American Redevelopment Fund Earnings Report
Kale Flagg says fund projected to earn 21.26% IRR for 2012.
Rocklin, California – October 30, 2012 – Kale Flagg, Manager of the General Partner of the American Redevelopment Fund, recently reported the official figures for the Fund’s 2012 third quarter. Earnings for each partner are currently annualizing at 12% for the year, Kale Flagg stated in the announcement. He additionally explained that contingent on selling all current inventory by year-end, the American Redevelopment Fund will earn 21.26% IRR for 2012.
The American Redevelopment Fund is a Nevada-based business that purchases and resells distressed residential properties in Northern California and surrounding areas. The operators overseeing the Fund have purchased and resold more than 1,700 single-family residences in the past decade, according to Kale Flagg. Additionally, Kale Flagg noted that 2012 was a challenging year in real estate redevelopment, with a sharp decline in participants as investors losing money have learned that real estate redevelopment is a skill that requires a certain level of expertise to master.
Kale Flagg reports that many “mom and pop” operations have joined with large investors in recent years to purchase distressed real estate with the intention of renting it. According to Kale Flagg, these operators purchased the property for dollar amounts that were higher than the amount for which the American Redevelopment Fund usually sells properties after renovation. Additionally, the amount of product released by banks to the market was cut in half in year-to-year comparisons, with banks holding onto property for undetermined reasons. This has created a challenge in the market, Kale Flagg stated.
Regardless, said Kale Flagg, the American Redevelopment Fund’s management team is looking forward to 2013, when they expect the floodgates will open and investors will have an opportunity to thrive. As a further explanation, Kale Flagg compared 2012 to 2007, when inventory also evaporated and the number of people participating in the industry shrunk significantly. According to Kale Flagg, 2008 brought incredible opportunity for distressed property investors, with earnings of more than 54% IRR for the investors that were working with ARF’s operators at the time. Kale Flagg said the incredible returns came as a result of a “release of the gates,” as the real estate that banks had been sitting on during 2007 suddenly hit the market en masse in 2008.
Kale Flagg also stated that the fact that banks have a large amount of inventory on their books that wasn’t released in 2012, coupled with the increased pricing and rising market demand, suggests that Banks will be incentivized to release REO (real estate owned) to the market. Following the election, banks are expected to begin releasing inventory, and Kale Flagg said that he believes the industry will begin to see major growth and profits at this point.
Kale Flagg and the team at the American Redevelopment Fund anticipate growth in 2013, beginning with the first quarter. While the past few years have been more than challenging for residential flipping, Kale Flagg is confident that these years of slow growth will bring great returns once the market begins to change. Not only is investing in real estate great for local communities, stated Flagg, it also can bring large returns for investors who know that the economy is always cyclical…and good things come to those who are in the right place at the right time.