Sky Development, SunVest Communities Create $300M Distressed Properties Fund

Investors are flocking to opportunities created by the credit crisis, and Sky Development Inc. and SunVest Communities are the latest to ride the wave, creating the $300 million joint SkyVest Real Estate Opportunity Fund to capitalize on the economic, financial and property market dislocation. “Tons of opportunities are yet to come due to the economy and credit crunch,” Gavin Susman (pictured), a managing member of the joint venture & COO of Sky Development, told CPN. “There will be a huge downfall of properties that cannot support their loans.” The fund will invest in distressed residential and commercial projects, both directly and via the acquisition of debt. Targeted sectors include multi-family rentals, new condominium developments, condo conversions, office buildings, regional malls, manufacturing buildings, laboratory facilities and land. Other potential investments include hotels, senior living facilities and hospitals. It will primarily target transactions in the states where SkyVest’s partners have properties and have been working for years, including Florida, Nevada and Arizona, but will also seek opportunities in California, New York, Texas and the Carolinas. SkyVest primarily wants investments with upside potential and returns north of 20 percent. Susman noted that for the past few years, underwriting had been very lax and lenders were dishing out money for properties. In turn, the properties were raising rents to new levels, but the numbers went so high that tenants were no longer able to support the rent and leaving. Now, owners find themselves in a bind as they can not support their loans and equity in today’s market. And until the dust settles and prices go back down to normal levels, there will be plenty of opportunities to be had for investors, who are already on the ground seeking opportunities in the aftermath. Susman said that it will take at least three years to stabilize. Sky Development focuses on acquisition, development, rehabilitation, creative re-use and asset disposition, while SunVest Communities have been active in hotel and apartment conversions throughout the Southeast, Nevada and Arizona. To date, the two companies combines have acquired either directly, or with partners, more than 120 properties valued in excess of $1.5 billion.