REAL ESTATE NEWS

In California, there are only 456 project-based Section 8 properties with 100 or more units, a small fraction of which are designated for seniors.

One such property that meets the full criteria traded hands last week. ARKA Properties and Black Equities sold Lakeshore Villa Apartments, a 126-unit affordable senior community at 6888 Golfcrest Drive in San Diego, to an undisclosed buyer for $47 million.

The Mogharebi Group's Executive Vice President, Otto Ozen; Vice President of Affordable Housing, Shawn Bolour and Vice President, Jordan Pakzad, represented the seller. The buyer was not identified.

Lakeshore Villa Apartments benefits from a 100 percent Senior HUD HAP Contract, ensuring stable income and long-term occupancy.

The buyer plans to invest significant capital in the property and has committed to maintaining the asset's affordability, thereby preserving affordable housing for seniors in this local market, according to a release.

The Deal Faced Challenges

In the 1970s and early 1980s, the federal government, through the Department of Housing and Urban Development, funded the construction of these senior affordable housing assets. No new assets of this specific type are being allocated funds, and over time, many of them have been converted to market-rate properties, Bolour told GlobeSt.com.

Managing these types of assets come significant compliance standards that the federal government requires. In fact, Washington must approve the new owner and management company.

That's in addition to the deal facing other challenges.

"While we were under contract, there were not one, but two federal government shutdowns," Bolour said.

"HUD's approval process for the new ownership and management was in limbo as we waited for the federal government to reopen. The deal made its way through the longest federal government shutdown in our country's history."

Lakeshore Villabenefits from a Project-Based Section 8 rental subsidy, which applies to each unit, not to the residents.

"So, when a resident moves out, the rental subsidy is put towards the next person on the waiting list," Bolour explained.

"This asset has 100% Project-Based subsidy coverage for all units, excluding manager units. The scale of the property, at over 100 units, along with the rental subsidy of almost 100% units, is what makes this type of asset highly attractive to the buyer pools we target."

Bolour said the universe of affordable housing has more capital chasing these assets than deals for them to get into. The supply of stock is oversubscribed with intense demand.

Lakeshore Villa is in San Carlos, a neighborhood that's known to be quiet, making it suitable for residents ages 62 and older. The community consists of two, three-story buildings, offering one-bedroom and one-bathroom floor plans with an average unit size of 520 square feet.

Source: GlobeSt/ALM