Daryl Carter turned a $100,000 investment into one of the country’s largest African-American-owned real estate investment firms earlier this decade.
At his new venture,Irvine-based Avanath Capital Partners LLC,he’s starting with a much bigger checkbook.
Avanath’s looking at buying apartments, making commercial real estate loans and doing specialty finance.
Avanath and partner MacFarlane Costa Housing Partners LLC of Long Beach this month said they were buying 26,000 affordable-housing apartments from Denver’s Simpson Housing Solutions.
The portfolio includes 273 properties in more than 30 states. The majority of the buildings are in California. About 1,000 apartments are in Orange County, including in Buena Park, Fullerton, Orange and San Juan Capistrano.
“This is a great opportunity to buy existing apartments,” said Carter, who serves as chief executive of Avanath and is the majority shareholder of the company that started up in November. “There is never enough affordable housing.”
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Simpson Housing property: Avanath and MacFarlane Costa bought its 26,000 apartments |
Deal Estimate
Terms of the deal weren’t disclosed. A conservative valuation of the apartments likely puts the portfolio at more than $1 billion. Simpson Housing’s parent company, Simpson Housing LLLP, was valued at more than $2 billion in 2006.
Avanath has a 20% stake in the deal with MacFarlane Costa,a venture of Simpson Housing’s longtime president, Michael Costa, and San Francisco-based investment firm MacFarlane Partners LLC.
Avanath plans to exercise an option to acquire the remaining 80% stake in the portfolio later this year after it closes an investment fund, Carter said.
MacFarlane Costa would keep Simpson Housing’s development and financing arms.
Pension funds and institutional investors are the most likely sources of money for the investment fund, according to Carter. He’s not saying how big the fund is expected to be.
“It’s a challenging market to raise capital, but it’s always hard to raise capital,” Carter said.
Outside investors in Avanath include Jeff Stack, principal and managing partner of Irvine-based Sares-Regis Group.
Carter’s History
Carter made his name as a co-founder of Capri Capital LP, a real estate financial services firm that grew to more than $7 billion in assets under management earlier this decade.
The Coto de Caza resident received an Excellence in Entrepreneurship award from the Business Journal in 2002.
Capri’s Irvine office was headed up by Carter, while his partner and high school classmate Quintin Primo was in charge of the company’s Chi-cago headquarters..
Capri sold its commercial mortgage business to Centerline Capital in 2004.
In 2006 Carter sold his interest in Capri’s pension fund investment business to his partner.
Carter’s three-year contract with Centerline ended in September.
Two months later he started Avanath.
“This time around we’re hoping to replicate the good things (from Capri), and eliminate some of the mistakes,” he said.
The new company has about a dozen employees, including several former Capri colleagues. It’s based at the new 2211 Michelson Tower next to John Wayne Airport. Carter is working to set up a second office in New York.
Avanath could buy another 30,000 to 40,000 apartments in time, Carter said. That volume would push the company close to the top 20 apartment owners in the country, in terms of portfolio size.
Affordable Housing Players
OC already counts one of the country’s largest apartment owners that emphasize affordable housing, Irvine’s WNC & Associates Inc.
As of January, WNC counted a portfolio of close to 49,000 apartments, valued at about $3.6 billion.
That placed it at No. 20 among the country’s largest apartment owners, according to the latest rankings from the National Multi Housing Council.
After the Simpson Housing buy, Avanath and MacFarlane Costa will rank as the fifth largest owner of affordable housing. The buildings qualify for federal low-income housing tax credits, which are an indirect subsidy used to spur private investment in the properties.
Carter said the income-restricted properties are well kept and in high demand, which keeps occupancy levels above the norm.
They also serve a growing need in increasingly expensive areas such as OC, he said.
“It was important to me to have a product that meets a need beyond just making money,” Carter said.
The portfolio counts close to a dozen OC properties, totaling close to 1,000 apartments. Prominent OC complexes include the 108-unit Courtyard in Fullerton on West Valencia Drive, and the 83-unit Harmony Creek Apartments in Orange on East Rock Creek Drive.
Building apartments isn’t in the cards for Avanath.
“Development is not something that’s in my DNA,” Carter said. “We’re better at investing.”
