CDT, Southport Financial Services Pay $37M for Central CA Portfolio
- Jun 07, 2019
Five Central Valley California apartment properties serving low and very-low income residents have been acquired by a joint venture of the Community Development Trust (CDT) and Southport Financial Services for $37 million. The new ownership plans to invest another $6 million in capital improvements and renovations, which will help preserve the properties for residents at 50 to 60 percent of area median rent/income through 2050.
CDT provides long-term debt and equity capital for creation and preservation of affordable housing and charter school facilities. Southport is a long-standing operating partner with more than 16,000 affordable housing units across the country. The two companies have been partnering for more than 10 years to acquire and preserve affordable housing without the use of tax credits and bond cap, according to CDT’s Senior Vice President and Head of Acquisitions Michael Lear.
“That can be a challenge in today’s competitive market, as there is a good amount of shorter-term capital with less mission focus out there”, Lear told Multi-Housing News. “Our partnership was able to work with Red Capital Group—now Orix—to structure bridge-to-FHA financing. Through the FHA financing and CDT’s long-term equity, our JV is able to provide substantial funding for capital expenditures and capital reserves to ensure these properties will be maintained as high-quality affordable housing for the long run.”
Central Valley Locations
The portfolio acquired consists of the following five properties:
- Alderwood Apartments in Lemoore: a 23-year-old, 80-unit rental community situated in Kings County, about 30 miles south of Fresno and near Lemoore‘s U.S. Naval Air Station;
- Maplewood Apartments in Fresno: a 100-unit apartment property near the California State University;
- Mountainview Apartments in Porterville: a 60-unit apartment community in Tulare County.
- Pineview Apartments in Bakersfield: a 1996-built, 100-unit property near the California State University campus.
- The Meadows Apartments in Bakersfield: a 25-year-old, 100-unit San Joaquin Valley apartment community near the College of the Sequoias campus.
Out of reach
A report produced by the National Low Income Housing Coalition (NLIHC) indicates California renter wages remain significantly lower than housing costs. That report, “Out of Reach 2018,” reveals the state’s fair market rent for a two-bedroom apartment is $1,699. The average state renter earns $21.50 per hour but would have to earn $32.68 hourly to avoid paying more than 30 percent of his or her income on housing. That shortfall of $11.18 per hour makes the quest for affordable housing a challenge.
The joint venture’s capital improvements and renovations plan will preserve and maintain the properties in conjunction with non-profit housing and service provider Trillium Housing Services, with which CDT and Southport have partnered on previous California ventures.