By Chuck
Sudo | March 3, 2020
A Los
Angeles real estate investor specializing in preserving affordable housing for
seniors through public-private partnerships has completed the largest
affordable tax credit financing in Illinois history and lowered the rents for
half of the residents in one senior apartment building.
Los
Angeles-based Standard Communities is now turning its attention to opportunity
zones as it plans to grow in scale over the next five years, Chief Investment
Officer Robert Koerner told Senior Housing News.
Standard
Communities’ total portfolio includes more than 7,550 units in nine states,
housing more than 15,000 residents. Senior housing accounts for approximately
one third of the portfolio, with 23 communities in seven states, serving mixed-
and low-income seniors. Two thirds of Standard’s senior housing assets are
financed with a mix of private equity and low-income housing tax credits.
Standard
is aggressive in leveraging private debt to fund its acquisitions, rather than
relying on Department of Housing and Urban Development (HUD) loans.
Additionally, the firm looks for acquisition opportunities in states where it
has affordable housing experience, and identifies properties that are at risk
of losing affordable housing assistance where ownership is looking to exit the
properties quickly.
This
allows Standard to close deals quickly and move fast to renovate units, common
areas and a building’s plant, where a competing buyer would be content to
continue operating the building as-is.
“Usually,
the seller doesn’t want to wait around for a buyer to line up [Federal Housing
Administration] financing,” Koerner said.
Sticking
to existing markets
Sticking
to markets where it already has experience gives Standard an advantage in
obtaining tax credits and other financing mechanisms to preserve the
affordability of the buildings for tenants. The Illinois deal is an example.
Standard acquired six communities totaling 855 units in 2018, financed through
a combination of private debt and a $200 million tax-exempt bond issuance from
the Illinois Housing Development Authority.
It was
the largest bond issuance for a single project in Illinois history, and allowed
Standard to preserve the affordable component of the portfolio. The firm was
even able to obtain a federal rent subsidy for one building, which lowered
rents for half of its residents.
Standard’s
commitment to affordability extends to its holding strategy. The firm is a
long-term holder of its assets, typically up to 15 years.
While
acquisition has been the foundation for Standard’s growth in scale, it recently
pivoted to ground-up affordable housing development where it sees untapped
potential, Koerner said. Last month, the firm announced an affordable
development in Savannah, Georgia, using qualified opportunity zone funds.
The
Savannah project will not include senior housing, but Standard Companies is
looking for opportunities to build senior apartments using opportunity zone
funds.
“[Opportunity
zone developments] don’t always work because of how Census tracks line up,”
Koerner said.
The
pivot to ground up development and interest in opportunity zone projects are
components of an aggressive growth strategy for Standard Communities. The firm
expects to add up to 4,000 units to its portfolio annually over the next three
to five years.
“We
will pursue [opportunities] where we find them, if it’s of enough scale and we
can add value,” Koerner said.
Chuck
Sudo - Always inquisitive and often curmudgeonly, Chuck can often be
found on a bike unlocking Chicago's secrets, telling stories, making cocktails,
checking out live music, tearing through his podcast and Filmstruck queues and
playing with his pitbull, Mira.
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