UNITED STATES - Tricon Capital Group has created a new investment platform for the recapitalisation of single-family communities.
The first of several deals to be signed was for a $33m (€21.3m) equity investment in eight single-family communities in San Diego, Los Angeles and Riverside Counties in Southern California, by the owner of the communities, TransWest Housing based in San Diego.
Tricon is expecting to achieve a 30% IRR on the transaction, according to its president David Berman.
"We are a believer in the single-family market in Southern California market on a long-term basis. Our plan here is not to develop any of the lots in six of the eight communities until 2010. At that time the housing market should be better off," said Berman.
There are a total number of 300 lots in this deal and it is anticipated the land will eventually be turned into single-family homes targeting ‘move-up' buyers.
Tricon is now working on a second deal for the platform - which is now under contract - involving another 300 lots in Riverside County, said Berman.
"These lots had been under contract to a public builder for $50m a couple of years ago and we intend to invest $10m into the deal. This shows the kind of deals that are now available in the marketplace," he added.
Tricon is using capital for both of these transactions for its commingled fund, Tricon IX, which the firm will have a total equity raise of $600m by the end of the year.
It has so far raised $240m, and the lead investor in the fund is the Teacher Retirement System of Texas with a $125m commitment.
The overall investment strategy for the US-only commingled fund is to make equity and mezzanine debt transactions with residential developers on the East and West Coasts and in Chicago.
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