$37 million deal preserves affordable housing in the Valley
New York, NY – Two Tulare County apartment complexes were part of a $37 million deal to preserve affordable housing in the Central Valley.
On June 7, Community Development Trust (CDT), which provides long-term debt and equity capital for the creation and preservation of affordable housing and charter school facilities, announced a joint venture with Southport Financial Services Inc. to purchase and improve five apartment complexes totaling 484 units, including: The Meadows Apartments in Visalia, a 100-unit apartment complex in the San Joaquin Valley built in 1994 near the College of the Sequoias campus; and Mountain View Apartments in Porterville, a 60-unit apartment complex in Tulare County built in 1994.
The CDT-Southport partnership plans to invest another $6 million into improving and renovating the apartments to preserve affordable housing options for low- and very low-income residents, those at 50-60% of area median rent/income levels, living in tight rental markets through 2050. The joint venture is highlighted by a capital plan allocating approximately $6 million toward capital improvements and reserves. They will preserve and maintain the properties in conjunction with Trillium Housing Services, a nonprofit housing and service provider that CDT and Southport have partnered with on previous California joint ventures.
The deal also included: Alderwood Apartments in Lemoore, an 80-unit apartment complex built in 1996 near the city’s U.S. Naval Air Station; Maplewood Apartments in Fresno, a 100-unit apartment complex built in 1996 near the city’s California State University campus; and Pineview Apartments in Bakersfield, a 110-unit apartment complex built in 1996 near the city’s California State University campus.
“CDT’s investment with Southport is a ‘win-win’ for both organizations that reflects our mission of preserving affordable housing opportunities for low-income families,” said CDT Senior Vice President and Head of Acquisitions Michael Lear. “The partnership is part of our larger commitment to ensure long-term access to quality, safe and affordable housing in California and throughout the country.”
The announcement is the latest in a series of CDT-Southport acquisitions spanning 14 years and nine completed transactions. The two companies most recently combined on a $16 million joint venture in 2017 to purchase three affordable California housing apartment complexes, in Kings County, San Bernardino County and Yuba County. The new 2019 investment that will expand their joint portfolio to nearly 900 units in California. Southport is a longtime CDT operating partner with over 16,000 units of affordable housing under ownership throughout the West Coast, Midwest and East Coast.
“We were particularly attracted to this portfolio because it provides both our teams with the ability to create long-term stability for families and senior citizens in an area of the state where affordable units represent a critical unmet need,” said Paul Fortino, Senior Vice President of Southport Financial Services.
Renter wages in California continue to fall short of housing costs, according to data included in the National Low Income Housing Coalition’s (NLIHC) “Out of Reach 2018” report. The fair market rent in California for a two-bedroom apartment is $1,699. The average renter in the state earns $21.50 per hour, NLIHC reports. But in order to afford this level of rent and utilities – without paying more than 30% of income on housing – a household must earn $5,665 monthly or $67,976 annually. Assuming a 40-hour workweek, 52 weeks per year, this level of income translates into an hourly housing wage of $32.68 per hour – a shortfall of $11.18 per hour that makes finding affordable housing difficult.
The challenge to find affordable housing is particularly escalating in the state’s Central Valley, which the Sacramento Bee described last year as “slowly becoming a society of renters.”
Data from the U.S. Census Bureau show that many counties in the valley, including Kings and San Joaquin, have seen double-digit growth in renter-occupied households and only modest gains in homeownership – if not single-digit declines since 2011. Between 2011 and 2017, the number of owner-occupied homes in the valley fell by three-tenths of a percentage point, whereas renter-occupied households grew to 103,000, an 11% increase, according to census data cited in the Bee report.
Across California, NLIHC data show there is a shortage of more than 1 million rental homes that are affordable and available to extremely low-income households (ELI). Approximately 1 in 5 California renters – 22% of the state’s more than 1.3 million ELI renter households – have incomes that are at or below the poverty guideline or 30% of their area median income. Many of these households are severely cost burdened, spending more than half of their income on housing, NLIHC reports. Severely cost-burdened poor households are more likely than other renters to sacrifice other necessities like healthy food and health care to pay the rent, and to experience unstable housing situations like evictions.
“Together with CDT, we are helping to build better communities by providing families with quality affordable housing and amenities that will help parents and their children to thrive and for the elderly to live with dignity and peace of mind,” Southport’s Fortino said.
The Community Development Trust (CDT) is a national lender and investor in affordable communities. Working with local, regional and national partners, CDT makes long-term equity investments and originates and acquires long-term mortgages. In its 20 years, CDT has invested over $1.7 billion in debt and equity capital in properties in 44 states and regions — helping to preserve and create over 47,000 units of affordable housing. CDT is a private real estate investment trust (REIT), a certified Community Development Financial Institution (CDFI), an approved Fannie Mae affordable housing lender and a member of the Federal Home Loan Bank of New York (FHLBNY). As a CDFI and private REIT with a social impact mission, CDT operates as a double-bottom-line organization by utilizing creative financial solutions to provide debt and equity capital to underserved real estate markets, all while seeking attractive returns for shareholders.