(01-11) 14:51 PST — While the feds and the banks continue to sit on their hands when it comes to addressing the backlog of foreclosed homes, an Oakland real estate investment company is doing something positive about it – and getting richly recognized for its efforts.

Waypoint Real Estate Group, which buys, renovates and rents out distressed single-family homes, primarily in hard-hit Contra Costa and Solano counties, has just received a capital infusion worth $250 million from GI Partners, a private equity firm headquartered in Menlo Park.

The money will enable Waypoint, which currently owns approximately 1,000 homes in the East Bay and southern California, to buy several thousand more as it expands both locally and nationally, said the company’s managing director, Gary Beasley. And there may be more money to come.

“Assuming we meet our investment milestones, we expect to have a $1 billion to acquire homes over the next two years,” said Beasley.

The $1 billion figure was confirmed by GI Partners managing director Richard Magnuson. “These guys have put together a lot of properties simultaneously, and are getting good rents,” he said.

“The question is, can they scale it to 5,000 homes, and if so, can they get to 10,000? There are a lot of people who want to rent.”

Win-win: What makes Waypoint an attractive proposition is its ability to buy foreclosed or short-sale homes at a significant discount in focused markets, charge a monthly rent well below the original mortgage, and realize a decent yield on its investment. Prospective tenants get a pretty good deal also.

For example, a 3-bedroom, 2-bath, 2-garage house in Vallejo is currently listed on Waypoint’s website at $1,279 a month. A 4-bedroom, 2-bath in Antioch: $1,799 per month.

And for those who lost homes they owned to foreclosures and short-sales, Waypoint provides a way back, through a lease option “rent to buy” program.

“Right now, it’s impossible for them to get a mortgage. But as long as they pay the rent on time and keep the home in good shape, they can repair their credit and get back into owning a home,” said Beasley.

Approximately half of Waypoint’s renters have lost their homes to foreclosures, including some renting the homes they once owned, he said.

Being relatively new, and given the fact it can take several years to re-establish a credit rating, it’s difficult to judge the effectiveness of the program.

One foreclosure victim, featured in a Chronicle story on Waypoint last summer, closed escrow in December on the lost house he had been renting. ( sfg.ly/x1iscy)

“We have dozens of others working toward either buying the houses they currently lease from Waypoint, or another MLS-listed home,” said Erin Smith, a company spokeswoman.

‘A lot of interest’: With the backing of GI Partners – one of the first institutional investors to enter this emerging market – Waypoint has “pretty aggressive expansion plans,” beginning with Alameda County, said Beasley.

Beyond the Bay Area and southern California, the company is looking closely at Las Vegas, Phoenix, Atlanta, Chicago and South Florida, all hit hard by the mortgage meltdown, and all with attractive rental markets.

“There’s a lot of interest in what we’re doing,” said Beasley, who was returning Wednesday from Washington, D.C., where he met with officials from Freddie Mac, Fannie Mae and other federal housing agencies. “There’s a lot of interest in how to get more liquidity into the housing market while helping to address a major social and economic problem.”

An unprecedented “white paper” addressed to Congress last week by the Federal Reserve urged the government to take more measures, including the renting of foreclosed properties, to revive the moribund housing market.

Noting the massive overhang of unsold homes resulting from the Great Recession – an estimated one million unsold “real estate owned” (REO) properties will be on the market this year – the Fed said “reducing some of the barriers to converting foreclosed properties to rental units will help redeploy the existing stock of houses in a more efficient way.”

“Such conversions might also increase lenders’ eventual recoveries on foreclosed and surrendered properties.”

Referring to the white paper, Magnuson remarked, “the Fed apparently didn’t know that capital like ours is available.”

 

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