To say the Pynchon Terrace/Edgewater apartment community is the affordable housing anchor of Springfield, Mass., is an understatement.
Spread out over five city blocks, 612 units comprise a “city within the city” spanning 51 buildings, including a 10-story high-rise. Over 80 percent of the units are under a long-term Housing Assistance Payment contract and many other tenants use Section 8 vouchers. The clean, well-maintained apartment community is central to the low-cost housing strategy of this western Massachusetts town of 153,000.
In June, BLVD Capital, a Los Angeles-based privately held real estate investment company, closed on the purchase of the $76 million apartment community. The acquisition locks-up the property’s affordability status for 20 more years, a direct benefit to the residents and the city.
The Pynchon Terrace/Edgewater deal illustrates why “… affordable housing is an acceptable asset class for investment,” BLVD Capital principal Patrick Luke explains. “Affordable housing properties are often misunderstood as low-quality properties.
“The reality is a very large portion of affordable housing stock is in great condition. Fortunately, many investors now recognize that and sentiment appears to be shifting to affordable housing.”
Win-Win Opportunity
That’s welcome news for low-income Americans who depend on subsidized housing to keep a roof over their heads through the pandemic. For investors searching for stable returns, properties like Pynchon (pronounced PEA-shon) Terrace/Edgewater are a particularly attractive opportunity.
BLVD Capital understands the advantages. “Through project-based Section 8 subsidies, low-income housing tax credits, and other local and federal programs, we aim to preserve and expand long-term housing affordability,” says Luke. The BLVD team maintains an undefined hold time on their properties and, in the case of Pynchon/Edgewater, plans are underway for property upgrades and green building improvements.
Safe Harbor
The real test of investor sentiment is happening right now. One expert who has closely followed that trajectory since the pandemic’s early days is Jim Flinn, vice chairman of the debt and structured finance team at CBRE Affordable Housing. BLVD Capital selected Flinn’s team for the acquisition capital, a 10-year, fixed-rate loan through Freddie Mac.
“The pandemic highlights how Section 8 housing is one of the safest bets investors can make. There’s almost no collection decline. Occupancy is stable. Financing rates are low. The long wait lists indicate just how important a Section 8 property is,” says Flinn, who also credits Freddie Mac in helping get the deal done. “Their special rate-lock feature right after application and green building upgrade incentives helped ensure the deal hit the loan amount BLVD wanted.”
Big Winners
The big winner, of course, are Pynchon Terrace/Edgewater residents.
“Subsidized housing is a tremendous benefit to residents because they have a home even if they lose their job,” Luke says. “Growing affordable housing stock is more important than ever. We plan to be part of the solution by offering clean, safe housing for our most vulnerable citizens.”
