Avanath Capital Management has announced the acquisition of a senior affordable housing community located in Sterling, Virginia, and a historic affordable family community in San Jose, California, comprising 209 units in total. The properties were purchased for $44.65 million.
The acquisitions represent the firm’s continued expansion into new markets as well as its ability to realize economies of scale in markets where it currently owns assets, according to John Williams, president and chief investment officer of Avanath Capital Management, a private real estate firm that invests in affordable and workforce housing properties throughout the U.S.
“Northern Virginia, where we now own four assets, and Northern California, where we now own eight assets, are two regions that show great potential for continued economic growth and affordable housing demand, as well as favorable risk-adjusted returns for our investors,” he said.
The firm has acquired Cascades Village, a 150-unit affordable senior housing community in Sterling for $27.15 million. It is located in Loudon County, one of the most affluent counties in the metro Washington, D.C., area.
“Avanath was attracted to Sterling because home pricing and existing market-rate product in the market are unaffordable to lower-income renters, resulting in a significant demand for affordable rental units in the area,” said Williams.
The financing for the transaction included a $17.1 million Fannie Mae loan provided by M&T Realty Capital Corp. The loan has a 10-year, fixed-rate term with 10 years of interest-only payments at an interest rate of 2.58%. The transaction was led by M&T Realty Capital managing director Matthew Hodson.
Built in 2001, Cascades Village is a three-story apartment community that is restricted to residents 55 and older and is 98.7% occupied. The development features 180 surface parking spaces and community amenities, including 24-hour emergency maintenance, a beauty salon, billiards, controlled-access entry, elevator service, a fitness center, a gazebo, a hospitality suite for guests, a library, a multipurpose entertainment room, on-site laundry facilities, a solarium, an outdoor patio with charcoal grills, and a screened-in porch.
Avanath is planning to implement its value-add strategy to the property, which includes adding tenant wellness services and senior activity planning and improvements to the common areas and amenity spaces.
The firm has also acquired Vintage Tower, a 59-unit historic affordable housing community in San Jose for $17.5 million.
“There is a demonstrated need for properties that provide important affordable housing to qualifying residents in the San Jose market,” said Williams. “While Vintage Tower is Avanath’s 13th acquisition in Northern California, it is our first acquisition in San Jose. This community presents an opportunity to acquire a historical, high-rise apartment building that provides housing to low-income families in one of the most expensive markets in the country and the potential for strong returns for our investors.”
Vintage Tower was acquired with $10.27 from a Fannie Mae loan provided by CBRE as the DUS lender. The loan has a 10-year fixed rate term with seven years of interest-only payments at an interest rate of 2.57%. The financing was led by Stephen Baird of CBRE Capital Market.
Built in 1928 in the heart of downtown and renovated in 1987 and 2004, Vintage Tower is a fully occupied 12-story mid-rise building with an average of 559 square feet per unit. The community features in-unit amenities including a self-cleaning oven, a dishwasher, and a garbage disposal. Two penthouse units on the 11th floor also have large private balconies. In addition to 76 parking spaces on the first floor of the adjacent property to the north, the property features community amenities including two elevators, secured access, an on-site laundry facility, a courtyard, and additional storage space.
Due to its age, history, and location, Vintage Tower has been designated as an historic city landmark in San Jose. Originally constructed as a medical and dental building, the property was converted to apartments and commercial space in 1987 utilizing low-income housing tax credits (LIHTCs). San Jose First United Methodist, a church founded in 1847 that is located adjacent to the property, participated in a second LIHTC refunding of Vintage Tower in 2004, which included improving residential units and retail spaces, seismic upgrading, and a new courtyard and exercise facility.
The property contains unique historic features including original art painted on walls and wood on various floors, carved wood banisters in stairwells, two original 2,000-gallon water-storage tanks from 1928 in the maintenance shop, and an original medical incinerator located in the manager’s office.
Avanath is planning to invest capital into the property for continued improvements to the units and exterior. In addition, the firm is implementing a free program for residents where it partnered with Wellbeats, a fitness app that offers various virtual classes, to all residents of Vintage Tower, which will allow residents to exercise at home during the COVID-19 pandemic.
