Phoenix’s Developer Turned Landlord

By the time the federal government announced its plan last month to begin selling REOs owned by Fannie Mae to investors to be converted into rentals, Phoenix-based The Empire Group of Cos. was already way ahead of them. For a few years, the residential and commercial developer has been biding its time for the development market to come back by acquiring single-family homes around the Phoenix area and turning them into rental properties. "It started out of necessity in mid-2009," says Geoffrey Jacobs, one of Empire’s principals. "We were overbuilt, and we weren’t going to do a development for a number of years. But we had local knowledge and infrastructure, and the price corrections were unbelievable. In the market segment we focus on, the price drops were 70% peak to trough. It was an artificially low number, and the opportunity was so compelling." Since then, Empire has amassed more than a thousand properties, and the company is pre-qualified to bid on properties offered in the upcoming round of sales of REOs held by Fannie Mae. (Freddie Mac may later participate in the FHA-led initiative to get investors involved in converting REOs to single-family rentals, but it has not yet announced plans to do so.)

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