Avanath Capital Management, LLC, a private real estate investment manager, announces the acquisition of the Novato Portfolio, comprising two LIHTC rental apartment properties in the Bay Area submarket of Novato, California, for $131.5 million.
Purchased with equity from the firm’s Renaissance Fund and debt financing through CBRE and Fannie Mae, the purchase expands Avanath’s presence in Northern California and achieves its seventeenth and eighteenth acquisitions in the market, according to Daryl Carter, Founder, Chairman, and CEO of Avanath Capital Management.
“There is a significant need for affordable housing in the greater San Francisco market,” says Carter. “Currently, 26 percent of the total units in the market are designated as affordable housing. While planning to develop new properties exists within the market, only 16 percent of newly completed units would be affordable. There is a genuine affordable housing crisis, and we are determined in our mission to contribute to its resolution.”
The portfolio comprises two communities totaling 297 units: Bay Vista at Meadow Park and Creekside at Meadow Park, which were built in 2005 and 2003, respectively, using LIHTC. Both properties are over 98 percent occupied.
“With the acquisition of the Novato Portfolio, Avanath brings two well-located apartment communities into its San Francisco area holdings that provide housing to low-income families in the most expensive housing market in the country,” explains Carter. “Based on the lack of development pipeline in the immediate area, both properties will remain as some of the highest quality affordable communities in fast-growing Marin County, serving an incredibly strong demand for years to come.”
Avanath now manages over 3,000 units in Northern California and owns more than 800 units in the Bay Area. The acquisitions of Bay Vista and Creekside further strengthen Avanath’s economies of scale in the region and allow for more efficient operations across the portfolio, confirms Carter.
According to Connor Mortland, Avanath’s Vice President of Acquisitions, both the market performance and need for affordable housing within the region make the Novato Portfolio an ideal acquisition which aligns with Avanath’s goals and purpose.
“The population is expected to continue on a strong growth trajectory, and the average median income has increased at a significant rate,” continues Mortland, who notes that the San Francisco MSA AMI increased by an average of 8.79 percent each of the past five years and is the third highest in the United States.
“In addition to the increasing AMI, as of July 2022, the San Francisco asking market rents increased by 8.62 percent within 12 months, reaching an average $3,139,” explains Mortland. “The market has displayed strong performance and growth year-over-year; however, the need for affordable housing remains.”
Bay Vista and Creekside provide housing for residents at rents between 30% AMI and 60% AMI.
While the communities are in exceptional condition, Avanath plans to leverage its deep experience operating affordable and workforce housing communities to invest in the assets through strategic upgrades and the implementation of ESG initiatives, according to John R. Williams, President and Chief Investment Officer of Avanath.
“Washers and dryers are currently not offered at Bay Vista and are in high demand by renters, so we have budgeted for the installation of both in each unit over the first four years of the investment term,” explains Williams. “As some mechanical systems are approaching the end of their useful lives, the budgeted funds per unit are extremely important when replacing equipment such as water heaters and roofing.”
Avanath will also be assessing the amount of greenhouse gas that has been emitted from the property and will recommend property level initiatives to reduce energy consumption and greenhouse gas production.
“Our goal is to reduce our portfolio-wide greenhouse gas emissions by 50 percent by the year 2030. To reach this goal, action starts now,” continues Williams.
The firm will be installing LED lighting, electrical appliances, and electric water heaters to the Novato Portfolio units and may potentially add electric vehicle charging stations. Both Bay Vista and Creekside offer a daycare center for resident use.
As part of the firm’s social impact initiatives, Avanath plans to implement even more social programs in alignment with its core values. These may include after school programs, community forums, and arts and crafts classes. Further, Avanath plans to retain most of the Portfolio’s current property management staff.
“Not only will we be hiring a diversified and skillful team, but also we will hire current staff members from the Novato Portfolio properties to maintain resident relations with the leasing staff,” adds Williams.
Bay Vista is composed of 15 two-story buildings totaling 220 units, a leasing office that also serves Creekside, and a laundry building across 16.40 acres. The property offers two- and three-bedroom units, and property amenities include the daycare center, swimming pool, spa, and picnic areas.
Creekside consists of 26 two-story buildings totaling 77 units with a daycare center and playground across 7.81 acres. Creekside offers two-, three-, and four-bedroom floorplans. Both properties are well-located close to CA-101 and I-580 for convenient access to San Francisco, Oakland, and Santa Rosa.
Bay Vista is located at 5 Hutchins Way in Novato, California, and Creekside at 46 Tinker Way in Novato, California. The transaction was marketed by CBRE on behalf of the owner, Shea Homes.
