Avanath JV Acquires $220M Workforce Community
This represents the largest single-asset sale in Los Angeles County this year.
Avanath Capital Management has acquired Baldwin Village, a 669-unit family workforce housing community in Los Angeles. In partnership with the Housing Authority of the City of Los Angeles and Kaiser Permanente, the firm purchased the property from Upside Investments for $220 million in a deal that will eventually convert most of the units to affordable housing.
The sale represents the largest single asset sale in Los Angeles County this year, according to Northmarq, which arranged the sale and secured $121 million in acquisition financing from Fannie Mae. Vince Norris, Jim Fisher, Mike Smith, Bryan Schellinger and Shane Shafer collaborated to complete the sale. Joe Giordani, Scott Botsford and Brendan Golding of Northmarq’s debt and equity team in Newport Beach, Calif., secured the Fannie Mae financing. Giordani said in prepared remarks the team secured full-term, interest-only floating rate debt with an aggressive spread and proceeds of 55 percent loan to purchase price. Giordani added they were able to push their Fannie Mae affordable group to underwrite collections aggressively and maximize loan proceeds for Avanath.
Daryl Carter, founder, chairman & CEO of Avanath Capital Management said in a prepared statement the plan calls for making 70 percent of the property’s units available to residents earning between 60 percent and 80 percent of the area median income to create budget-friendly homes in the country’s least affordable rental market. Carter noted that market-rate apartments in Los Angeles had rental increases of 17.3 percent year-over-year in the second quarter.
Avanath plans to add more institutional investors to the joint venture in the coming months. Carter said Avanath, an Irvine, Calif.,-based private real estate investment manager that focuses on providing attainable residences in several markets across the United States, worked with HACLA after the association solicited partners in 2021 for a program to respond to the affordable housing shortage in the city of Los Angeles. Carter said the collaboration will make the community eligible for a California tax exemption for properties serving residents at 80 precent AMI or lower.
The transaction marks the firm’s fifth acquisition in Los Angeles and the second market-rate-to-affordable conversion without the use of tax credit equity, according to John Williams, president & CIO at Avanath Capital Management. In March, the company secured $536 million for its open-ended affordable housing fund. Earlier this month, Avanath purchased a six-community affordable and senior housing portfolio totaling 1,032 units in Sacramento, Calif., in an off-market recapitalization for a total of $181.6 million.
Baldwin Village, which is comprised of Santa Rosalia Apartment Homes with 326 units and Santo Tomas Apartment Homes with 343 units, will be managed by Avanath’s property management group, Avanath Communities Inc.
Keith Harris, executive vice president of acquisitions at Avanath, said in prepared remarks that working with HACLA will enable Avanath to keep rents affordable for low- and moderate-income residents while also making significant enhancements to the property. Planned renovations include updating interiors and flooring and electrical infrastructure to support the addition of dishwashers and microwaves. Furnaces and roofs will be replaced. Upgrades will also be made to public infrastructure including transformers and conduits owned by the Los Angeles Department of Water and Power utility company.
Avanath will offer social programming for residents, including community engagement programs, financial literacy classes and health-oriented services.
The apartment community is 98.5 percent occupied and consists of 61 two-story walk-up structures totaling 324 one-bedroom units, 296 two-bedroom units, 31 three-bedroom units and 13 studios. Common amenities at the property include 358 surface parking spaces and 452 garage spaces, electric doors in some garages and central laundry facilities. Apartment features include stainless steel appliances, high-speed internet access and ceiling fans.
The community has a total of more than 1 million square feet of space, according to Northmarq. Built in 1940s and 1950s, Santa Rosalia Apartment Homes is located at 4220 Santa Rosalia Drive and Santo Tomas Apartment Homes is located at 4318 Santo Tomas Drive. Baldwin Village is part of the Los Angeles-Long Beach-Glendale market. The transit-oriented property is located near shopping and public transportation. It is a 20-minute drive southwest of Downtown Los Angeles and 24 minutes northeast of Los Angeles International Airport.