Infusing New Life Into Old Housing Speeds Delivery

Oak Village is Avanath Capital’s third Oakland property.

OAKLAND, CA— John Williams , president and chief investment officer of Avanath Capital Management , recently spoke with GlobeSt.com exclusively about a recent acquisition in Oakland and the motivation behind the firm’s future activities. GlobeSt.com: What trends are you currently seeing in Oakland and why is now the right time to invest? John Williams: Both the Bay Area and its surrounding submarkets are experiencing enormous rent increases, and Oakland is no exception. Our acquisition of Oak Village, our third Oakland property to date, will allow us to capitalize on the strong demand for affordable rentals near major employment hubs across the Bay Area. The unbridled demand for affordable housing in the region, coupled with our value-add upgrades to an already well-located property, will help generate competitive, risk adjusted returns for our institutional partners. GlobeSt.com: There has been a lot of talk about developing new affordable housing projects in Oakland to accommodate the enormous demand for them. What is Avanath’s position on building new construction vs. rehabilitating preexisting affordable properties, especially in these two markets? Williams: As an investment firm, our strategy is to renovate and reposition existing affordable assets, rather than developing new ones. This strategy is more cost effective and profitable to our investors. Further, there is a social benefit to our strategy. There is unlimited demand and very little supply in affordable housing. The reality is that people in metro markets throughout the US need this housing now. New affordable housing construction can take five to seven years to build, whereas rehabilitating existing product and infusing new life into these projects can be completed in only 12 to 18 months. By preserving and improving existing product, we can achieve a quicker turnaround, and more rapidly deliver quality affordable housing to those who need it. Our value-add strategy enables us to enhance the quality of undervalued, undermanaged assets, bringing them up to par with the surrounding communities, and thereby create value for entire neighborhoods, without the tremendous expense of new construction. Oakland, for example, is an extremely development-constrained market where it is difficult to build new construction. Our repeat success in this market has taught us that there is a huge opportunity to revitalize existing affordable assets. With a few value-add enhancements, we can deliver consistent, attractive risk-adjusted yields to our investors. GlobeSt.com: What types of value-add renovations do you plan to implement at the Oakland property? Williams: In our Oak Village property, we will implement drought-resistant landscaping to reduce water usage and utility costs, ensuring that the property remains both affordable and sustainable for our tenants. GlobeSt.com: Looking ahead, what other markets is Avanath targeting for future investments? Williams: Avanath will continue to target large, urban markets demonstrating tremendous employment growth and a high cost of living. Current targets include the coastal regions of California such as the Bay Area and Los Angeles, Orlando, where the I-4 Corridor’s growth has created thousands of jobs for blue-collar workers, as well as New York, Seattle, Washington D.C., Denver, Chicago and Dallas. Looking ahead, we will continue to identify opportunities in cities that feature similar employment and rent growth dynamics.