Americans aren't buying homes like they used to. They're renting more. That's good news to landlords like Philadelphia-based Resource Real Estate, which has been buying up troubled apartment complexes in working-class neighborhoods in places like Memphis (home to Fed Ex) and Albuquerque (near US military and Energy Department labs), across the South and West, fixing and filling vacant units for service and factory workers.
Resource Real Estate is an arm of father-and-son energy-and-finance moguls Edward and Jonathan Cohen's publicly-traded Resource America Inc. The Cohens have a long track record of buying mundane assets cheap, holding them for years, and selling high. Another Cohen company, Atlas Pipeline Corp., and its natural-gas assets in Pennsylvania and other states, was just purchased by Chevron for $4.3 billion in cash and debt.
Resource owns more than 100 properties and mortgages, and controls 18,000 apartments, many of them purchased at discount prices from "distressed" owners who owe more than the buildings are worth, says Kevin M. Finkel, director of acquisitions.
"Our history is buying distresssed," he told me. "By the time we get involved, the asset may have gone two or three years with nobody taking care of it," apartments lying vacant, trees falling in the parking lot, and un-evicted criminals making life tough for working tenants. They buy the overpriced loans from banks at a discount, take title from the borrowers, and get to work.
There's a lot more apartments coming on the market as overpriced loans from the mid-2000s come due in the next few years, said Resource chief executive Alan F. Feldman. "We like bankruptcy. It adds complexity, and that scares away the (publicly-traded real estate companies) and folks with a short attention span."
Resource buys in the South and West, but rarely in Philadelphia or New York. (It also avoided Las Vegas and Phoenix in the boom years.) “This part of the country is too pricey,” Feldman said.