Affordable Housing Developer Picks Up 320-Units in Florida

Southport Financial, one of the largest affordable housing investors in the country, has expanded its Florida multifamily portfolio with the purchase of The Sands at St. Lucie in Fort Pierce. Southport Financial purchased the property for $30.2 million from Code Capital Financial.

The 320-unit apartment complex operates under Section 42, a subsidized housing and tax credit program that restricts rental rates and the income of residents to qualify as affordable housing. On a sprawling site with 21 two-story building, the property has a mix of two- and three-bedroom units and 98% occupancy. The property also features an on-site fitness center, business center, clubhouse, kids club, volleyball court, sparkling pool and hookups for washer and dryers in all units.

Affordable housing has become a target asset class during the pandemic with several investors increasing exposure to the housing segments. In October, Morgan Stanley issued a $1 billion social bond that will be used to finance affordable housing projects, and Avanath Capital Management and MacFarlane Partners jointly filed paperwork with the SEC to create a new REIT to focus on affordable and workforce properties in opportunity zones.

Affordable housing was in limited supply before the pandemic, but the challenges of the last 12 months have only increased rent-burdened households and demand for affordable units. This week, the Lincoln Institute of Land Policy released a report detailing the affordability problem and providing a roadmap for local governments to develop thoughtful policy to tackle the issue. The report shows that more than half of renting households in the US are rent burdened, meaning they pay more than 30% of their income on rent, and 26% of US households are severely rent burdened, meaning they pay more than half of their income on rent.

As a result of the increasing demand, Moody’s Analytics REIS expects affordable housing properties to outperform market-rate multifamily this year after a strong 2020 performance. Last year, affordable housing rents grew—even as total multifamily rents declines—by more than 1%, and many markets experienced strong occupancy gains. Tulsa, Little Rock, Raleigh-Durham, Daytona Beach and Omaha were among the top markets for affordable housing performance.

The Southport deal is exemplary of the trends around affordable housing. Franklin Street’s Tampa-based multifamily investment sales team of Darron Kattan, Zach Ames, Avery Jordan, and Mark Savarese arranged the sale on behalf of the seller.