Affordable Housing Finance

NEW DIRECTIONS

Costa and Partners Buy Simpson Housing Solutions Portfolio

AFFORDABLE HOUSING FINANCE • June 2008

BY DONNA KIMURA

LONG BEACH, CALIF. - One of the nation’s largest affordable housing developers and syndicators has been purchased by the newly formed venture of MacFarlane Costa Housing Partners (MCHP).

The deal involves the acquisition of an affordable housing development, syndication, and operating company including a portfolio of 270 properties, with 27,000 low income housing tax credit (LIHTC) apartments, owned by Simpson Housing Solutions (SHS) throughout the United States, including Puerto Rico.

In addition, eight properties are ready to begin construction this year, according to Michael Costa, the longtime president of SHS. He teamed with MacFarlane Partners, a San Francisco-based real estate investment firm, to purchase SHS, a subsidiary of Denver-based Simpson Housing.

MCHP owns 80 percent of the current venture. Avanath Affordable Capital, led by Daryl Carter who co-founded Capri Capital, owns 20 percent and has an option to buy the rest of the portfolio.

“We’re excited about the whole group,” said Costa, noting that he, Carter, and Victor MacFarlane of MacFarlane Partners are longtime friends.

SHS had been one of the nation’s largest owners of affordable housing. It ranked No. 5 on AFFORDABLE HOUSING FINANCE’s Top 50 owners list this year.

The sales price for the portfolio was not disclosed. Costa said he had tried on two occasions in the last five years to purchase the company. The third time was the charm, but it wasn’t easy. After signing a letter of intent in 2006, the parties began lengthy negotiations and set about acquiring the necessary approvals for the sale. The many layers of financing involved in affordable housing made for a complex transaction, Costa said.

Like SHS did, the new team will develop affordable housing throughout the West. The goal is to produce about 1,500 LIHTC units a year.

In a new move, the firm will also look at developing 80/20 deals financed with tax-exempt bonds. These are projects where 80 percent of the units are market-rate and 20 percent are affordable. Costa said he would like to work up to building about 1,000 of these units a year.

SHS was based in Long Beach, Calif. The new business, which has about 75 employees, will be moving to nearby Carson, where the company has purchased a 25,000-square foot warehouse that it will convert into office space.