Avanath Capital Management has acquired a 669-unit workforce housing community located in Baldwin Hills for $230 million, or $343,796 per unit. Upside Investments sold the property.
The sale represents the largest single-asset sale in Los Angeles County this year, according to Northmarq, which arranged the sale and secured $121 million in acquisition financing from Fannie Mae.
The buyer purchased the property, known as Baldwin Village, as a joint venture with the Housing Authority of the city of Los Angeles and Kaiser Permanente. They plan to involve a few additional institutional investors in the coming months.
Baldwin Village is comprised of Santa Rosalia Apartment Homes — located at 4220 Santa Rosalia Drive — with 326 units and Santo Tomas Apartment Homes — located at 4318 Santo Tomas Drive — with 343 units.
The property, which is 98.5% occupied, is made up of 61 two-story walk-up structures built in the 1940s and 1950s. It includes studios, one-bedrooom, two-bedroom and three-bedroom units.
Avanath plans to convert 70% of Baldwin Village’s units into workforce housing, serving residents earning between 60% and 80% of the area’s median income and allowing the firm to provide budget-friendly homes in the country’s least affordable rental market, according to Daryl Carter, founder, chairman and chief executive of Avanath.
“With second quarter market-rate apartment rents increasing 17.3% year-over-year in Los Angeles, we are honored and excited to partner with these public and private entities to bolster the supply of affordable housing in a rapidly improving and increasingly expensive community,” Carter said in a statement.
For the acquisition of Baldwin Village Avanath worked with HACLA after the association created a solicitation for a partnership program last year in response to the shortage of affordable housing in Los Angeles. Through this collaboration, the community will be eligible for a California tax exemption for properties that serve tenants at 80% of area median income or lower, Carter said.
“Avanath has long championed public-private partnerships as an excellent solution for delivering quality affordable housing in markets experiencing especially high rental rates, where there is a lack of homes within reach of many lower-income families and individuals,” Carter said.
Baldwin Village marks the firm’s fifth acquisition in Los Angeles and second market-rate-to-affordable conversion without the use of tax credit equity, said John R. Williams, president and chief investment officer at Avanath Capital Management.
“Partnering with a public agency on this purchase speaks to Avanath’s reputation within the public sector and our ability to navigate programs that are mainly geared towards tax-credit developers,” Williams said. “With access to these programs, we are able to execute preservation strategies that position our residents and the community to thrive for the long term.”
Avanath has identified an opportunity to modernize the community in a fiscally responsible way on behalf of its residents, according to Keith Harris, executive vice president of acquisitions for Avanath.
“Working with HACLA enables us to assure low- and moderate-income tenants that rents will be kept affordable while simultaneously allowing us to make significant enhancements to the property,” Harris said. “Conducting these renovations will make Baldwin Village indistinguishable from nearby market-rate apartment communities.”
Planned improvements at the property include updating interiors and flooring, updating electrical infrastructure to support the addition of basic unit amenities.
In addition, Avanath will implement its social programming strategy to improve the resident experience, adding community engagement programs, financial literacy classes and health-oriented services.
