Waterford Property Co. has teamed up with a statewide financing authority to acquire a large apartment building in Anaheim, Calif., which the partners will convert into workforce housing geared towards middle-income renters. The duo paid $156 million for the luxury property, Parallel Apartments at 1105 E. Katella, marking the biggest multifamily deal in Orange County since 2016.
Waterford secured the asset in partnership with the California Statewide Communities Development Authority (CSCDA), a joint powers authority composed of hundreds of cities, counties and special districts across the Golden State. The property was sold by UDR Inc., a publicly traded REIT. Joseph Smolen, Geoff Boler, and Lee Redmond of Eastdil Secured represented both parties in the deal.
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After partnering with CSCD, Waterford identified the real estate opportunity, handled the underwriting and property-level due diligence, and will now convert the asset into workforce housing as the operator of the project, John Drachman, the firm’s co-founder, noted to Multi-Housing News.
“Waterford will begin immediately offering the lower rents to new tenants,” he commented. “It will take time to implement across the entire asset as we will not displace any current tenants. Our goal is to implement the new rents as quickly as possible.”
Built in 2018, Parallel Apartments sits on a 3.6-acre site in the city’s emerging Platinum Triangle district, a former industrial area that is giving rise to new office, retail and residential projects. The property is currently 95.5 percent leased, according to a statement by the buyers. The one-building, five-story community includes a mix of studio, one- and two-bedroom units along with amenities such as a resort-style pool, basketball court and rooftop gym.
Luxury to workforce
Waterford and CSCDA said they plan to lower rents in the property to serve middle-income residents earning between 80 and 120 percent of the area median income, a segment that often find itself priced out of the region. The project forms part of a new Workforce Housing Program launched by CSCDA last year, under which the authority sells tax-exempts bonds to purchase rental properties and restricts rents to affordable levels for moderate- or middle-income residents.
Workforce housing for this “missing middle” segment is not eligible for tax credits or most federal, state or local government subsidies, and it rarely makes economic sense for developers to build for this market. The City of Anaheim announced last November that it would work with CSCDA to reduce rents at more than 1,000 apartments, with a focus on the city’s workforce including first responders, nurses and teachers.
In December, Standard Communities partnered with CSCDA to acquire a downtown luxury apartment project in Carson, within Los Angeles County’s South Bay region, with plans to convert the 150-unit community into workforce housing. Standard Communities led the $78 million transaction and serves as the property’s asset manager on the authority’s behalf.
Waterford specializes in affordable housing projects as well as entitling large mixed-use developments throughout Southern California, where it has more than 1,355 entitled residential units, according to the company’s website.