing REO inventory can only be a good thing for the housing industry as it slowly recovers, and economic analysis of the FHFA’s program has suggested very good economic activity as well.
An analysis by CoreLogic estimated that the program’s investors could net as much as $100 billion in income in 2012 from the program, and a separate study by Morgan Stanley estimated the program would create more than a million one-time jobs in its initial phase and 800,000 permanent, long-term positions in maintenance and upkeep.