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Newly Formed MCHP to Operate Like Simpson Housing Solutions, Says CEO
Published: June 09, 2008
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By Anuradha Kher, Online News Editor
Long Beach, Calif.--Avanath Capital Partners and MacFarlane Costa Housing Partners (MCHP) have acquired Simpson Housing Solutions (SHS) and its portfolio of 273 properties, representing 26,000 affordable rental apartments in 33 states, the District of Columbia and Puerto Rico.
“We will run MCHP the same way as we did Simpson Housing Solutions,” Michael Costa (pictured), president and CEO of MCHP, tells MHN. "The only change will be that we will now focus on our own development processes instead of third party syndication."
Earlier this year, SHS was ranked by Affordable Housing Finance magazine as the fifth-largest owner of affordable housing in the United States. It owned the most units of affordable housing in California.
The firm, which was a wholly owned subsidiary of Simpson Housing LLP, specialized in the development, rehabilitation and management of rental apartment communities that qualify for the federal Low Income Housing Tax Credit (LIHTC), an indirect subsidy to facilitate private-sector investment in affordable housing. More than half of its 273 properties are located in California.
“Our parent company, Simpson Housing, wanted to sell SHS in order to focus more on market-rate properties and I always wanted to buy it. The money from the sale of SHS will be used by Simpson Housing to focus on market-rate apartments, which has always been company’s business objective,” explains Costa.
In the initial phase of what will be a two-phase transaction, ownership of the former SHS portfolio will be jointly held by Avanath Affordable Capital, a wholly owned subsidiary of Avanath Capital Partners, and MCHP. MCHP is a newly formed joint venture between Michael Costa, the long-time president of SHS, and MacFarlane Partners Affordable Housing (MPAH), an affiliate of MacFarlane Partners, a real estate investment management firm headquartered in San Francisco.
In the transaction's second phase, which is expected to occur later this year, Avanath will acquire sole ownership of SHS' general partnership interests in the investment funds or partnerships that own the 26,000-unit portfolio, as well as an experienced staff of SHS asset management and partnership accounting professionals. In completing the transaction, it will be one of the largest owners and managers of affordable housing in the country.
Following the second phase of the transaction, MCHP will retain SHS' property development, finance and corporate accounting functions and continue to develop affordable housing. MCHP will be led by Costa, who founded the firm's predecessor entity in 1994, and will be fully staffed by former 68 SHS employees, working from their headquarters in Long Beach, Calif.
Costa expects that MCHP will develop 1,000 to 1,500 apartment units each year. Properties will consist entirely of affordable housing financed through the use of the LIHTC or will feature a mix of market-rate apartments and affordable units that qualify for the LIHTC and/or are financed with proceeds from the sale of tax-exempt bonds issued by government agencies.
