A state agency has closed on one of three large, recently built apartment complexes it plans to buy in the city of Anaheim and will convert the sites into workforce housing projects.
The first of the three apartment properties, the 220-unit Alexan CTR City, closed at the end of December under the new public-private partnership structure.
It sold for $110 million, property records indicate.
By price, it was the largest multifamily transaction in Orange County reported to be completed in 2020, according to CoStar Group Inc. records.
Other deals in the works by the same agency will be more expensive, state records indicate.
CSCDA Trio
The three-property transaction, backed by the city and funded through tax-exempt bonds, appear likely to ultimately top $400 million. The new ownership structure is expected to cut rent costs at north of 1,000 apartment units in downtown Anaheim and in the Platinum Triangle.
The deal is part of a workforce housing finance program created last year by the California Statewide Communities Development Authority (CSCDA).
The program provides low-cost financing for apartment transactions; those complexes are in turn capped on what they can charge for rent.
Under the public-private partnership, sponsoring real estate firms are retained to act as property managers for the complexes, and the cities are able to take over ownership of the apartments from the state in 30 years.
Two More in Works
The CSCDA’s purchase of the 220-unit Alexan CTR marks the start of the partnership between the CSCDA and Anaheim.
The CSCDA plans on closing the other two Anaheim transactions—including the Jefferson Platinum Triangle and The Parallel Apartments—within the next two months, according to Managing Director Jon Penkower.
The total investment will likely top $400 million.
All three projects will lower rents to “meet the needs of middle-income residents” making between 80% and 120% of the area median income (AMI), according to Penkower.
“We do a lot of traditional affordable housing finance for lower-income individuals, but there is a growing ‘missing middle’ demographic that earns too much to qualify but not enough to rent in the communities where they are working,” Penkower said. “This program aims to meet the needs of that demographic.”
Newly Built
At $500,000 per unit, the deal for the CTR City apartments is the priciest apartment transaction to occur on a per-unit basis in the past several years in OC among larger complexes, CoStar records indicate.
The seller, Dallas-based Trammell Crow Residential built the mid-rise development in 2019. It is on a 4.3-acre site at 255 N. Anaheim Blvd., near city hall.
Studio, one- and two-bedroom units range in size from 611 to 1,081 square feet with current asking rents ranging from $1,899 to $2,750 per month.
It is currently about 94% occupied.
Penkower noted that no tenants will be displaced during the transition, which will essentially involve cutting rents for new or existing occupants that qualify for the program.
Of the 220 units, 40% will be restricted at 80% of the AMI or below; 20% will be for those making 100% of the AMI or below; the rest is for 120% of the AMI or below.
Rents at the other two Anaheim properties will also maintain that same basic structure, but “will vary between each level, the type of property and how many individuals are living in the unit,” Penkower said.
Menatt Housing Solutions of Costa Mesa is sponsoring the CTR City deal, meaning that it will essentially act as the asset manager for the site going forward.
The Parallel
In the second Anaheim deal, the CSCDA expects to pay $157.6 million for The Parallel, a 386-unit project built in 2018 at 1105 E. Katella Ave., in the Platinum Triangle.
Highland Ranch, Colo.-based UDR Inc. bought the complex in 2019 for a reported $131.7 million. The forthcoming sale marks a 20% increase in price over the 2019 transaction.
The deal, which was out for bond pricing last week and is expected to close in about a month, works out to about $408,000 per unit for the mid-rise complex. It is a few blocks from Angel Stadium and is next to the recently built Chapman Grand, which is used for off-site housing for Chapman University students.
Newport Beach investment firm Waterford Property Co. has signed on as a project sponsor for the deal.
“We are excited about this program and being able to work with the CSCDA,” Waterford co-founder John Drachman told the Business Journal. “It allows us to grow our assets under management while also fulfilling a need we’ve seen in the market, which is to provide affordable housing to a segment of the market that’s been missing.”
Asking rents at the property currently average about $2,300; following the transition, prices will be cut by 9.2% to nearly 17% depending on the unit type and what level of AMI the individual qualifies for, according to Penkower.
Jefferson Platinum Triangle
Negotiations for the third sale of the Jefferson Platinum Triangle complex are still in the works.
JPI built the 400-unit apartment project in 2017; it is at 1781 S. Campton Ave., just north of Katella Avenue.
Waterford is also project sponsor for this proposed deal, which could close by early March. A price has yet to be finalized.
No physical upgrades are needed following the transactions as all three properties have been built in the past five years, city officials note.
Other Cities
The three deals kicked off in November when the city passed a resolution to add Anaheim as a member of the CSCDA Community Improvement Authority.
The agency is designed to assist in the creation of affordable and workforce housing projects by partnering with local governments to finance projects through tax-exempt bonds.
After the 30-year term of the bonds, cities such as Anaheim are able to buy the projects to maintain the lower rents.
“It’s a win-win as cities are able to provide affordable housing and generate a ton of equity,” Penkower said.
The statewide program, first introduced in Carson and Long Beach, is expected to quickly expand to other cities in Orange County, with deals in the works in Huntington Beach, Irvine and Santa Ana.
