$2B JV Targets California’s ‘Missing Middle’
- Aug 19, 2021
Standard Communities and Faring have formed a joint venture to create $2 billion of middle-income housing throughout California over the next two years through a combination of acquisitions and ground-up developments.
Using California’s public-partnership structure that relies on tax-exempt bond financing, Standard-Faring Essential Housing has already created more than 650 units of middle-income housing at three properties with a total capitalization of more than $400 million.
Chris Cruz, managing director of essential housing at Standard Communities, an affordable and workforce investment firm based in New York and Los Angeles, said the joint venture is well on its way to meet its 24-month plan.
“We have over $300 million under contract and an active pipeline of offers out and negotiations in excess of $500 million,” Cruz told Multi-Housing News.
The joint venture will focus mainly on an acquisition and conversion strategy of existing properties. However, Cruz noted the partnership will continue looking for “projects of scale to move forward with on the development side.” They are targeting areas in southern Los Angeles County, Orange County and the Bay Area in northern California for both acquisitions and ground-up projects, Cruz told MHN.
Using a Joint Powers Authority (JPA) public-private partnership structure, the transactions are acquired with tax-exempt bond financing provided by the CSCDA Community Improvement Authority, which becomes the owner of the properties. Standard-Faring Essential Housing serves as project administrator and the entities work to immediately lower rents for new residents who qualify with incomes between 80 percent and 120 percent of the area median income (AMI). According to Cruz, Standard acts as the asset manager and is responsible for the operations at the properties.
Traditionally, California’s state-administered affordable housing programs have focused on housing for households earning no more than 80 percent of AMI, creating a “missing-middle” gap for those households that earn too much to qualify for affordable housing programs, but not enough to afford market-rate rents.
Jeffrey Jaeger, principal & co-founder of Standard Communities, said in a prepared statement the public-private structure they are using helps cities keep middle-income families and essential workers like first responders, hospital and healthcare staff and teachers live in the communities they serve. The need is particularly crucial in California, which is in the midst of a severe housing shortage, he said.
The first multifamily property that was acquired and converted to dedicated middle-income housing was Renaissance at City Center, a mixed-use asset with 150 units located at 21800 S. Avalon Blvd. in Carson, Calif. Standard Communities served as project administrator and led the $78 million transaction that transitioned the property from market-rate to middle-income housing in 54 days. The partnership included the CSCDA Community Improvement Authority, Stifel Nicolaus & Co. and the city of Carson.
Built in 2013 as a luxury mixed-use community, the property also includes more than 12,000 square feet of retail space. It features premium finishes and amenities including a pool, fitness center, recreation room, movie theater and pet grooming facility.
Since that late December announcement, two more properties were acquired and converted using the same public-private partnership structure.
Last month, the partnership worked again with the city of Carson in a transaction that created 357 middle-income housing units at Union South Bay Apartments at 615 E. Carson St. The total capitalization of the transaction was more than $220 million. The property consists of two five-story buildings on 5 acres and includes more than 28,000 square feet of retail. Completed in 2020, the property features premium finishes and amenities including a fitness center, rooftop deck, resort-style swimming pool, indoor/outdoor bar and dog washing station.
In June, Standard led a public-private partnership that included the city of Glendale, Calif., to acquire The Link Apartments, a 143-unit community at 3909 San Fernando Road in Glendale. The total capitalization of the transaction was more than $100 million. Built in 2020, the mixed-use property has 13,520 square feet of ground-floor retail space. The community’s amenities include a fitness center, pool, courtyard with games, BBQ lounge, clubhouse with a game room and catering kitchen, and on-site parking with 236 free garage parking spaces.