The affordable housing sales market continues to see strong interest this year.
CBRE Affordable Housing reports that its activity is up “double digits” in the number of deals closed compared with the same time last year.
“The market is still continuing to grow,” says Robert Sheppard, managing director, explaining that the affordable housing stock continues to expand as more low-income housing tax credit properties age and come to the end of their initial 15-year compliance periods.
His firm recently arranged the sale and financing of Diamond at Prospect, a 140-unit affordable community in Denver to Hamilton Zanze Real Estate Investments for $20.5 million.
It represented Security Properties in the sale of the property, which contains 98 apartments with income restrictions. The property has averaged 96% occupancy for the last three years.
CBRE Real Estate and Andrew Behrens of CBRE’s San Francisco office secured $12.3 million in acquisition financing on behalf of the borrower. The 10-year fixed-rate loan was provided by Fannie Mae at CBRE’s lowest rate to date—3.07%.
Located in Denver’s Prospect neighborhood, the property is near schools, restaurants, major shopping centers, and Coors Field—home to the Colorado Rockies baseball team. At a 21% rent-to-income ratio, the city’s cost of living continues to increase, keeping the demand for affordable housing high while maintaining Denver as a desirable location for investors, says CBRE.
Looking at the overall affordable housing sales market, CBRE Affordable Housing reports that the average size of properties it has sold this year is 139 units, and the average price has been $57,057 per unit.
Properties on the market average about 14.5 years old, estimates Sheppard. They had recently been closer to 13 years but are trending closer to 15.
Beginning in 1990, new LIHTC developments were required to preserve affordability for 30 years, so most properties on the market will continue to be affordable for years to come even if they change hands, says Sheppard.
He advises affordable housing owners thinking about selling a property or portfolio to start planning early.