September 12, 2024
Randolph Hills will be operated by Infinity Real Estate Advisors, an Atlanta-based alternative asset manager that oversees more than 6,000 affordable units in its portfolio. (CoStar)
By Jon Leckie | CoStar News
September 12, 2024 | 1:22 P.M.
For-profit impact fund manager American South Capital Partners is providing $4.23 million in preferred equity for the purchase and renovation of an affordable housing property in Charlotte, North Carolina, as an increasing number of the city’s residents struggle to pay for housing.
Funds from the investment are expected to be used to complete an interior and exterior renovation program at Randolph Hills, a 168-unit affordable housing project in Charlotte’s Grier Heights neighborhood.
The property will be operated by Infinity Real Estate Advisors, an Atlanta-based alternative asset manager that oversees more than 6,000 units governed by the U.S. Department of Housing and Urban Development’s Housing Assistance Program. Under terms of the program, Randolph Hills will rent half of its mix of two- and three-bedroom apartments to families earning 80% or less of the area’s median income and the remainder to those earning less than 50% of the area’s median income.
“Infinity is committed to maintaining the affordability of our housing projects, and American South Capital Partners’ investment ensures we will keep Randolph Hill’s rents under 80% of the area median income,” Gregory B. Jones, chief investment officer at Infinity Capital Partners, said in a statement.
Built in 1968, Randolph Hills is located at 3501 Wheatley Ave. Asking rents currently average $727, roughly half the level of market rate rents for similar apartments nearby, according to CoStar data. The property was 95% occupied at the time of closing.
Residents will also be provided supplemental services operated by local organizations including after-school care, financial literacy and resume services.
Rent burdened
The deal comes as the number of renters in the Charlotte area who or rent rent-burdened — or spending more than 30% of their income on housing costs — has surpassed 160,000 or 23% of the total renting population, according to ASCP, formally known as American South Fund Management.
“The U.S. is short a shocking 7 million rental units across the country. American South is investing in projects like Randolph Hills to close the gap,” Deborah La Franchi, ASCP managing partner, said in a statement.
Capital for the Randolph Hill project was sourced through the American South Real Estate Fund II that provides equity financing for affordable housing projects across Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Texas.
The American South Real Estate Fund II and its sister Fund I are an aggregate pool of $234 million that provide risk-adjusted, market-rate returns comparable to other housing funds while investing in affordable projects largely without government subsidies or tax credits. Investments are managed by ASCP a joint venture between Vintage Realty Company, a Shreveport, Louisiana-based property developer, and Los Angeles-based impact fund manager SDS Capital Group, where La Franchi acts as CEO.
Good business model
The funds look to work with partners who know the communities they invest in when developing or maintaining an affordable housing property. “We know that there’s such a strong demand for affordable housing,” La Franchi told CoStar News. “It’s a good business model. The sponsors we fund know the project is going to be 99% leased up all the time because there’s simply not enough affordable units in the community, and they’re very good at what they do.”
La Franchi founded SDS Capital Group not long after serving as Los Angeles Mayor Richard Riordan’s Assistant Deputy Mayor for Economic Development. While incentives for producing affordable housing like the Low-Income Housing Tax Credit have been a “powerhouse,” according to La Franchi, she says the challenge is that with limited government funds and cumbersome compliance regimes, the United States is not building enough affordable housing to meet the demand from low- to moderate-income renters.
“We just can’t produce enough [affordable housing] if we’re relying on these tax credits,” she said, adding that “the cost of the projects gets quite expensive.
Through both Fund I and II, ASCP has invested more than $140 million in 24 projects covering more than 5,400 housing units affordable to families earning less than 80% of the area median income. Investors in the fund include GCM Grosvenor, which recently raised $50 million from five public pension funds, an investor type that La Franchi said has typically avoided affordable housing in the past.
