In our previous segment on the preservation of affordable housing in October, we examined the growing need for affordable rental housing in the U.S. To address this issue, PNC Real Estate has structured a targeted business focus on “preservation” investment funds, which acquire existing affordable housing properties, such as those previously developed using LIHTCs. The properties are then held for a period of time and can be sold into a LIHTC transaction — ultimately extending the affordability period for 30 years or more.
To date, PNC Real Estate has acquired more than 1,800 units for purposes of preservation, with another 692 units scheduled to close prior to year-end.
One of the first such properties is Island Terrace Apartments, a 240-unit affordable multifamily community in Chicago, Illinois, that was built in 1969. PNC ARHPF Warehouse Fund, LLC, acquired the property via a fee simple acquisition of the real estate and improvements.
The apartments boast stellar views of Lake Michigan and feature community amenities like computer and fitness centers. Many nearby apartments in the Jackson Park area are rented at higher market rates; however, PNC Real Estate remains committed to maintaining the affordability of this property for the long-term and endeavors to extend or renew existing contracts with the U.S. Department of Housing and Urban Development and the Chicago Housing Authority, which cover a portion of the 240 units.
The prior owner had made significant capital improvements. PNC Real Estate has already upgraded the access system and is planning additional interior and exterior enhancements.
The Island Terrace Apartments project demonstrates how PNC Real Estate’s preservation strategy helps both investors and PNC to meet Community Reinvestment requirements while maintaining vital affordable housing stock.
In an environment where many fund investors find it difficult to acquire product in specific markets, these preservation funds offer an attractive vehicle for investing in affordable housing.
Date: April 2015
Location: Chicago, Illinois
Equity Investment: $6.9 million
Financing Amount: $13.15 million
Financing Type: Non-recourse, interest-only balance sheet loan
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