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$500M Opportunity Knocks for Intracorp

The developer-owner of the downtown Park Terrace condominiums is changing stripes in the middle of the market downturn.

Instead of new construction, the Intracorp Cos. will focus on acquiring properties through a third-party “Opportunity Fund” during the next two years and use its expertise to maximize the value of those properties.

Intracorp, which consists of five West Coast companies, recently unveiled a $500 million fund to acquire undeveloped, residential properties in the West.

The largest chunk , as much as 30 percent of the fund , will be spent on San Diego-area acquisitions, says Bill Nichol, president of Intracorp San Diego/Hawaii, which has 22 employees and is based in downtown San Diego.

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“The (partners) are trying to take advantage of opportunities in this marketplace that are available because the markets are so weak at this point,” he said.

Nichol says the fund will acquire properties zoned for multiunit development and hold them three to five years.

The shift marks a departure for Intracorp, which previously focused on developing its own properties, such as the 45-unit Serenata townhome development in College Grove, and the 223-unit Park Terrace development near Petco Park, which is 80 percent sold.

The other four companies in the Intracorp group are: Intracorp San Francisco, Intracorp Southern California, Intracorp Seattle and Intracorp Capital, also based in Seattle. The group declined to disclose revenues.

Under the deal, the Opportunity Fund will own the properties. Intracorp, which said it plans to acquire properties in Orange County, Los Angeles, San Francisco, Seattle and Hawaii, as well as San Diego, would have the option to buy them at fair market value and develop them.


Looking Ahead

“The real task will be finding values; the market has slowed significantly,” Nichol said. “Hopefully we will find values where real estate is available and can be acquired at values that make sense in today’s market , or five years from now.”

Nichol declined to identify fund investors, saying only that they are large, institutional private investors.

Peter Scepanovic, a broker with real estate broker Colliers International in San Diego, says the deal represents an emerging trend of large investors buying and holding undervalued property until the market improves.

“It’s really transferring wealth from one group to another,” he said. “The good thing is there is capital out there available to take advantage of the opportunities.”

There’s currently no market for developers to build condominiums, but there is an interest by investors in buying and holding land perceived to be undervalued, he says.

“They’re all trying to survive,” he said of developers.

Intracorp will earn fees from acquisitions and entitlement changes, and by managing properties producing revenue, such as parking lots, says Nichol.


A Sensible Approach

Scepanovic says it makes sense to have some stake in the land so they can buy it back , even if the price is higher later.

“They don’t have a problem buying it back at fair market value. Right now, they’re having liquidity problems. One of the ways to get liquidity is to sell land that’s entitled,” he said.

Nichol says he is adding a staff member who will focus solely on San Diego acquisitions.

“I’ve already got a couple of folks versed in development and can deal primarily with entitlements, but I’m looking for someone who would be really focused on generating leads for property in the marketplace and be responsible for leading the charge on contacting sources,” he said.

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