Canopy Scoops Up Distressed Townhomes Outside Phoenix

Canopy Real Estate Partners has made a bottom-feeder purchase of a distressed townhome complex outside Phoenix.

The Denver-based private equity firm paid $8.8 million in cash for a newly built, 27-unit townhome development at 16601 North Parkview Place, in Surprise, the Phoenix Business Journal reported.

The sale in-lieu of foreclosure of the unoccupied ParkView Townhomes was made by Next Generation Capital, a limited liability company based in near Sacramento, California, which ran sideways with its construction loan, according to Canopy.

The deal works out to $325,926 per unit.

Locally based TBBG Investments targeted the property, handled the sale and will provide property management services.

Jay Rollins, co-founder of Canopy, said he’s beginning to lease the 27 townhomes, which average 1,420 square feet and start at $2,100 per month.

He thinks it will take eight or nine months to lease the property until it’s stabilized, then will apply for a loan — with better rate terms on a stabilized property than one that’s empty.

“Nobody likes to lend on an empty building,” Rollins told the Business Journal. “If you have money, pay all cash. Get the property to where you want it then you go to the debt markets.”

Rollins is seeing more distressed multifamily properties in greater Phoenix, which is why he expanded there and set up a Scottsdale office.

It’s not the asset that’s distressed, he said, “It’s the people that bought them who paid too much for them and put too much debt on them.”

Rollins also plans to target retail, industrial, self storage and build-to-rent properties. But he’s seeing more distress in multifamily than the other sectors.

“People overpaid more for multifamily than they did for retail and industrial,” he told the newspaper. “That is why there’s more distress.”

Rollins, who previously founded JCR Capital and sold it to a public company in 2018, launched Canopy to provide middle-market developers with joint venture capital, general partner co-investment capital, and intellectual capital to help them evolve into institutional fund managers.

More purchases could be on the horizon. Rollins, who moved to Phoenix two years ago, will focus on middle-market assets of $50 million or less, which are properties typically ignored by the big institutional investors.

Canopy currently has about $80 million in commitments in its Fund I, which will remain open for new commitments through mid-summer until it reaches about $100 million, he said. Fund II will be launched next year with a target of $250 million, he said.

Rollins said he sees himself as a talent scout, looking for people between 35 to 45 years old to create the next generation of great real estate investors.

“Nobody else is doing what we’re doing to try to help the next generation of real estate entrepreneurs,” he told the Business Journal. “And we picked Phoenix as a place to do it.”

— Dana Bartholomew