Investor named after mythical hellhound is snatching up metro Phoenix's affordable houses

Catherine Reagor | The Republic | azcentral.com

First-time homebuyers in metro Phoenix are dealing with a new competitor for the area’s shrinking supply of affordable houses.

A cash-wielding investor named after the hound of Hades has snatched up almost 600 Valley homes priced below $300,000 since November, public real estate records show.

And it’s unclear what Cerberus Sfr Holdings plans to do with its rapidly growing cache.

Arizona housing analyst Tom Ruff discovered the home purchases by Cerberus, the name for the monstrous multiheaded dog in Greek mythology that guards hell.

“This is not a group of poorly funded amateur investors. It’s reported that Cerberus has $30 (billion) to $40 billion dollars under management,” said Ruff of The Information Market, owned by the Arizona Regional Multiple Listing Service. "There’s something about our market they like, and they are aggressively purchasing where our inventory levels are the lowest.”

A dog by any other name

Cerberus Capital Management is a Wall Street equity firm that typically specializes in distressed investments.

But few would say metro Phoenix’s housing market for homes priced below $300,000 is hurting or would be considered a distressed buy. Prices are rising the fastest in that part of the market because demand is highest.

The number of metro Phoenix homes for sale is down 12 percent from a year ago.

Andrew Johnson, a spokesman for Cerberus, declined to comment on the company’s metro Phoenix buying spree.

Former U.S. Vice President Dan Quayle, who is a longtime Paradise Valley resident, is chairman of Cerberus Global Investments. He is also the grandson of former Arizona Republic owner and publisher Eugene C. Pulliam.

Former U.S. Treasury Secretary John Snow is chairman of Cerberus Capital Management.

The tax mailing address for the homes might offer one clue to the investor’s plans. According to real estate records, the address in Marietta, Georgia, is the corporate office for FirstKey Homes, which Cerberus owns.

FirstKey Homes is a property manager for thousands of U.S. rental homes. The recent Valley home purchases look to be the company’s first foray into Arizona’s housing market.

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More rentals?

Cerberus appears to be metro Phoenix’s newest big landlord, and it’s buying at much higher prices than its competition.

During the housing crash, big institutional buyers including Invitation Homes, Colony and American Homes for Rent bought thousands of Valley foreclosure homes for about one-fourth of what they are worth now.

Invitation continues to buy Phoenix-area homes and turn them into rentals, but only about six a month, according to Ruff’s analysis.

What do renters pay in the Valley? What is the average rent paid by Phoenix-Metro residents?

Big investors helped metro Phoenix’s housing market recover when they bought foreclosures that could have sat vacant and dragged the market down for years. Many people who lost those houses to foreclosure needed the affordable rentals the investors provided.

But now, people trying to buy their first home in the Valley could be losing out to another big deep-pocketed investor who can pay cash and close fast. These are people who can afford to buy and don’t want to rent anymore.

“Cerberus, which I’m pretty sure regrets the name selection, is an investor to watch in the Valley," Ruff said.

Unfortunately, too many potential first-time buyers are now watching houses they want purchased by a Wall Street investor.