Post on 22-Mar-2016
description
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Trion focuses on maximizing investor returns through an
aggressive acquisition strategy and by increasing net operating
income throughout the holding period through a hands-on
management style of heavy renovation and aggressive lease-
up. Since its inception in 2005, Trion has generated an average
internal rate of return in excess of 40% with an average holding
period of 18 months.
Trion Properties is a private equity investment company which
acquires value-added multifamily properties that need moderate
to heavy rehab on a 12-24 month investment horizon. Founded
in 2005, Trion has successfully closed several million dollars
in transactions through either a purchase of the fee simple
interest or taking ownership of the asset through acquiring the
nonperforming debt.
Trion Properties is managed by principals whose combined
experience spans over 20 years in West Coast real estate
markets and in excess of $1 billion in transactions.the company
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Max Sharkansky | Co-Founder
principals
Sharkansky oversees al l aspects of acquisit ion, disposit ion, and property analysis for Trion Properties. Since founding Trion Properties, Sharkansky has led the acquisition, renovation, and disposition of several millions in assets, yielding an average IRR in excess of 40%.
Prior to co-founding Trion Properties, Sharkansky was a Senior Associate at Marcus & Millichap from 2002 through 2006. While at Marcus & Millichap, Sharkansky managed the sale of several million dollars in real estate throughout the continental United States, specifically in the multifamily arena, elevating him to one of the top-ranking brokers in Los Angeles, California. His ability to seek out and acquire distressed multi-family properties and his expertise of the marketplace has been instrumental in the success of Trion Properties.
He graduated from Loyola Marymount University where he earned a Bachelor’s degree in Business Administration with an emphasis on Finance.
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Mithc Paskover | Co-Founder
Paskover oversees all aspects of debt and equity placement and asset management for Trion Properties. Prior to co-founding Trion Properties, Paskover was a Managing Director in the Los Angeles office of HFF (Holliday Fenoglio Fowler, L.P.).
Paskover has over eight years of experience in commercial real estate finance. Paskover’s primary focus was on debt and equity transactions including multifamily, office, retail and hospitality properties with an emphasis on multifamily. During the course of his career in commercial real estate, Paskover has been involved in over $1.8 billion in commercial real estate transactions.
He graduated from University of Southern California where he earned a Bachelor’s degree in Business Administration with an emphasis on Finance.
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trion properties
the marketAs the recessed market cont inues to play i tsel f out, i t has
become apparent that today’s “opportunity” is to be found in the
nonperforming notes and REO properties currently held by banks
and lenders. Following many years of inflated acquisition prices
and exceedingly high leverage in the marketplace, many otherwise
fundamentally sound assets have become nonperforming, unable to
meet their high debt obligations.
The foregoing is especially true in the multifamily sector, which
has seen a resurgence in fundamentals, but for many owners and
operators such resurgence has been too little too late.
The result being that lenders and banks have a glut of nonperforming
loans and/or REO assets on their books, many of which are, or have
the potential to become, performing assets with substantial upside,
based upon current pricing.
After several years of holding onto these troubled loans and assets,
either not wanting to take losses or in an effort to increase their
balance sheets, banks and lenders are beginning to sell their
nonperforming notes and REO properties in order to get them off
their books.
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opportunisticrather than discount oriented
The marketplace is supposedly saturated with “opportunity funds”
with billions of dollars to spend on the acquisition of distressed
assets. The problem is that the vast majority of these funds are either
too focused on a minimum investment threshold, which requires the
funds to either forego attractive opportunities or to acquire portfolios
that contain unattractive assets diluting returns, or they are not truly
opportunity focused, imploring cookie cutter criteria that is yield
driven with a 5 or 10 year investment horizon.
What furthers the problem for such funds and prevents them from
truly being “opportunistic” is that most funds are managed by
traditional investment/money managers who have “re-invented”
themselves to become experts in distressed real estate because
that is supposedly where the best opportunity exists. However, there
is an inherent disconnect between these money managers and the
opportunity that exists in the current marketplace.
While most Trions understand the theoretical approach to acquiring
“distressed” real estate, most have spent the good years scratching
out 7 percent returns by imploring leverage and riding appreciation
through a 5 or 10 year investment horizon, they have not, for the
most part been in the trenches, buying, managing, repositioning and
selling value-add assets in B, C and D markets.
The result is that while many investment funds have targeted the
niche marketplace of distressed real estate, with the intent of getting
“a substantial discount” from either the par value of nonperforming
loans or the market value of REO properties, this philosophy has
left many such investment groups spending substantial time and
resources without many results.
trion properties
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In today’s marketplace successful transactions arise when a
purchaser is able to identify immediate opportunity and upside in
a real estate asset that may not be as attractive to a yield based
investor (or investment fund) with a 10 or 15 year investment horizon.
Another factor which has inhibited the “discount” buyer is that
often, especially in the multi-family sector, the bank or lender’s cost
basis is not as high as might have been expected. What has proven
out, although most have not yet realized this, is that focusing on
“discounts” to the Par Value of a note or the perceived market value
of an asset is not the right approach in this marketplace.
The result, to the exacerbation of many funds and investors, is that
the banks and lenders need not always sell their loans or assets
at such a substantial discount in order for the deal to pencil and
therefore are much more willing to move the asset if the appropriate
price is presented.
Opportunity in today’s marketplace may present itself in any
number of scenarios, whether it be paying full par value for a
nonperforming note on an underperforming asset with substantial
deferred maintenance and high vacancy, and thus substantial
upside, or buying an REO property that is fully leased, but presents
a substantial re-position play.
The identification of these assets that the banks and lenders are
willing to move for one particular reason or another, is a process
that has been cultivated and refined through the experience of many
successful transactions by the affiliates of Trion over the last twenty-
four (24) months.
It is a process that includes an understanding of not only the core
real estate fundamentals driving the acquisition process, but also
of the nuance, risk and issues associated with acquiring debt in
order to ultimately obtain title to the underlying real estate asset and
dealing with banks and/or lenders.
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trion properties
access to dealsThrough their dil igent efforts and successful transactions, the
principals of Trion have been able to establish relationships amongst
banks, lenders and brokers tied into the nonperforming note and
REO marketplace.
The result being they are provided with a tremendous amount of deal
flow and opportunity in this arena.
Trion has seen a recent increase in deals and opportunities that
“pencil” and expects the current situation amongst lenders and
banks to continue to produce opportunities to acquire multi-family
and/or mixed use real estate assets and/or nonperforming debt
secured by such real estate assets at advantageous prices to the
value of the assets being acquired.
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trion properties
proven strategyThe implementation of a proven strategy, evidenced by a track record
of many successful nonperforming note and REO acquisitions, is
how Trion differentiates itself from its competitors. Trion, through its
affiliates, for many years preceding the market meltdown, has been
extremely successful in identifying, buying, managing, repositioning
and selling value-add multi-family properties.
By imploring a proven, successful reposit ioning strategy, in
acquiring, managing, renovating and re-tenanting properties in
transitional, inner-city neighborhoods in Southern California markets,
the principals of Trion were able to timely exit projects prior to
getting caught in the market meltdown of 2008. The principals of
Trion, through their affiliated entities have been able to seamlessly
transition this strategy into the acquisition of nonperforming debt and
real estate assets from Lenders.
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In fact it is just this segment of the market where opportunity
abounds. The principals of Trion have developed an intimate
knowledge of the neighborhoods in which they invest and they
have taken advantage of the foregoing by successfully employing
opportunistic investments in these inefficient markets that are
generally characterized by unsophisticated, capital-constrained
sellers, significant government regulation (primarily rent control), and
a large variance in rents for similar units in the marketplace.
The primary target Seller shall be either distressed sellers or lenders,
with ownership through either the fee simple purchase of the
real estate asset or through the acquisition of the nonperforming
debt. On debt acquisition all exit strategies are analyzed, however,
investment underwriting generally contemplates taking ownership of
the asset through either a workout with the borrower or a non-judicial
foreclosure, which may or may not include the appointment of a
receiver by the court to manage the property during the foreclosure
process.
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In Los Angeles County, their geographic area of focus, there is also
a significant supply constraint, making the opportunities in this
market the most compelling. Properties purchased generally range
from small to medium sized (4-200 units) and are typically in need of
extensive refurbishment and improvement.
Through implementing the foregoing investment strategy the
pr incipals and aff i l iates of Tr ion have been able to ident i fy
opportunistic acquisitions by establishing value and/or upside in the
real estate asset, and then working backwards to establish the price
they are willing to pay the bank for the nonperforming note or REO
property based upon the amount of risk assumed. Benchmarks are
set for valuation and a property or note will not be bought unless it
meets the pre-determined criteria.
Once purchased and title to the Property is obtained, the objective
is to achieve positive cash flow within 12 months with a goal of
significantly increasing rent rolls, through legal rent increases,
managing tenant turnover, an intense focus on tenant relations,
property maintenance, and cosmetic improvements.
Further, expenses and capital expenditures are tightly controlled
through Trion’s affiliated management team. All properties acquired
are managed through its affiliated property and asset management
team with a hands-on approach to every aspect of the management
process, including accounting, renovation and leasing. The typical
holding period for each property is 1-3 years, and target sales
multiples are established up front.
All properties are continuously monitored along with the surrounding
neighborhoods to identify and capitalize on the opportunity to sell at
the high end of the established multiple range. The closer a property
gets to market-level rent rolls, the closer ownership moves toward
selling the asset.
The principals of Trion are readily able to understand the investor
perspective in that they have achieved their success by placing
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equity in deals through the use of their own capital as well as through
the raising of funds from outside investors. In every deal, even when
outside funds have been raised, their own capital has always been
at risk. Additionally, they have developed relationships with private
financing sources that are willing to finance nonperforming note
acquisitions and REO’s with substantial deferred maintenance and/
or in transitional inner-city neighborhoods.
They also have relationships with Lenders who are wil l ing to
carryback financing on the sale of their nonperforming notes. As
title to properties are taken, and as those properties are upgraded
and repositioned, refinancing with institutional lenders offer more
attractive terms and thus create an additional source of cash flow.
The primary investment drivers will be the maximization of returns
relative to the risk of the investment and will focus on Internal Rate of
Return analysis. Acquisitions will likely run in the range of $1 million
- $15 million.
Assets under $20 mil l ion are below the target range of most
institutional investors and above the range of most owner-users or
individual investors. Pricing in this range is usually more favorable,
and can, therefore, produce better returns than comparable assets
in higher or lower price ranges.
The exit strategy shall vary for each asset acquired and may include
either holding through stabilization for a period of short or long term
growth or immediate reversion upon stabilization or acquisition, with
the intent of a short term high yield.
225 N. Avenue 53
1case study
Opportunity to acquire an asset in a dense urban in-fill location specifically in the Highland Park submarket in the City of
Los Angeles through purchase of the nonperforming debt on the asset and acquisition through subsequent foreclosure.
The note was purchased in April, 2011 for $1,250,000.
At acquisition the asset was approximately 40% vacant with an additional
20% of bad debt from the occupied units and required extensive renovation
prior to lease-up and increase of rent stream.
The property has since been extensively renovated and an aggressive leasing
program has been put in place. Upon completion of renovations and lease-up
the asset will be listed and sold with the procuring broker for approximately
$2,000,000.
4620 Coliseum Street
2case study
Opportunity to acquire an asset in a dense urban in-fill location, specifically in the Baldwin Village submarket in the
City of Los Angeles, through the purchase of the non-performing debt with a concurrent Deed in Lieu of foreclosure.
The note was purchased in November 2010 for $1,800,000 with over 400
Los Angeles Housing Department violations and a 60% occupancy level.
After being removed from REAP, the property was sold in December 2011 for
$2,550,000, free and clear of all LAHD violations with an occupancy of over
90%.
PROJECT DETAILS
Number of Units: 35
Acquisition Date: December 2010
Acquisition Price: $1,800,000
Renovation Costs: $150,000
Disposition Date: December 2011
Disposition Price: $2,550,000
Hold Period: 12 months
Gross Profit: $250,000
6407 10th Avenue
3case study
Acquired an asset in a dense urban in-fill location specifically in the Hyde Park submarket in the City of Los Angeles, through
purchase of the non-performing debt on the asset and acquisition of the fee-simple title through subsequent foreclosure.
The asset was approximately 43% vacant and required extensive renovation
prior to lease-up and increase of the rent stream. Upon acquisition of the
note, the property was immediately placed into Receivership ceding full
management control of the property to the Sponsor via a Receiver which
allowed the Sponsor to get a head start on the renovations and leasing of the
property as well as collecting rents from existing tenants which helped offset
the carrying costs throughout the workout period.
The property was extensively renovated and brought to 90% occupancy at
which point it was listed with the procuring broker and sold for $2,125,000.
PROJECT DETAILS
Number of Units: 28
Acquisition Date: May 2010
Acquisition Price: $1,500,000
Renovation Costs: $120,000
Disposition Date: July 2011
Disposition Price: $2,125,000
Hold Period: 14 months
Gross Profit: $200,000
Max Sharkansky
323.330.6161 | msharkansky@trion-properties.com
www.trion-properties.com
5455 Wilshire Boulevard, Suite 1700 | Los Angeles | California 90063