Starwood acquires $563.5m portfolio of low income housing
Starwood Property Trust, an affiliate of Starwood Capital Group, has picked up a 31-property Low Income Housing Tax Credit (LIHTC) portfolio worth $563.5 million. The 8,498 unit portfolio consists of properties mainly in Tampa and Orlando that were developed between 1995 and 2004 under Section 42 of the Internal Revenue Code. The code states that developers receive LIHTC to offset development costs in return for those properties being leased at lower than usual rates. Rents for the portfolio are approximately $350 per month below rents in nearby market-rate communities. Holliday Fenoglio Fowler represented the seller, The Wilson Co., a well-known owner and manager of affordable housing in Florida. HFF also arranged $255.9 million in financing for Starwood through Freddie Mac’s CME Program on 19 of the properties. HFF will service the loans through its Freddie Mac Program Plus Seller/Servicer program on behalf of the Atlanta based buyer.
“This transaction represents the beginning of a new era for LIHTC investment sales,” said Doug Childers, Managing Director, HFF. “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.”
