By Ariela Moraru
Avanath Capital Management LLC has nearly doubled its footprint in the Sacramento region with the acquisition of a $56.5 million affordable housing portfolio, bringing its total concentration of units to 1,034 apartment homes. In an off-market transaction, the firm purchased three apartment communities totaling 468 units from an affordable housing developer.
What makes Sacramento one of the nation’s hottest markets?
“Sacramento is one of the hottest real estate markets in the nation right now and is experiencing explosive growth,” said John Williams, Avanath president & CIO, in prepared remarks. “The market has made a tremendous comeback since the recession and leads the nation in highest annual effective rent growth, with rental increases exceeding 10.5 percent last year. This surge in market-rate rents is placing enormous pressure on renters and driving demand for affordable housing throughout the region.” Williams also pointed out that a regional migration is underway as the surrounding Sacramento suburbs are still a more affordable alternative to the Bay Area, despite the region’s rent hike due to limited supply.
Mixed portfolio catering to different age and income demographics
Built in 2005 and 2006 under the Low Income Housing Tax Credit program, the portfolio caters to seniors, families and mixed-income renters and offers one-, two-, and three-bedroom apartments averaging 922 square feet. Upon closing, the portfolio had an occupancy rate of 98.5 percent.
“Eighty percent of new multifamily developments in the largest U.S. metros target the affluent millennial demographic, while the majority of renters are low and middle-income families earning an average of $35,000 a year,” said Williams in a prepared statement. “This disproportionate supply of luxury to workforce inventory indicates a severe lack of affordable housing to support the largest stock of renters. By catering to these underserved families and seniors, we will be able to maintain high occupancies and drive consistent, risk-adjusted returns for our investors.”
The company plans to renovate the properties and introduce social services in partnership with COR-CDC, such as after-school tutoring programs, fitness classes and computer literacy courses. Planned renovations include upgrading exterior paint, installing LED lighting for energy efficiency and revitalizing some common areas.
Located at 8280 Geneva Pointe Drive in Elk Grove, Calif., the 152 affordable-unit community serves families earning between 50 and 60 percent of the area median income and offers after-school programs. Property amenities include a clubhouse, a business center, a fitness room and a pool. Local employers in the education, health care, distribution and professional services sectors like Consumnes River College are only a short commute away.
Located at 1395 N. Lincoln St. in Dixon, Calif., the 172-unit mixed-income community comprises 95 affordable family units, 48 affordable senior units and 29 market-rate units. Community amenities include a clubhouse with a business center, a fitness room, a pool and spa, and a separate community center dedicated entirely to seniors.
Lincoln Creek is part of Solana County, where employment growth was driven by the manufacturing, financial services, leisure and hospitality sectors.
Located at 4500 Elverta Road in Antelope, Calif., the 144-unit community serves seniors earning 50 to 60 percent of the area median income. Social services provided include educational classes, transportation services and activities such as monthly potlucks, game nights and community-oriented events. With no new multifamily construction underway in Antelope, the community benefits from the supply-constrained market with limited competition and high demand.
Images courtesy of Avanath Capital Management LLC