PTE Real Estate Group Announces $200 Million Fund to Invest in Distressed Real Estate Assets

Phoenix, Ariz. (PRWEB) January 17, 2008 -- The news is inescapable: the housing market bubble is bursting, and the effects are rippling through the economy, affecting builders, lenders, investment firms, and individual homeowners alike.

"During the real estate boom, investors were stepping over each other to buy real estate, thinking that values would keep rising forever," said Nick Lynum, CEO of PTE Real Estate Group, a Phoenix-based real estate investment firm. "Unfortunately, many of those investors bought at the market peak and have had to sell their real estate assets at a loss or stand by as they continue to depreciate," he said.

"It used to be that the adage, 'buy low, sell high,' was the principle by which investors lived," Lynum said. "But now we're seeing a 'bought high, selling low' epidemic coursing through the residential real estate markets."

And that epidemic is affecting both small market players - individual real estate investors and homeowners who are seeing their homes fall into foreclosure - and large market actors, including mortgage lenders, builders, and investment firms.

For the individuals, foreclosure rates have skyrocketed. In most areas, they are the highest they've ever been. And forecasters predict a huge wave of foreclosures in 2008 and 2009 as millions more adjustable rate mortgages reset.

As foreclosures rise, banks and other lending institutions are bogged down with real estate owned (REO) inventory. When a mortgage lender forecloses on a home, it will try to sell the home at auction - often at a loss. But if the home doesn't sell at auction (as many today aren't), it goes back to the bank and becomes REO inventory.

It's this type of inventory that has flooded banks and other lending institutions - which aren't in the business of owning real estate. Increasing REO inventory has become a major concern for banks, as REO weighs down their balance sheets. To liquidate REO assets, banks typically package them into $20 million+ packages, which they sell to investors at as little as 40% of market value.

It's not just anyone who can buy REO assets

But it's not only the normal $20 million-minimum investment that makes REO investments available only to a select few. "It's not just anyone who can deal with the banks that own REO properties," Lynum said. "Banks are very particular about who they can sell REO properties to. They typically only sell to investors with whom they have longstanding relationships."

They're the kind of relationships that PTE Real Estate Group has with lending institutions.

PTE Real Estate Group recently launched a $200 million fund to take advantage of their relationship with holders of undervalued real estate assets. "People sometimes refer to this method of investing as a vulture fund," Lynum said. "But that sounds so predatory."

His firm's strategy, Lynum said, is simply to capitalize on opportunities that are being created by the foreclosure crisis and credit crunch.

Part of the fund's strategy will be to acquire bulk REO inventory from lending institutions as well as surplus home builder inventory at significantly discounted prices. "The fund's buying power will allow us to acquire these distressed assets at 40-60% less than current market value," Lynum said.

"When the market turns back around, we'll sell the assets for a significant profit," he said. In the meantime, the assets will generate revenue for the fund's investors in the form of rental income.

"PTE Real Estate Group has specialized in distressed residential real estate since our inception. We feel that this kind of head start gives us a huge advantage over the potential competition. We've worked diligently throughout the boom to develop relationships with the banks and homebuilders who we felt would be the most affected by a market collapse. Now, those relationships are paying off for us as we can buy REO and surplus inventory at below-market value."

Buy low, sell high

"Buying low and selling high is the oldest and simplest investment strategy," said Lynum. Real estate markets are cyclical and the most opportune time to buy is at the bottom of a cycle - which Lynum says we will see in the near future.

But he acknowledges that some don't agree. "Of course there are skeptics. There are people who say that the real estate market will never turn around. There are people who say it won't turn around for 20 years. But the real estate market has been down before. And it's always come back up."

"There's one thing we can all agree on," Lynum said, "that it always makes more sense to buy real estate at the bottom of the market than it does to buy at the top."

For more information on PTE Real Estate Group or their new real estate fund, visit their website at www.PTEREgroup.com or call toll-free 1-800-USA-LAND (1-800-872-5263).

###