New REIT Will Focus on Affordable Housing
The company will mostly buy, or create, multifamily assets in Opportunity Zones, reportedly becoming the first such organization to do so.
Avanath Capital Management and MacFarlane Partners, two of the largest African American-owned real estate companies in the US, have jointly filed paperwork with the SEC to create a new REIT. It is reportedly the first REIT to focus on Opportunity Zones, though it will look to other properties as well.
The company will “invest in, develop, redevelop and manage mostly affordable and workforce multifamily properties in Opportunity zones, in dynamic, US metropolitan areas,” the filing said.
Entitled Aspire Real Estate Investors, the new company will be managed and advised by Aspire REIT Manager, a new entity formed by affiliates of the two parent real estate firms.
“We believe we will be the first Opportunity Zone fund listed for trading on a national securities exchange,” the filing said. “These sectors historically have been fragmented in ownership and underserved by institutional capital, yet they comprise a majority of the US multifamily market (by units) and offer strong long-term fundamentals to generate attractive returns for investors.
“Moreover,” the filing continued, “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 partnership will acquire an initial portfolio of nine multifamily properties across six states, for $260.4 million in cash. The combined estimated total project cost for the first properties, including initial purchase prices plus development and redevelopment costs, is approximately $582.4 million.
Five of the Opportunity Zone properties in the initial portfolio—Arbors at Cary, Academy at Waterford Lakes, Woodside Senior, Oak Village and Seaport Village—are existing operating properties which Entitled will purchase from a private investment fund managed by Avanath for an aggregate purchase price of about $176.4 million.
Over the longer term, the filing said, investments both in and out of Opportunity Zones will be “focused on assets in high-growth metropolitan areas.”
More specifically, Entitled committed in its filing to improving the properties it buys, while also building new ones in “vibrant, supply-constrained markets.”
The firm explained why it likes the affordable housing segment. “We believe that 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.”