Avanath Capital Management, a private real estate investment manager based in Irvine, Calif., closed eight affordable housing acquisitions with almost 1,700 units in 2014 and has bigger plans for this year.
“In the current economic environment, the affordable housing sector continues to be one of the few segments of the real estate investment industry with attractive economics, boasting excellent and sustainable risk-adjusted returns with high barriers to entry and strong downside protection,” says John Williams, president and CIO.
The eight communities were purchased through Avanath Affordable Housing II, a fund with $200 million of equity commitments; another two acquisitions are under contract. The 2014 acquisitions were double what the firm had acquired the previous year.
The communities, located in four states, include: the 101-unit Castelar in Los Angeles; the 212-unit Natomas Park in Sacramento, Calif.; the 528-unit Northpointe in Long Beach, Calif.; the 144-unit Woodside Senior Apartments in Ontario, Calif.; the 176-unit Ospreys Landing in Naples, Fla.; the 228-unit Cypress Club in Orlando, Fla.; the 143-unit Fields of Germantown in Germantown, Md.; and the 150-unit Eagle View Court in Middle Island, N.Y.
The properties all have some level of rehab to them, Williams says, estimating that renovations will be approximately $2,000 to $5,000 per unit.
The firm has a focus on acquiring properties in high barrier-to-entry markets that are very expensive and high job-growth markets. “There’s a high demand for affordable housing in those markets,” he adds.
Avanath expects 2015 to be another big acquisition year for the firm. “We’re off to a good start, and we are looking at a lot of things,” says Williams, adding that the firm will probably invest another $100 million to purchase 15 new assets through the same fund.
He says the firm will raise the Avanath Affordable Housing III fund toward the end of the year.
“We have a lot of investor demand. We’ll probably be one of the largest buyers of affordable housing over the next eight to 10 years,” Williams says. “The long-term goal is that we preserve and enhance affordable workforce housing.”