Pacifica closes on distressed residential debt deals

The San Diego-based private equity real estate firm has bought four pools of discounted notes with a face value of $70m. Financial details were not disclosed, although other private equity firms are reporting discounts of up to 80%. The deal was closed in 30 days.

Pacifica Equity Partners has closed on four pools of discounted residential and commercial debt.

Pacifica managing director Chris Rosenstock said in December that failed residential projects in oversupplied markets in the US would be some of the best opportunities of 2009.

Today, the firm told PERE it had invested its own equity into four pools of notes, which are backed by real estate in US Sunbelt states, such as Florida, California and Nevada. The notes, with a face value of $70 million, were bought from regional banks for “deep discounts”. Pacifica declined to disclose further financial details.

However, Shah Bahreyni, fund manager of LRG Capital’s new $50 million LRG Capital Hospitality Fund, this week said LRG was seeing discounts of between 20 cents to 30 cents on the dollar for many hospitality-focused assets. “Pricing has come back to what it used to be from the unusual highs of the past few years,” he said.

Rosenstock said the Pacifica deals were closed in just 30 days, as banks sought to clear their balance sheets prior to year end. The debt is backed by property including single family housing, condos and finished lots. Pacifica acquired $140 million of residential debt through 2008.

“We have been dealing with a large number of banks relating to the debt they have on their books. Towards the end of 2008, some banks were willing to accept our offers as they sought liquidity,” Rosenstock added.

Pacifica, set up by the Indian Israni family, targets US residential investments as well as Indian real estate through its India Fund I, according to the firm's website. Pacifica also has two other funds, the US Residential Opportunity Fund I and the Pacifica Senior Housing Fund I.