Starwood Scoops Up $566M of Affordable Housing Units

Downtown Orlando

ORLANDO—A 31-property, Low Income Housing Tax Credit (LIHTC) portfolio totaling 8,498 units in several Florida locations has traded hands. The sale price: $563.5 million. HFF represented the seller, Wilson Company .  Starwood Property Trust , an affiliate of Starwood Capital Group, purchased the assets. HFF worked on behalf of the new owner to secure financing totaling $255.87 million through Freddie Mac’s CME Program on 19 of the assets.  HFF will securitize loans through its Freddie Mac Program Plus Seller/Servicer program. The HFF managing director Doug Childers along with senior managing director Jason Nettles and managing director Matt Mitchell led the sale. HFF managing director Gregg Shapiro and executive managing director Jody Thornton handled the debt placement. “This transaction represents the beginning of a new era for LIHTC investment sales,” Childers says.  “Traditionally, LIHTC transactions have attracted primarily private, regional capital providers. HFF’s affordable housing experts were able to educate institutional investors regarding the portfolio’s relatively low cash-flow volatility and the regulatory and operational nuances associated with LIHTC communities. As a result, we were able to create a competitive bidding process that included large, institutional investors.” Heavily concentrated in Orlando and Tampa, the portfolio was developed between 1995 and 2004 under Section 42 of the Internal Revenue Code. Under this code, developers receive LIHTC to offset development costs. LIHTC properties, in return, are encumbered with long-term rent and income restrictions. “Starwood emerged from the field by proposing an expedited closing process and demonstrating a thorough understanding of the opportunity,” says Nettles. “They performed flawlessly as though they had been investing in the LIHTC space for years.” On average, maximum allowable rents across the portfolio are approximately $350 below prevailing rents at nearby market-rate communities. Tremendous demand for affordable housing across the portfolio contributed to an average portfolio occupancy exceeding 97%. Starwood could not immediately be reached for comment.