Trion Properties

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Trion focuses on maximizing investor returns through an

aggressive acquisition strategy and by increasing net operating

income throughout the holding period through a hands-on

management style of heavy renovation and aggressive lease-

up. Since its inception in 2005, Trion has generated an average

internal rate of return in excess of 40% with an average holding

period of 18 months.

Trion Properties is a private equity investment company which

acquires value-added multifamily properties that need moderate

to heavy rehab on a 12-24 month investment horizon. Founded

in 2005, Trion has successfully closed several million dollars

in transactions through either a purchase of the fee simple

interest or taking ownership of the asset through acquiring the

nonperforming debt.

Trion Properties is managed by principals whose combined

experience spans over 20 years in West Coast real estate

markets and in excess of $1 billion in transactions.the company

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Max Sharkansky | Co-Founder

principals

Sharkansky oversees al l aspects of acquisit ion, disposit ion, and property analysis for Trion Properties. Since founding Trion Properties, Sharkansky has led the acquisition, renovation, and disposition of several millions in assets, yielding an average IRR in excess of 40%.

Prior to co-founding Trion Properties, Sharkansky was a Senior Associate at Marcus & Millichap from 2002 through 2006. While at Marcus & Millichap, Sharkansky managed the sale of several million dollars in real estate throughout the continental United States, specifically in the multifamily arena, elevating him to one of the top-ranking brokers in Los Angeles, California. His ability to seek out and acquire distressed multi-family properties and his expertise of the marketplace has been instrumental in the success of Trion Properties.

He graduated from Loyola Marymount University where he earned a Bachelor’s degree in Business Administration with an emphasis on Finance.

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Mithc Paskover | Co-Founder

Paskover oversees all aspects of debt and equity placement and asset management for Trion Properties. Prior to co-founding Trion Properties, Paskover was a Managing Director in the Los Angeles office of HFF (Holliday Fenoglio Fowler, L.P.).

Paskover has over eight years of experience in commercial real estate finance. Paskover’s primary focus was on debt and equity transactions including multifamily, office, retail and hospitality properties with an emphasis on multifamily. During the course of his career in commercial real estate, Paskover has been involved in over $1.8 billion in commercial real estate transactions.

He graduated from University of Southern California where he earned a Bachelor’s degree in Business Administration with an emphasis on Finance.

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trion properties

the marketAs the recessed market cont inues to play i tsel f out, i t has

become apparent that today’s “opportunity” is to be found in the

nonperforming notes and REO properties currently held by banks

and lenders. Following many years of inflated acquisition prices

and exceedingly high leverage in the marketplace, many otherwise

fundamentally sound assets have become nonperforming, unable to

meet their high debt obligations.

The foregoing is especially true in the multifamily sector, which

has seen a resurgence in fundamentals, but for many owners and

operators such resurgence has been too little too late.

The result being that lenders and banks have a glut of nonperforming

loans and/or REO assets on their books, many of which are, or have

the potential to become, performing assets with substantial upside,

based upon current pricing.

After several years of holding onto these troubled loans and assets,

either not wanting to take losses or in an effort to increase their

balance sheets, banks and lenders are beginning to sell their

nonperforming notes and REO properties in order to get them off

their books.

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opportunisticrather than discount oriented

The marketplace is supposedly saturated with “opportunity funds”

with billions of dollars to spend on the acquisition of distressed

assets. The problem is that the vast majority of these funds are either

too focused on a minimum investment threshold, which requires the

funds to either forego attractive opportunities or to acquire portfolios

that contain unattractive assets diluting returns, or they are not truly

opportunity focused, imploring cookie cutter criteria that is yield

driven with a 5 or 10 year investment horizon.

What furthers the problem for such funds and prevents them from

truly being “opportunistic” is that most funds are managed by

traditional investment/money managers who have “re-invented”

themselves to become experts in distressed real estate because

that is supposedly where the best opportunity exists. However, there

is an inherent disconnect between these money managers and the

opportunity that exists in the current marketplace.

While most Trions understand the theoretical approach to acquiring

“distressed” real estate, most have spent the good years scratching

out 7 percent returns by imploring leverage and riding appreciation

through a 5 or 10 year investment horizon, they have not, for the

most part been in the trenches, buying, managing, repositioning and

selling value-add assets in B, C and D markets.

The result is that while many investment funds have targeted the

niche marketplace of distressed real estate, with the intent of getting

“a substantial discount” from either the par value of nonperforming

loans or the market value of REO properties, this philosophy has

left many such investment groups spending substantial time and

resources without many results.

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In today’s marketplace successful transactions arise when a

purchaser is able to identify immediate opportunity and upside in

a real estate asset that may not be as attractive to a yield based

investor (or investment fund) with a 10 or 15 year investment horizon.

Another factor which has inhibited the “discount” buyer is that

often, especially in the multi-family sector, the bank or lender’s cost

basis is not as high as might have been expected. What has proven

out, although most have not yet realized this, is that focusing on

“discounts” to the Par Value of a note or the perceived market value

of an asset is not the right approach in this marketplace.

The result, to the exacerbation of many funds and investors, is that

the banks and lenders need not always sell their loans or assets

at such a substantial discount in order for the deal to pencil and

therefore are much more willing to move the asset if the appropriate

price is presented.

Opportunity in today’s marketplace may present itself in any

number of scenarios, whether it be paying full par value for a

nonperforming note on an underperforming asset with substantial

deferred maintenance and high vacancy, and thus substantial

upside, or buying an REO property that is fully leased, but presents

a substantial re-position play.

The identification of these assets that the banks and lenders are

willing to move for one particular reason or another, is a process

that has been cultivated and refined through the experience of many

successful transactions by the affiliates of Trion over the last twenty-

four (24) months.

It is a process that includes an understanding of not only the core

real estate fundamentals driving the acquisition process, but also

of the nuance, risk and issues associated with acquiring debt in

order to ultimately obtain title to the underlying real estate asset and

dealing with banks and/or lenders.

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trion properties

access to dealsThrough their dil igent efforts and successful transactions, the

principals of Trion have been able to establish relationships amongst

banks, lenders and brokers tied into the nonperforming note and

REO marketplace.

The result being they are provided with a tremendous amount of deal

flow and opportunity in this arena.

Trion has seen a recent increase in deals and opportunities that

“pencil” and expects the current situation amongst lenders and

banks to continue to produce opportunities to acquire multi-family

and/or mixed use real estate assets and/or nonperforming debt

secured by such real estate assets at advantageous prices to the

value of the assets being acquired.

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trion properties

proven strategyThe implementation of a proven strategy, evidenced by a track record

of many successful nonperforming note and REO acquisitions, is

how Trion differentiates itself from its competitors. Trion, through its

affiliates, for many years preceding the market meltdown, has been

extremely successful in identifying, buying, managing, repositioning

and selling value-add multi-family properties.

By imploring a proven, successful reposit ioning strategy, in

acquiring, managing, renovating and re-tenanting properties in

transitional, inner-city neighborhoods in Southern California markets,

the principals of Trion were able to timely exit projects prior to

getting caught in the market meltdown of 2008. The principals of

Trion, through their affiliated entities have been able to seamlessly

transition this strategy into the acquisition of nonperforming debt and

real estate assets from Lenders.

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In fact it is just this segment of the market where opportunity

abounds. The principals of Trion have developed an intimate

knowledge of the neighborhoods in which they invest and they

have taken advantage of the foregoing by successfully employing

opportunistic investments in these inefficient markets that are

generally characterized by unsophisticated, capital-constrained

sellers, significant government regulation (primarily rent control), and

a large variance in rents for similar units in the marketplace.

The primary target Seller shall be either distressed sellers or lenders,

with ownership through either the fee simple purchase of the

real estate asset or through the acquisition of the nonperforming

debt. On debt acquisition all exit strategies are analyzed, however,

investment underwriting generally contemplates taking ownership of

the asset through either a workout with the borrower or a non-judicial

foreclosure, which may or may not include the appointment of a

receiver by the court to manage the property during the foreclosure

process.

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In Los Angeles County, their geographic area of focus, there is also

a significant supply constraint, making the opportunities in this

market the most compelling. Properties purchased generally range

from small to medium sized (4-200 units) and are typically in need of

extensive refurbishment and improvement.

Through implementing the foregoing investment strategy the

pr incipals and aff i l iates of Tr ion have been able to ident i fy

opportunistic acquisitions by establishing value and/or upside in the

real estate asset, and then working backwards to establish the price

they are willing to pay the bank for the nonperforming note or REO

property based upon the amount of risk assumed. Benchmarks are

set for valuation and a property or note will not be bought unless it

meets the pre-determined criteria.

Once purchased and title to the Property is obtained, the objective

is to achieve positive cash flow within 12 months with a goal of

significantly increasing rent rolls, through legal rent increases,

managing tenant turnover, an intense focus on tenant relations,

property maintenance, and cosmetic improvements.

Further, expenses and capital expenditures are tightly controlled

through Trion’s affiliated management team. All properties acquired

are managed through its affiliated property and asset management

team with a hands-on approach to every aspect of the management

process, including accounting, renovation and leasing. The typical

holding period for each property is 1-3 years, and target sales

multiples are established up front.

All properties are continuously monitored along with the surrounding

neighborhoods to identify and capitalize on the opportunity to sell at

the high end of the established multiple range. The closer a property

gets to market-level rent rolls, the closer ownership moves toward

selling the asset.

The principals of Trion are readily able to understand the investor

perspective in that they have achieved their success by placing

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equity in deals through the use of their own capital as well as through

the raising of funds from outside investors. In every deal, even when

outside funds have been raised, their own capital has always been

at risk. Additionally, they have developed relationships with private

financing sources that are willing to finance nonperforming note

acquisitions and REO’s with substantial deferred maintenance and/

or in transitional inner-city neighborhoods.

They also have relationships with Lenders who are wil l ing to

carryback financing on the sale of their nonperforming notes. As

title to properties are taken, and as those properties are upgraded

and repositioned, refinancing with institutional lenders offer more

attractive terms and thus create an additional source of cash flow.

The primary investment drivers will be the maximization of returns

relative to the risk of the investment and will focus on Internal Rate of

Return analysis. Acquisitions will likely run in the range of $1 million

- $15 million.

Assets under $20 mil l ion are below the target range of most

institutional investors and above the range of most owner-users or

individual investors. Pricing in this range is usually more favorable,

and can, therefore, produce better returns than comparable assets

in higher or lower price ranges.

The exit strategy shall vary for each asset acquired and may include

either holding through stabilization for a period of short or long term

growth or immediate reversion upon stabilization or acquisition, with

the intent of a short term high yield.

225 N. Avenue 53

1case study

Opportunity to acquire an asset in a dense urban in-fill location specifically in the Highland Park submarket in the City of

Los Angeles through purchase of the nonperforming debt on the asset and acquisition through subsequent foreclosure.

The note was purchased in April, 2011 for $1,250,000. At acquisition the asset

was approximately 40% vacant with an additional 20% of bad debt from

the occupied units and required extensive renovation prior to lease-up and

increase of rent stream.

The property has since been extensively renovated and an aggressive leasing

program has been put in place. Upon completion of renovations and lease-up

the asset will be listed and sold with the procuring broker for approximately

$2,000,000.

PROJECT DETAILS

Number of Units: 20

Acquisition Date: April 2011

Acquisition Price: $1,250,000

Renovation Costs: $95,000

Disposition Date: May 2012

Disposition Price: $2,000,000

Hold Period: 13 months

Gross Profit: $550,000

In-place NOI: $32,000

Stabilized NOI: $150,000

Projected IRR: 92%

4620 Coliseum Street

2case study

Opportunity to acquire an asset in a dense urban in-fill location, specifically in the Baldwin Village submarket in the

City of Los Angeles, through the purchase of the non-performing debt with a concurrent Deed in Lieu of foreclosure.

The note was purchased in December 2010 for $1,800,000 with over 400

Los Angeles Housing Department violations and a 60% occupancy level.

After being removed from REAP, the property was sold in December 2011 for

$2,550,000, free and clear of all LAHD violations with an occupancy of over

90%.

PROJECT DETAILS

Number of Units: 35

Acquisition Date: December 2010



Disposition Date: December 2011






IRR: 36%

6407 10th Avenue

3case study

Acquired an asset in a dense urban in-fill location specifically in the Hyde Park submarket in the City of Los Angeles, through

purchase of the non-performing debt on the asset and acquisition of the fee-simple title through subsequent foreclosure.

The asset was approximately 43% vacant and required extensive renovation

prior to lease-up and increase of the rent stream. Upon acquisition of the

note, the property was immediately placed into Receivership ceding full

management control of the property to the Sponsor via a Receiver which

allowed the Sponsor to get a head start on the renovations and leasing of the

property as well as collecting rents from existing tenants which helped offset

the carrying costs throughout the workout period.

The property was extensively renovated and brought to 90% occupancy at

which point it was listed with the procuring broker and sold for $2,125,000.

PROJECT DETAILS

Number of Units: 28

Acquisition Date: May 2010



Disposition Date: July 2011






IRR: 28%

Max Sharkansky

323.330.6161 | [email protected]

www.trion-properties.com

5455 Wilshire Boulevard, Suite 1700 | Los Angeles | California 90063

Documents

Trion Properties