You may think affordable housing doesn't pencil out, but every kind of deep-pocket investor wants to be involved in financing the space. Avanath Capital Management president John Williams tells us why.
1. The Returns
The returns can be sweet, for one thing. Recently Avanath closed Avanath Affordable Housing II Fund, having completed its $200M capital raise. With anticipated returns at 13% to 15% net to investors for the fund, "we and all of our investors are focused on bottom-line profitability." Also, John notes, the fund has two bank investors that are each motivated to provide financing to receive CRA credits.
2. Doing the Right Thing
Also, John explains, the breadth of financial organizations involved in the second fund also shows support for the social benefits it provides. The fund is comprised of 10 investors, including three state pension funds, two banks, three insurance companies, one foundation and one family office. The second fund has already invested in 13 affordable and workforce multifamily assets in SoCal and other parts of the country.
3. GSE Support
Finally, the GSEs are still in growth mode when it comes to affordable housing. "We really don't face many challenges with respect to financing our assets," John says. "Both Fannie Mae and Freddie Mac are highly motivated to increase their affordable lending program, and we've been designated a select and preferred borrower by both organizations."
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