SACRAMENTO, Calif., (June 14, 2017) – Avanath Capital Management, LLC, an institutional fund manager that specializes in affordable and workforce housing investments, has acquired an affordable housing portfolio of three apartment communities totaling 468 units in Sacramento for $56.5 million. This acquisition nearly doubles Avanath’s footprint in this market, bringing its total concentration of units to 1,034 apartment homes in the Sacramento region.
“Sacramento is one of the hottest real estate markets in the nation right now and is experiencing explosive growth,” asserts John Williams, President and Chief Investment Officer of Avanath. “The market has made a tremendous comeback since the Recession and leads the nation in highest annual effective rent growth, with rental increases exceeding 10.5 percent last year. This surge in market-rate rents is placing enormous pressure on renters and driving demand for affordable housing throughout the region.”
Williams notes that a regional migration is underway as the high cost of living in the Bay Area drives renters to the surrounding Sacramento suburbs in search of affordability.
“While still an affordable alternative to the Bay Area, Sacramento is now seeing rapid rent appreciation and not enough supply of quality affordable housing to meet current demand,” continues Williams. “This acquisition will allow us to preserve affordability in one of the fastest rent-growing markets in the country, while also amassing economies of scale by bringing our total Sacramento portfolio to over 1,000 affordable units.”
Built in 2005 and 2006 under the Low Income Housing Tax Credit program, the three-building portfolio was 98.5 percent occupied at acquisition and of relatively new vintage, providing strong in-place cash flow and an opportunity to add value through minimal capital improvements, according to Williams.
The portfolio consists of a diverse range of affordability types, including senior housing, family housing, and mixed-income housing, making it well-positioned to cater to different age and income demographics. In addition, the properties offer large units averaging 922 square feet and boast a unit mix of one-, two-, and three-bedroom options.
“80 percent of new multifamily developments in the largest U.S. metros target the affluent millennial demographic, while the majority of renters are low and middle-income families earning an average of $35,000 a year,” explains Williams. “This disproportionate supply of luxury to workforce inventory indicates a severe lack of affordable housing to support the largest stock of renters. By catering to these underserved families and seniors, we will be able to maintain high occupancies and drive consistent, risk-adjusted returns for our investors.”
Avanath’s investment strategy is to acquire affordable and workforce housing assets in supply-constrained markets with strong growth fundamentals. The firm generates long-term value through property level renovations and social services that improve quality while maintaining affordability, according to Williams.
Planned renovations include upgrading exterior paint, installing LED lighting throughout the portfolio to optimize energy efficiency, revitalizing some common areas, and addressing deferred maintenance items, among others. Social services at each property include after-school tutoring programs, fitness classes, computer literacy courses, and more.
“Overall, this portfolio acquisition advances our mission to generate strong risk-adjusted returns for our institutional investors while simultaneously achieving social returns that deeply benefit the communities in which we invest,” affirms Williams.
Avanath will team with longtime non-profit service provider COR-CDC to offer these community-enriching social services.
Avanath acquired the three properties from a repeat seller, an affordable housing developer, in this off-market transaction. The three-building portfolio includes:
- Geneva Pointe
Comprised of 152 affordable units, this community serves families earning between 50 and 60 percent of AMI. The property includes a clubhouse, business center, fitness room, pool, and detached parking garage, and offers social services such as after-school programs.
Located in Elk Grove, the second largest city in the greater Sacramento region, the apartment complex offers a short commute to many employers in the education, healthcare, distribution, and professional services industries.
The property is located at 8280 Geneva Pointe Drive in Elk Grove, California.
- Lincoln Creek
This mixed-income community comprises 172 apartment units: 95 affordable family units, 48 affordable senior units, and 29 market-rate units. Community amenities include a clubhouse with a business center, fitness room, pool & spa, separate community center dedicated entirely to seniors, a laundry room, and detached garage parking.
Lincoln Creek is situated in Solano County, which is currently experiencing strong population growth and economic expansion. Employment has grown by 2.8 percent since December 2016, with the strongest gains in manufacturing, financial services, leisure and hospitality.
The property is located at 1395 N. Lincoln Street in Dixon, California.
- Sierra Creek
Encompassing 144 units, Sierra Creek is an affordable senior housing community serving seniors earning 50 to 60 percent of AMI.
The property places a heavy emphasis on social services, including educational classes, transportation services, and activities such as monthly potlucks, game nights, and community-oriented events. Avanath plans to continue providing these services to keep its senior residents active and engaged, according to Williams.
Located in Antelope, Sierra Creek benefits from favorable demographics and market fundamentals. No new multifamily construction is underway in Antelope, making this a supply-constrained market with limited competition and high demand. In fact, the waitlist for this property includes over 200 applicants.
Sierra Creek is located at 4500 Elverta Road in Antelope, California.
About Avanath Capital Management
Avanath Capital Management is a privately-held, vertically integrated investment firm managing real estate and real estate-related investments generating attractive risk-adjusted returns through current income and capital appreciation from its investments. The firm also provides property management services through its two affiliates, Avanath Property Management and McKinley- Avanath Property Management.
Founded by Daryl J. Carter, the Avanath management team averages 25 years of experience and has successfully guided investment funds in defining growth opportunities and delivering attractive returns. Avanath professionals have real estate operating expertise and long-standing relationships with strong local, regional and national sponsors that can access investment opportunities aligned with Avanath’s initiatives. More information is available at www.avanath.com.