Partnership Formed to Own 275 MF Properties

Dees Stribling, Contributing Editor

Gardena, Calif.–Real estate veteran Michael A. Costa, along with El Segundo, Calif.-based Highridge Partners and the financial giant Citibank, have formed a joint venture to own and manage a sizable portfolio of multifamily properites. The new entity, Highridge Costa Housing Partners L.L.C. (HCHP), will be located in Gardena, with Costa as its president and CEO.

HCHP will hold a general partnership interest in the $3.4 billion portfolio, which comprises about 275 multifamily and seniors apartment complexes in 34 states and Puerto Rico. All together, the properties contain nearly 27,000 housing units with a total population of 88,000 residents. Nearly half of the properties are located in California, and all were developed using federal low-income housing tax credits.

Over the last 15 years or so, a variety of companies controlled by Costa put together the portfolio by acquisition, as well as the development of new affordable multifamily and seniors housing properties in California and other western states. However, Costa lost control of the portfolio during the real estate meltdown of the last few years, and it eventually ended up in the hands of lender Citibank.

Costa has been negotiating with Citibank for about a year to re-acquire the portfolio one way or another. Private investor Highridge Partners brought $40 million to the deal, thus allowing Citibank’s $100 million loan to be converted into equity in the portfolio. According to the partners, the plan is to eventually pay back the entire $100 million, relying on cash flow from continued operations. Ultimately, within 15 years, the 275 properties will be re-syndicated.

In addition to managing the existing portfolio, the partners say they will seek to develop new affordable tax credit apartment communities, primarily in California, through a separate corporate structure. “With tax credit financing still available to support high-quality affordable housing developments, and with [our experience] in tax credit syndications, development and operations, we can continue to deliver new affordable housing,” Costa said in a statement.

Costa added that the company already has seven projects in various stages of pre-development and will submit applications for several of them in the October tax credit allocation round. More immediately, HCHP expects to break ground within the next 30 days on an as-yet unnamed 62-unit multifamily property in Hesperia, Calif.