Recent announcements by Lane Cos. underscore the crazy, conflicting factors at play in the marketplace during these topsy-turvy times.
On one hand, there is the company's new focus on distress. The Atlanta-based owner, builder, and manager of apartments just announced a $250 million joint venture with Philadelphia-based Lubert-Adler, a real estate private equity firm specializing in redevelopments, to buy distressed properties.
On the other hand, Lane is dealing with internal issues. The firm faces a number of maturities on development projects. And it recently announced a reorganization that resulted in the resignation of former CEO Bill Donges and return to power of founder George Lane.
"Everybody who has been in business during the past 10 years has some form of distress in their portfolio and is working through those issues with lenders and equity partners," says Eric Hade, general counsel for Lane. "There are certain maturities that we're coming up against, sort of like everyone else."
But as Lane's development group is working with lenders, its acquisitions group wants troubled deals. "We're looking to make money out of it [distress]," Hade says. "We need to stabilize our own existing assets?most of them that came out of a development program, but we really see it as an opportunity to expand an acquisition program that we hadn't been aggressive on."
Linwood Thompson, senior vice president and managing director for Marcus & Millichap Real Estate Investment Services, a brokerage firm based in Atlanta, thinks Lane's strategy makes sense. "I think you have to look at Lane and realize most of where their stress has been is on the development side," he says. "George Lane has been around forever, and I think he's licking his chops because he can come back in and buy at distressed prices. That represents a good opportunity for them."
Hade says Lane hasn't discussed buying some of its own development projects for its fund. And even if it did, it would be a tough sell with the lenders. "There's a different psychology for a borrower to go to its lender and say, 'I've got a solution that negatively impacts you, and I stay in the deal,'" he says. "It's just a different mentality that your investment partners may have."
Instead, Lane will be seeking multifamily properties ripe for acquisition, rehabilitation, and repositioning in the Southeast and Southwest as well as properties held by distressed sellers. The company has partnered with Lubert-Adler on a number of ventures over the past decade, including the acquisition of Solace on Peachtree Apartments in Atlanta, which is currently under renovation.
"It's our sweet spot and Lubert-Adler's," Hade says. "Their goal is to buy irreplaceable, high-quality assets in great locations at a discount to market."