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SAN FRANCISCO-Avant Housing LLC, a green, urban-infill housing venture of AGI Capital, TMG Partners and CalPERS, has acquired its first redevelopment site. The tripartite paid $8.75 million for a site in San Francisco’s South of Market District, with plans to develop a residential development anchored by street-level retail.

Located at 260 5th St., the property now supports a two-story 41,250-sf concrete building and a surface parking lot. For the past decade, the property was used by Bill Graham Presents, now a part of LiveNation, which was the seller. The site will be scraped clean to make way for the redevelopment.

For the coming decades, it will support between 115 and 151 residential units and an uncertain amount of street-level commercial space in a five- to eight-story building, assuming the JV can obtain the necessary entitlements. There is as yet no development timeline for the project, which is being designed to achieve a LEED gold rating from the US Green Building Council.

Avant Housing was formed to invest a little more than $100 million of equity in urban-infill housing throughout California, with particular focus on nine Bay Area counties: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma. With approximately 75% leverage, the joint venture plans to invest $400 million over the next two or three years and completely liquidate the JV in no more than six or seven years, TMG Partners chairman/CEO Michael Covarrubias told GlobeSt.com last fall, when the joint venture was launched. The goal is to produce a mid-teens IRR for CalPERS over the life of the joint venture, he says.

The relationship is unusual in that CalPERS typically invests its money through pension fund advisors rather than directly with developers. Covarrubias says CalPERS decided to work directly with TMG, in part because TMG is a known quantity, having been around a long time and having worked with CalPERS advisors on a number of transactions. The other benefit for CalPERS is that with AGI Capital, a younger company majority owned by a woman, Alexis Wong, the JV helps it meet its diversity requirements.

CalPERS is putting up $100 million of the equity while TMG and AGI have put up relatively small “co-invests” that push the total equity to “slightly more” than $100 million,” Covarrubias said at the time of the JV‘s formation. The $300 million of debt is coming from a small consortium of banks in the form of a credit facility that like will have a floating interest rate and, in order to maintain exit flexibility, will not become CMBS, he says.

The defined mix of the JV’s investments call for 60% of the equity to be put toward work force housing, be it in the form of apartments or entry-level condominiums. Another 20% to 25% of the equity would be invested in higher-end product. Covarrubias says the JV might buy entitled land for apartment or condominium developments, which it would have built and then sell off; it might just buy raw land, entitle it and then sell it to another developer; and it might buy run-down apartment properties for repositioning or conversion to condominiums.

Avant Housing is being run by Paul Neito, brought on board last month. As president of the company, Nieto will oversee the acquisition, entitlements process, design, construction, marketing and sales of all properties. Nieto will report to the board of directors which is comprised of Michael Covarrubias and Cathy Greenwold of TMG Partners and Alexis Wong and Eric Tao of AGI Capital.

Prior to launching the San Diego office of TMG in 2004, Nieto was president and CEO of ProjectDesign Consultants, A large San Diego-based planning, civil engineering, survey, environmental consulting and construction management firm. Nieto also served for 10 years as vice president for real estate for California’s largest agriculture company, JG Boswell Co., the parent company of EastLake Development, which he became president of in 1990.

Anton Qiu, an SVP with TRI Commercial, represented Avant in acquisition of the SOMA infill site. Mike Brown and Bill Benton of Newmark Knight Frank Real Estate Advisors represented LiveNation.

In addition to its JV with CalPERS, AGI and TMG also have joined forces for the 246-unit Soma Grand condominium tower in the South of Market district, for which sales kicked off last month. Located at 1160 Mission St., the 22-story development next to the new GSA Federal Building will include two restaurants at street level and a 504-car underground parking garage. The condos are expected to be ready for occupancy in November and to sell for prices ranging from the high $400,000 range to $1 million.

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