About Us and the Business Enterprise
Our investment structures prioritize investor returns
- We offer preferred redemptions in the amount of the original investment plus attractive coupons and profit participation. We intend to operate in lucrative segments of the real estate market. This combination offers potential returns usually only from more volatile investment alternatives.
- Working with institutional and individual investors and joint venture partners, we structure instruments to meet their distinctive investment objectives. We attempt to design our investment structures to align the interests of management with the interests of investors.
Recovering ValueWe will recover much of the value typically lost by banks during the foreclosure default / resale processes by targeting the acquisition of residential assets at a significant discount to fair market value. The net profits are derived from the bulk purchase, mitigation, financing, holding and disposition of bank-owned properties. We will prudently pursue opportunities regardless of geographic location.
Continuous Research of New OpportunitiesAcknowledging the need to offer more long-term investment vehicles for its investors as well as the commercial real estate expertise of Forward Real Estate Capital’s principals, commercial real estate acquisition opportunities are continuously researched. The residential acquisition / disposition business model is being established to drive current income for Forward Real Estate Capital, LLC such that capital reserves can be amassed to subsequently capitalize on the distressed commercial real estate markets as acquisition opportunities are identified. Real estate sectors currently being monitored are multi-family and hospitality.
- Due diligence with a significant sales team throughout the country to perform property inspections and obtain photos of subject properties. Centralized hosted software solution to catalogue and manage all assets for risk management purposes.
- Proven model to purchase, repair, and dispose of assets.
- Superior proprietary valuation models to aid in acquisition negotiations as well as to maximize yield and sales velocity.
- Outstanding purchase negotiation results securing the lowest purchase price with transparent discussion of all due diligence findings with selling agents.
- Efficient contractor vendor network to successfully identify and execute appropriate repositioning activities to maximize sales value.
- National Realtor sales network utilizing the lowest sales price in the local markets to attract all possible buyers and dispose of assets expeditiously.
Business Strategy Components
Asset Acquisition Identification
- Forward Real Estate Capital is continually in discussions with numerous banks, special servicers, investment entities and other financial institutions regarding the purchase of portfolios of residential properties. These discussions are in regard to the purchase of portfolios or bulk packages of bank owned real estate between $5 million and $20 million in asset value. The acquisition costs being discussed are between 45% and 70% of current market value of the assets (based on location and condition). Forward Real Estate Capital is continually reviewing portfolios of potential assets and will not acquire any potential assets unless they meet our strict underwriting criteria.
- Forward Real Estate Capital has established market research activities that include continual data collection and analysis of the 384 currently existing Metropolitan Statistical Areas (MSA’s) in the United States (containing over 80,000 Zip Codes) such that geographic direction can be determined to identify the acquisition opportunities with the highest projected yield. In addition to single family home listings, sales transactions and median pricing, Forward Real Estate Capital also monitors employment levels (including reported anticipated job reductions), foreclosure rates, local home price fluctuations and extensive population demographics (nearly 100 fields for each MSA).
Asset Valuation and Selection
- Forward Real Estate Capital understands that each institution has unique requirements and procedures to complete sales of its residential portfolios. We have the flexibility to work with any system allowing smooth trades and expedient closings. Our relationships with special servicers, financial institutions and other sources of distressed real estate allow us to capitalize on the broad range of assets that are currently available both geographically and across all levels of property value. This wealth of opportunity has required the development of multi-tiered screening techniques that go beyond traditional asset selection based on property value alone and employs proprietary risk-weighted techniques as a significant part of the initial screening and selection process. Once risk-prone assets have been isolated, our focus shifts to obtaining and creating the most accurate and defensible valuations of target properties with the goal of including those that yield the highest potential return. As a first level filter, the underwriting process employs automated valuation models (AVMs) to create a high level gauge of an asset’s possible value. Subsequent stages employ ever-increasing scrutiny of market and property characteristics, which include quantitative measures such as inventory and days-on-market, as well as property valuation by multiple regression analysis in locations where adequate market data is available.
- Qualitative evaluations of location, convenience and neighborhood amenities are performed to further segment investment opportunities. Those assets identified by ever-increasing probability of return are subject to more intensive and in-depth review which includes site visits, appraisals or Broker Price Opinions (BPOs), culminating with approval and bid or denial by our participating partners. Our objective is to complete these stages within 48 to 72 hours, which may vary depending on the size of the portfolio as well as its geographic dispersion.
Acquisition of the Assets
- Once an opportunity is identified and the market economies local to the portfolios’ assets are cross-referenced with the demographic and housing research data (which is continually updated), the valuations of the target properties are confirmed. The valuations of the individual assets are then cumulated to define the portfolio bid price. After the indicative bid is generated, a Letter of Intent is drafted to define the key elements of the purchase contract. With an executed contract, escrow is established with a 10% refundable deposit and the review process is commenced. During the review process, purchase orders are drafted and site visits are conducted for each property to confirm the final valuation. A Broker Price Opinion (BPO), and/or Independent Appraisal are obtained on each property prior to closing. At the conclusion of the review period, the deposit shall be non-refundable, but applicable to the purchase price. Closing is then scheduled within approximately fourteen (14) business days.
Asset Improvement and Repositioning
- Forward Real Estate Capital has interviewed and qualified several construction contractors and Real Estate Owned (REO) asset preservation and management companies that specialize in high velocity, high volume business enterprises specifically catering to the distressed single family home market. We have also procured asset management software that is the leading nationwide platform for the management of residential asset portfolios. The TAZA System software tracks each asset from acquisition through repositioning and disposition with seamless, confidential and accurate access for all vendors, managers, staff employees and investors alike. All individual assets are assigned a unique identifier and access to the various records of each asset is controlled such that information associated with each stakeholder remains confidential.
Exit Strategy – Disposition of the AssetsOur relationship with the seller takes into consideration that discretion must exist for our exit strategy to be mutually beneficial. If we do not execute properly on our exit, it could adversely reflect on the selling institution. We have several proven exit strategies currently in place, some of which are used in the general market, while others are tailored for specific needs. We understand the importance of the following methodologies:
- Retail Sales – The primary objective and focus will be to place the majority of the individual assets on the market for an immediate retail sale at a reduced price from the current market value of comparable properties. We anticipate the majority of the properties will be in good condition and in a favorable market location to make this feasible. We anticipate and have allotted a range of $5,000 to $15,000 in repair and improvement expenditures for each asset. Depending on each asset’s physical condition and the market economics local to its geographic location, the construction cost may be higher or lower than this allotted range. Forward Real Estate Capital , in its reasonable business discretion, will make the business decision in regard to construction expenditures.
- Investor Sales – Our secondary focus will be to utilize our large, nationwide database and network of thousands of cash buyer investors, who have the desire to buy those properties that are in need of the greatest repair, thus buying at wholesale pricing and mitigating the Fund’s holding period risk.
- Auctions – Regional auctions, which market properties across the country, may be used as an alternative strategy. However, this is the least desirable of any exit strategy, due to the increased marketing costs.