A Los Angeles real estate investor specializing in preserving affordable housing for seniors through public-private partnerships has completed the largest affordable tax credit financing in Illinois history and lowered the rents for half of the residents in one senior apartment building.
Los Angeles-based Standard Communities is now turning its attention to opportunity zones as it plans to grow in scale over the next five years, Chief Investment Officer Robert Koerner told Senior Housing News.
Standard Communities’ total portfolio includes more than 7,550 units in nine states, housing more than 15,000 residents. Senior housing accounts for approximately one third of the portfolio, with 23 communities in seven states, serving mixed- and low-income seniors. Two thirds of Standard’s senior housing assets are financed with a mix of private equity and low-income housing tax credits.
Standard is aggressive in leveraging private debt to fund its acquisitions, rather than relying on Department of Housing and Urban Development (HUD) loans. Additionally, the firm looks for acquisition opportunities in states where it has affordable housing experience, and identifies properties that are at risk of losing affordable housing assistance where ownership is looking to exit the properties quickly.
This allows Standard to close deals quickly and move fast to renovate units, common areas and a building’s plant, where a competing buyer would be content to continue operating the building as-is.
“Usually, the seller doesn’t want to wait around for a buyer to line up [Federal Housing Administration] financing,” Koerner said.
Sticking to existing markets
Sticking to markets where it already has experience gives Standard an advantage in obtaining tax credits and other financing mechanisms to preserve the affordability of the buildings for tenants. The Illinois deal is an example. Standard acquired six communities totaling 855 units in 2018, financed through a combination of private debt and a $200 million tax-exempt bond issuance from the Illinois Housing Development Authority.
It was the largest bond issuance for a single project in Illinois history, and allowed Standard to preserve the affordable component of the portfolio. The firm was even able to obtain a federal rent subsidy for one building, which lowered rents for half of its residents.
Standard’s commitment to affordability extends to its holding strategy. The firm is a long-term holder of its assets, typically up to 15 years.
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While acquisition has been the foundation for Standard’s growth in scale, it recently pivoted to ground-up affordable housing development where it sees untapped potential, Koerner said. Last month, the firm announced an affordable development in Savannah, Georgia, using qualified opportunity zone funds.
The Savannah project will not include senior housing, but Standard Companies is looking for opportunities to build senior apartments using opportunity zone funds.
“[Opportunity zone developments] don’t always work because of how Census tracks line up,” Koerner said.
The pivot to ground up development and interest in opportunity zone projects are components of an aggressive growth strategy for Standard Communities. The firm expects to add up to 4,000 units to its portfolio annually over the next three to five years.
“We will pursue [opportunities] where we find them, if it’s of enough scale and we can add value,” Koerner said.