The new Housing Partnership Equity Trust (HPET) has begun investing in affordable housing in collaboration with 12 nonprofit housing providers across the country.
Formed as a social-purpose real estate investment trust, it has raised $100 million from Citi, Morgan Stanley, Prudential Financial, Inc., the John D. and Catherine T. MacArthur Foundation, and the Ford Foundation.
Operated by the Housing Partnership Network, a business collaborative of leading housing and community nonprofits, the trust will serve as a ready source of long-term, low-cost capital, enabling the nonprofits to efficiently acquire multifamily buildings that will provide homes for families, seniors, and others with modest incomes.
In its first transaction, HPET will provide funds to enable Mercy Housing Lakefront to acquire and rehabilitate a 128-unit property in Aurora, Ill., preserving critical affordable housing without dependence on low-income housing tax credits (LIHTCs) or other public subsidies.
"The HPET demonstrates a new approach to funding affordable housing—one that will streamline the capital-raising process for acquiring affordable housing units and sharply reduce transaction costs as well as the time it takes to close on a transaction," said Drew Ades, CEO of HPET.
HPET will focus on providing equity investments in acquisition-rehab deals, he said.
It will target properties with access to public transportation and other community amenities. Capital improvements will be made to lower operating costs and utility expenses.
The initial 12 nonprofit members of HPET are AHC Housing, Inc.; BRIDGE Housing Corp.; Chicanos Por La Causa; Community Preservation and Development Corp.; Eden Housing, Inc.; Hispanic Housing Development Corp.; Homes for America, Inc.; LINC Housing Corp.; Mercy Housing; Nevada HAND, Inc.; NHP Foundation; and National Housing Trust/Enterprise.
They are experienced LIHTC developers and will continue to use that program to its fullest extent, but HPET provides them with an alternative source of funding, according to Ades.
With the first $100 million, officials hope to invest in about eight to 12 deals. However, the initial funding is seen as a platform to raise even more equity, Ades said.
"Too many affordable properties are being lost due either to gentrification or neglect. By providing a ready source of funds, enabling BRIDGE and similar organizations to acquire properties, HPET is the answer that so many community development organizations have been looking for to address the pressing need to preserve and improve our existing stock of affordable rental housing," said Cynthia A Parker, chair of the HPET board and president and CEO of BRIDGE Housing, a leading developer and owner of affordable housing, in a statement.
The idea for HPET grew out of Housing Partnership Network's peer exchange process.