BROOKLYN, NY, – Avanath Capital Management, LLC, an institutional fund manager that specializes in affordable and workforce housing investments, has acquired an affordable housing portfolio of three apartment buildings in Brooklyn, New York. The properties were acquired in joint partnership with New York-based Oak Tree Management.
“Brooklyn is experiencing explosive economic growth,” explains John Williams, President and Chief Investment Officer of Avanath Capital Management. “The region’s mass transit options, historic community, and new development projects are driving investors and residents alike to Brooklyn, a market that is currently outpacing surrounding districts in rent growth. The result is increased pressure on renters, many of whom are already being priced out of expensive neighboring submarkets.”
According to a recent Elliman Report, Brooklyn saw a 4.5 percent rental increase from 2015 to 2016, surpassing Manhattan in rent growth and posting an average monthly rent of $3,134. Average luxury apartments in the area range from $2,700 to $5,000 per month for studio and one-bedroom units, according to Williams.
“As rents continue to surge throughout the greater New York region, demand for affordable housing options in Brooklyn are stronger than ever,” Williams confirms. “Located in the rapidly growing Bedford-Stuyvesant submarket, the three properties we acquired are positioned to capitalize on the continued demand from neighboring boroughs, while catering to the ever-increasing need for affordable housing.”
The three apartment buildings encompass 46 units and bring Avanath’s existing Brooklyn portfolio to a total of 195 units, expanding the firm’s presence in this growing market. The properties are located within three miles of Avanath’s four other affordable assets in Brooklyn, which are currently 100 percent occupied at rent levels that are half the cost of average rents in the Brooklyn submarket, according to Williams.
Williams notes that on a national basis, Avanath strategically targets areas such as Brooklyn, which are core urban, supply-constrained markets with strong growth fundamentals.
Avanath Capital Management worked closely with its JV partner, Oak Tree Management, on the acquisition of this second Brooklyn portfolio. Last year, Avanath acquired its first Brooklyn affordable housing portfolio with Oak Tree.
Rick Rosan, Founder and Principal at Oak Tree Management, explains, “Based on the success of our recent Brooklyn partnership, we teamed with Avanath once again, combining our local knowledge of the Brooklyn market with Avanath’s affordable housing expertise to source and acquire this portfolio.”
The three apartment buildings feature a mix of rent-stabilized and market-rate units, a structure which, according to Rosan, presents a strong opportunity to preserve affordable housing options in buildings with market-rate appeal and amenities.
“The National Multi-Housing Council reports that between 100,000 and 150,000 units are lost to obsolescence every year,” says Rosan. “By rehabilitating existing affordable units, we are actively preserving the available stock of affordable housing and addressing this national crisis.”
Ben Finley, a Senior Vice President with Avanath, who was responsible for sourcing and acquiring the deal, explains that this acquisition aligns with Avanath’s strategy of targeting affordable assets that present a significant opportunity for deep value creation.
“Our objective centers on generating both strong risk-adjusted returns for our institutional investors, and also delivering social returns to the communities in which we invest. Our philosophy has always been to invest not only in brick and mortar, but also in communities at large by providing safe, clean housing for undeserved neighborhoods,” explains Finley.
Avanath Capital Management acquired the properties from a private investor for $14.4 million. D.J. Johnston of Cushman and Wakefield represented the seller in the transaction. The portfolio acquired by the Avanath/Oak Tree partnership includes:
257 Quincy Street, Brooklyn, New York
Built in 1931 and 80 percent occupied at acquisition, this 21-unit apartment building features a mix of rent-stabilized and free-market rental units. Located just four blocks from the Bedford-Nostrand Avenue station, the apartment complex has convenient access to downtown Brooklyn, Williamsburg, and Long Island City.
Avanath Capital Management and Oak Tree Management plan to perform a series of interior and exterior renovations to reposition the property and lease the remaining vacant units to maximize occupancy.
570 Jefferson Avenue, Brooklyn, New York
Located on the southeast corner of Jefferson and Lewis Avenue, this nine-unit apartment building, 100 percent occupied at acquisition, was originally constructed in 1910 and is situated within close proximity to transit options and bus stops, with direct access to downtown Brooklyn and the John F. Kennedy Airport.
Avanath and Oak Tree have established a renovation plan to upgrade the interior and exterior of the property, as well as add a competitive amenity package.
308 Stuyvesant Avenue, Brooklyn, New York
A 16-unit apartment building in the Bedford-Stuyvesant borough of Brooklyn, this property, built in 1910, was 80 percent occupied at acquisition. The property has multiple transit options, including access to Utica Avenue Station and bus routes that lead directly to downtown Brooklyn, Ridgewood, and Manhattan.
Avanath and Oak Tree plan to renovate the units and add amenities such as laundry rooms, repositioning the property to enhance the quality for residents.
About Avanath Capital Management
Avanath Capital Management is a privately-held, vertically integrated investment firm managing real estate and real estate-related investments generating attractive risk-adjusted returns through current income and capital appreciation from its investments. The firm also provides property management services through its two affiliates, Avanath Property Management and McKinley- Avanath Property Management.
Founded by Daryl J. Carter, the Avanath management team averages 25 years of experience and has successfully guided investment funds in defining growth opportunities and delivering attractive returns. Avanath professionals have real estate operating expertise and long-standing relationships with strong local, regional and national sponsors that can access investment opportunities aligned with Avanath’s initiatives.