High Cost Relief

Investors can buy in for $10,000 a unit, according to Jack Frost, a Sierra Mortgage senior vice president and an Axio consultant.

The fund will seek developers interested in building retirement communities, condominiums and what Frost described as “affordable housing.”

Of course, “affordable housing” in California means something very different than in other parts of the country.

But the way he puts it, even a $300,000 home sounds affordable.

“In California, affordability has become sort of a joke,” Frost told MortgageDaily.com. “Houses are so expensive. What we have done is help solve the problem of affordable housing … in California and other places.”

For example, Frost said a large senior community in Sacramento that includes a golf course and other amenities is selling homes for up to $800,000.

Sierra Mortgage Investments will lend to developers who are building in the $300,000 to $400,000 range in developments that trade amenities for price.

“We want to create affordable, active adult senior communities,” Frost said. “We won’t have the expense of running a golf course, but we’ll be close to the golf course.”

Sierra will also make loans to developers and builders of traditional single family homes, condos — including units being converted from apartments — and home owners who are building their own houses.

“These aren’t general contractors,” Frost said. “We will have a program for owner/builders where they can get some oversight. It allows them to do a lot of the work themselves much cheaper than buying a new home.”

Loans will be made by Sierra, sometimes in connection with traditional lenders, Frost said. Borrowers could be smaller developers and builders who may have difficulty getting their projects finances.

Sierra and Axio also have a mortgage banking operation that can provide a sales force for the developments the fund invests in.

Through Axio’s Harborside Financial Network, a mortgage banking unit, the company has nearly 300 originators in California, Nevada, Oregon, Washington, Arizona and Texas.

“We have a real synergy with our mortgage banking subsidiary,” Frost said. “If we fund a development, the development gets a free sales staff marketing the homes and brokering mortgage loans.”

Frost said the fund is being pitched to individual and institutional investors, including pension funds. The company is pledging a minimum return of 10 percent, he said.

The Sierra fund may eventually be taken public as a traditional REIT.

On its corporate Web site Axio says it is licensed in 40 states, had 2002 revenues of $37 million and originated $1.7 billion in residential loans.

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: PatCrowley@MortgageDaily.com