Middleburg Closes First Deal on $75M Workforce Housing Fund
Middleburg says that it will continue to raise capital and add other assets and high net investors to the fund, which is expandable to $75 million and offers Middleburg the capacity to invest in approximately $250 million of assets.
VIENNA, VA—Locally-based real estate investment firm Middleburg reports it has launched a $75-million Workforce Housing Fund and has closed on its initial asset—the $30-million Vesta Derby Oaks in Louisville, KY.
In terms of the Workforce Housing Fund, Middleburg says that it will continue to raise capital and add other assets and high net investors to the fund, which is expandable to $75 million and offers Middleburg the capacity to invest in approximately $250 million of assets.
“The lack of supply of quality rental housing affordable to working families and individuals has reached crisis levels. Our investments through the fund not only provide high quality rental housing, but achieve strong returns for our partners, who appreciate the social impact of community building,” says Middleburg managing partner Chris Finlay. “Vesta Derby Oaks is a great template for how we can create real transformational impact in the community, with far reaching benefits.”
Middleburg acquired the former dilapidated Arcadia Apartments complex in Louisville in October 2018 for $9 million and renamed the low-income property Vesta Derby Oaks and is undertaking $16 million in renovations, according to a report in the Insider Louisville. The report notes that more than 200 of the units at the renovated 418-unit property will be marketed as workforce housing. The firm is reportedly receiving $2 million in incentives from the City of Louisville in connection with the property’s redevelopment.
Middleburg reports that the property, which consisted of 428 identical two-bedroom units, was 15% occupied at the time of purchase. Many of its buildings were abandoned, creating significant blight and crime risk for the neighborhood. In addition to introducing professional management and boosting security, Middleburg is performing a complete renovation including all new systems, roofs, exteriors and interiors and creating a mix of one, two and three-bedroom units (418 in total).
Middleburg has partnered with KeyBank for construction financing of Vesta Derby Oaks. “Teaming with KeyBank provided a very efficient and competitive capital structure for this project,” states Kory Geans, partner and chief investment officer for Middleburg. “KeyBank’s strategy aligns well with ours and we anticipate partnering with them on other deals within this fund.”
The strategy of the Workforce Housing Fund is to acquire and substantially rehabilitate physically and/or operationally distressed assets (major deferred maintenance, poor management, high vacancy etc.) of existing multifamily workforce housing in the Southeastern and Mid-Atlantic regions of the United States, Middleburg states. “After renovations, the fund will own modern, updated communities at a basis significantly below replacement cost, allowing Middleburg to rent high quality apartment homes at levels affordable to working families,” the firm adds.
Since 2004, Middleburg has acquired and developed more than 16,000 apartment units, executing approximately $2.0 billion in transactions in the southeastern and mid-Atlantic United States.