Peter Brennan used to work for a builder that stamped out several hundred homes a year during the real estate boom. He’s since built a business bringing failed boom-era projects back from the dead.
Mr. Brennan, 53, is principal of Hinsdale-based Foxford Communities, which since 2010 has scooped up 515 Chicago-area home lots and nearly 200 unsold condominiums left by the crash. Among its more notable acquisitions: the 20-acre Lansdowne estate in Lake Bluff and five lots at Trans of the Moor in Bannockburn, luxury projects dropped by homebuilder Orren Pickell.
Foxford also isn’t afraid to buy into failed condo projects, acquiring 52 unsold condos in the West Loop, another 72 in west suburban Bloomingdale, and last month, the failed 52-unit Century Station condo project in downtown Berwyn.
“The more distressed the property is, the better it is,” Mr. Brennan said. “There’s always a way to fix whatever problems there are.”
Yet with foreclosure filings falling, opportunities to buy distressed real estate are dwindling. Mr. Brennan is still confident he can pursue busted subdivisions in the next few years, but he’s starting to add other focuses, including construction and infill development.
Mr. Brennan, an Oak Forest native, graduated from Loyola University Chicago, where he played on the basketball team and earned finance and law degrees. After a few years at a local bank he joined Lombard-based Town & Country Homes in 1988 as general counsel, later becoming head of the company’s land department. Town & Country owner William Ryan sold the business to Hovnanian Enterprises Inc. in 2005, and later Messrs. Ryan and Brennan teamed up to form Foxford as banks began unloading distressed developments. Among Foxford’s first acquisitions: 60 lots in Oswego it is now selling in phases to D.R. Horton Inc.
Foxford also is active in South Florida and is building out the rest of a 108-unit condo project in west suburban Countryside called Clocktower Pointe where only 18 units have been built. In an interview, Mr. Brennan discusses his investment strategy and projections for the local housing market. Here are edited excerpts from that conversation:
CRAIN’S: How do you decide which opportunities fit your profile?
MR. BRENNAN: We always look at location. In any market that’s important. We also look at the school district that the property is in, because that’s a tremendous value-added component, especially in Chicago. Most of the projects we’re involved with, we have to add something to add additional value. If there’s a distressed (homeowners) association, we reinvigorate that in some form or another. There’s always something that needs to be done to create value.
Would you say that’s your greatest challenge? Taking that risk upfront and finding value at the same time?
It is. It’s evaluating the risk and pricing that into the deal, and going forward and spending the time and the effort and the money to fix the problems that exist. With the case of Century Station in Berwyn, they not only had five existing property owners, but substantial survey and title issues we spent an enormous amount of time on to fix before we closed on the property. Now (Century Station) can be a condominium project or it can be an apartment project because it’s not fractured.
Obviously the market is changing and is a lot healthier than it was five years ago. How are you preparing to adapt to the shifting market?
We see ourselves as becoming a lot provider for the local and national builders. The national homebuilders, especially, are still averse to land risk. We’re obviously not. We’ve been doing it all of our lives.
How many years of (lot) supply would you say is ready to be flipped?
In Chicago you have to break it down to a couple different markets. In good, solid submarkets, in the first and second rings, there’s very little supply left of developed lots. You’re going to see a lot more land development within the next year or two in good submarkets because there’s just no supply left. To buy lots you have to go out to that third ring, and the market’s not there yet. We’re still kind of focused on the first two rings.
When the current things you have sell out, where would you turn your attention? To farther-out places?
Yeah, and infill spaces. For example we own a piece of property in downtown Western Springs we’re taking through (zoning). It’s premature to know what we’re going to get, but we’re hoping to do something along the lines of a four-story condo and apartment community in downtown Western Springs.
What’s the biggest market shift you expect in the near term?
Builders have to keep focusing on the part of the market that’s growing the fastest and has the most, in terms of financial assets, and that’s the empty-nester. That’s everything we’re working on. That’s really where I think the future is in Chicago. Then over time the balance of the market will come back: the first-time homebuyer, the move-up buyer, the second move-up, there’s whole markets that come back.