Black-owned firms partner to launch affordable-housing REIT

Two large Black-owned real estate investment firms in the U.S. have partnered to launch a public real estate company to promote affordable housing. This will be the first of its kind.

The two firms are: California-based Avanath Capital Management and San Francisco-based MacFarlane Partners. Both companies have filed paperwork with the Securities and Exchange Commission (SEC) to start up a new real estate investment trust, with a target of $1.6 billion in investments.

“We will be the first publicly traded REIT to pursue a strategy focused on affordable and workforce multifamily housing,” the companies wrote on their registration form for the new entity called Aspire Real Estate, on Friday. “These sectors historically have been fragmented in ownership and underserved by institutional capital, yet they comprise a majority of the U.S. multifamily market (by units) and offer strong long-term fundamentals to generate attractive returns for investors.”

The new REIT will focus on federal Opportunity Zones, as well as other investment areas in affordable housing and workforce housing which will be available to renters whose maximum income is 60% of the area’s median.

The firm will “invest in, develop, redevelop and manage mostly affordable and workforce multifamily properties in Opportunity zones, in dynamic, US metropolitan areas,” the filing carried.

Avanath Capital was founded in 2007 by Daryl J. Carter. In 2018, the firm reportedly had $1.2 billion in assets under management (AUM). While MacFarlane Partners was founded by Victor MacFarlane in 1987.

According to the prospectus, Aspire Real Estate Investors already has a line-up of nine investments in its initial portfolio in Florida, Illinois, Texas, Michigan, California and North Carolina which will sum up to $582.4 million, including acquisition and redevelopment costs. Five of the properties in the initial portfolio: Arbors at Cary, Academy at Waterford Lakes, Oak Village, Seaport Village, and Woodside Senior, regarded as existing operating properties. These properties which Entitled will purchase from an Avanath-managed private investment fund for a purchase price of approximately $176.4 million.

The new REIT also said it has identified an acquisition pipeline which will total $1.1 billion worth of projects.

“Moreover, we intend to elect and qualify as the first publicly traded Opportunity Zone Fund REIT listed on a national securities exchange, which we expect will provide our investors with meaningful tax benefits available as part of the Opportunity Zone tax legislation,” the filing said.

The filing said over the longer-term the investments in and out of Opportunity Zones will be “focused on assets in high-growth metropolitan areas.”

“We believe the affordable and workforce housing sectors offer attractive risk-adjusted returns, with superior supply and demand dynamics and greater fragmentation of existing ownership than the market-rate segment of the multifamily market,” both companies said.