Irvine, Calif.—Affordable and workforce housing-focused private real estate investor Avanath Capital Management has acquired two affordable multifamily properties, one in the Seattle area and another in Northern California. The Seattle-area property marks the firm’s initial foray into the Pacific Northwest market. The two assets are the last two acquisitions purchased through the Avanath Affordable Housing Fund II.
“Both assets are in high-cost [and] high-demand markets that have a definitive need for high-quality, affordable housing,” John Williams, Avanath president and chief executive officer, told MHN. “Our Fund II is expected to achieve 12 to 15 percent net return for our investors.”
Avanath acquired Silver Springs, a 100-percent affordable apartment community in Kent, Wash., for $32.2 million. Kent is an expanding submarket that is the country’s third largest industrial area, and is exceptionally well positioned to leverage the demand for workforce housing in the area. It is home to some of the country’s most prominent warehouse distribution and manufacturing centers.
The 16-year-old Silver Springs apartment community was 98 percent occupied at the time of acquisition and features a competitive amenity array including a pool and spa, in-unit washers-dryers, storage units and garages. Renovations to the property’s clubhouse and leasing center are planned to keep the quality on par with market-rate housing.
Silver Springs is situated just five minutes from Kent Station, a newly developed downtown area that provides shopping, dining and retail services and commuter service to downtown Seattle. The property was purchased from a local private developer.
Oak Village, a 100 percent affordable housing development in Oakland, Calif. was also acquired by Avanath. It is situated within walking distance of two other Avanath-owned affordable multifamily properties.
“Rents in the Bay Area are soaring to unprecedented heights,” Williams said. He noted that double-digit rent increases continue to take effect year after year. As an example, Oakland registered a 12.3 percent increase from 2014-2015, the second largest in the nation.
The 43-year-old property was renovated in 2004 under the Low Income Housing Tax Credit (LIHTC) program. Oak Village was nearly 100 percent occupied at acquisition and features a fitness center, clubhouse, computer room and laundry room. Drought-resistant landscaping is among the improvements planned for the community, which is located close to job centers and BART transit stations. Avanath acquired the property from a repeat seller, a large private owner and developer.
“We have been successful in affordable assets, so we were anxious to return to that market,” Williams said. “With respect to the Seattle area, we wanted to expand our market footprint to such a dynamic market, with a need for affordable housing . . . On the Oakland asset, there was a winner bidder, who dropped out of their contract. Since we had experience with the seller, they called us because they knew we had the ability to close on short notice.
“Regarding the Seattle property, we were not the highest bidder, but we were awarded the transaction, because we had discretionary capital and the seller viewed us as the most likely buyer to close in the shortest period.”