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SAN JOSE, CA-KDF Communities recently acquired four apartment properties here for $74.6 million. The Newport beach-based affordable housing developer plans to invest an additional $13.2 million to rehab and convert the 691 market-rate units to affordable housing.The four acquisitions include:

• Orchard Glenn, a 288-unit, two-story affordable multifamily community located on Seven Trees Blvd. with 60 studios, 173 one-bedroom and 55 two-bedroom apartments;
• Casa Real, a 180-unit, two-story affordable multifamily community located on Fontaine Road with 148 one-bedroom and 32 two-bedroom apartments;
• Regency, a 143-unit, two-story affordable multifamily community located on Eden Avenue with one one-bedroom, 119 two-bedroom and 23 three-bedroom apartments; and
• Lexington, an 80-unit, two-story affordable property with 65 two-bedroom and 15 one-bedroom apartments.
• KDF says its average costs for the rehabilitation will be $11,000 per unit for Orchard Glen, $16,000 per unit for Casa Real and $28,000 per unit for both Regency and Lexington. Renovations are expected to be completed by December 2006 for Orchard Glen and Casa Real, and December 2007 for Regency and Lexington.

KDF principal Ray Harper tells GlobeSt.com the project is being financed with tax-free bonds and federal tax credits. As part of the associated requirements, 90% of the units will be available to people earning less then 60% of the median income and the remainder will be available to people making less than 50% of the median income. CharterMac Capital Solutions and Capmark Securities Inc. are involved in the financing.

"On a per-unit basis, it's not nearly as profitable as market-rate housing, and you don't have quite the upside," Harper says. "But we do receive a portion of the net operating income of the property and we are allowed to collect a fee on top of that, though economics often prohibit it."

KDF's portfolio totals about 4,500 units. Prior to this latest acquisition, it owned only two properties in San Jose, the 354-unit Valley Palms and the 120-unit Villa Monterey, both of which operate as affordable apartment properties.