We’ll Invest in ‘B’ Properties in ‘A’ Locations and ‘A’ Properties in ‘B’ Locations

Bill Stahlke (pictured) recently joined as president of Investments at Lane Strategic Investment LLC, where he will develop Lane Company’s acquisition strategy and oversee all of the firm¹s acquisitions. Stahlke came out of retirement to take the position. Before his retirement, he was president of Windsor Capital Partners (now known as The Shoptaw Group), an investment firm, which acquired large apartment communities for institutional pension funds and high net worth individual clients. He talks to MHN Online News Editor Anuradha Kher about his strategy to invest in distressed properties and what the division plans to do with them.MHN: Why does Lane Co. plan to make investments in distressed properties?Stahlke: In order to make a profit. We have a joint venture with Lubert-Adler Partners L.P. which will provide $250 million for the acquisition, rehabilitation and repositioning of distressed properties, or properties held by distressed sellers. I believe the markets were way over-bought. The financial engineers had taken over the market and that was the reason I left real estate in 2003. I believe the cap rates are now going to re-adjust to historically normal levels of 7.5 to 8.5. This is the time to take advantage of re-pricing as the apartments come back to where they should be.MHN: What kind of properties do you plan to invest in?Stahlke: We plan to buy in major and secondary markets in the southeast and southwest. The properties should be 200 units or more in order to get the critical mass. We’ll acquire either B+ properties in A+ locations of A+ properties in B+ locations. It doesn’t matter if they are 100 percent vacant or 100 percent occupied. I believe that real estate can be fixed but locations cannot. MHN: What criterion will you apply for locations?Stahlke: I’ll look at the household incomes and housing prices. People want to live in nicer neighborhoods that have good single-family homes.MHN: Why focus on Southeast and Southwest?Stahlke: Lane Co. is based in the southeast and we’re already in many of the markets in these regions. Also, our equity partner preferred that we have some local expertise. In addition, there is a lot of migration from the Midwest and Northeast into these two regions. Of course if we get some really good offers from other regions we will consider them.MHN: How many properties have been acquired so far?Stahlke: We are still evaluating some properties. I see that the spread between seller and buyer expectations still exists. I do see sellers ready to meet buyers’ needs in 2010.MHN: What do you plan to do with these properties?Stahlke: We are investors, not traders so we definitely intend on adding value to most of the properties we acquire, whether it be improving the management or rehabilitating and renovating or even just waiting for the market to turn around. Of course, there is no point renovating units right now because no one is willing to pay extra for units, so we’ll wait a couple of years to do that. MHN: How many employees will this division have?Stahlke: We will hire five to six people and also rely on Lane Co.’s existing employees and resources.