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Firm has plans to deal with distress

Real Estate: Twelvestone Capital is focusing on three strategies for success in difficult market

Posted: December 8, 2011 1:30 a.m.
Updated: December 8, 2011 1:30 a.m.

Matt Skinner of Twelvestone Capital Group unrolls a map in his new Valencia office on Nov. 30.

 

 


When the real estate construction and development business skidded to a virtual halt, Santa Clarita resident Matt Skinner said  he returned to his roots of buying, fixing and selling distressed properties.

But, this time, Skinner added a twist: building a real-estate investment company, Twelvestone Capital, based on equity acquisitions. Skinner is the CEO and director of the company.

And, after 13 years of doing business in Los Angeles, Skinner, a native of Santa Clarita, said he decided to relocate his business venture back in Valencia. Previously, he worked in the San Fernando Valley and Los Angeles markets.

During the last decade, Skinner owned and operated a real-estate development and construction business employing as many as 48 people during the height of the boom, he said.

Growth strategy

Twelvestone Capital is focusing on three business strategies.

“As a developer, I used to build multifamily developments,” Skinner said. “Now, I can buy them cheaper than it cost to replace them.”

So with that economic principle in mind, his firm has been purchasing apartment buildings with investors while the interest rates and prices are low. He said there’s a window of opportunity right now that won’t be here long.

“We purchased a 32-unit facility in Palmdale that was vacant, fixed it up and leased it out,” Skinner said. “We bought another building in L.A., and are currently buying a property in Texas.”

The strategy is to hold on to the multifamily properties for cash flow and then sell them four or five years down the road when the market is right, he said.

Skinner, who used to flip only houses years ago, said it makes more sense for investors to have 30 tenants generating cash flow than one house with one renter.

However, the economy of scale strategy doesn’t preclude Twelvestone Capital from also investing in single-family homes.

Bank-owned properties are often damaged or vandalized, Skinner said, making them ineligible for Federal Housing Administration financing and, thus, making them more difficult to sell.

The firm buys foreclosures and short-sale properties from the bank, paying cash, repairs and remodels the homes and puts them back on the market after making them FHA-eligible.

Hard money loans

Twelvestone Capital also handles hard-money loans for investors, making private loans to borrowers.

Investors loan money on a property that has equity established in exchange for a first-trust deed position and title and hazard insurance, securing the property for the investor in the event of a borrower’s failure to repay the loan.

Twelvestone only loans 55 to 65 percent of the future value of the property, Skinner said.

“We only loan 55 percent of the future value of the property to protect the investor,” Skinner said.

While there is some risk involved, investors favor the higher-interest returns these loans afford, making more money than they often make through traditional investments.

Business owners and other property investors at times seek these short-term loans because they can secure money quickly for their investment.

And, borrowers often prefer hard money loans for the ease of accessing capital quickly versus traditional, institutional financing.

In a world where time is money, borrowers often find paying higher interest rates a fair trade-off for getting money quickly to finance their own deals, he sad.

Yields


With regard to the investment in and management of an asset that Twelvestone Capital offers investors, Skinner said the firm’s conservative approach in selecting the right properties results in higher yields, or performance, for investors.

“We only buy apartment properties that have a return of 18 percent or better per year,” Skinner said.

Each quarter, the investors receive a check with about a 10-percent distribution of the rents collected, he said.

“Over a 5-year holding period, investors should make between 18 to 23 percent once we sell the property,” Skinner said.

Local appeal

As Twelvestone Capital grows, Skinner has already begun interviewing local people to fill positions in his company. He plans to hire at least four additional people in the next 12 months.

Declaring Santa Clarita as being the “path of progress” in Southern California, Skinner said his firm looks for markets that are attracting businesses and jobs.

And he doesn’t think he will be the only business person from the L.A. market to realize what the local market has to offer once the economy begins to turn around.

“We look for cities that have a plan for growth and improvement,” Skinner said. “Santa Clarita has the kind of environment we want to call home and this is the kind of environment that we want to invest in.

“The business taxes are lower, city taxes are less prohibitive, rent is less expensive, we don’t have to pay to park and the staff at city hall and the building department is helpful and friendly,” he said. “It’s just nice to be doing business in a city that understands what the driving forces of economic growth really are.”

More information can be found at www.twelvestonecapital.com. Twelvestone Capital is located at 27240 Turnberry Lane, Suite 200, Valencia. Matt Skinner can be reached at (818) 419-0202.

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