Vulture fund eyes California land at “Armageddon” prices

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From L.A. Times staff writer Scott Reckard:

Will California become the central feeding ground for real estate vulture investors?

That’s what was suggested today in a report from London describing something called the California Distressed Land Fund Ltd.

The fund’s manager, David Michelson, plans to raise $150 million from European investors to buy raw land from developers and banks in places like the Inland Empire where home values have sunk lowest.

Michelson told Bloomberg News that he has developed and managed residential projects in California for more than 25 years. He said he’s currently bidding for Riverside County land at “Armageddon” prices -- 20% of what it had been valued by builders.

The idea is to hang onto the property for six or seven years and then resell it. Michelson predicted he will eventually be buying from some updated version of the Resolution Trust Corp., the federal agency that liquidated the property the government inherited from 700 failed savings and loans in the 1980s.

He said his fund won’t compete with dozens of hedge funds that are raising capital to buy securities whose prices have been battered by defaults on exotic mortgages.

“They’re all looking to buy paper, we’re looking at the dirt,” Michelson told Bloomberg. “We’re builders. They wouldn’t know how to file a building permit.”

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Photo Credit: Cape Vultures in South Africa, via A.P.