Dealmaker: Avanath Capital Management Acquires New York Apartments for $73M

Avanath Capital Management, New York, acquired a 17-building New York affordable housing portfolio for $73 million.

The institutional fund manager acquired the 198-unit portfolio in partnership with Oak Tree Management, New York.

“This portfolio presented a rare opportunity to gain a substantial stake in one of the most dynamic markets in the nation,” said Avanath President and Chief Investment Officer John Williams. “Brooklyn’s economic growth, population gains and cultural renaissance are driving an influx of investment capital to this market, which consistently ranks as one of the most expensive places to live in the U.S.”

Brooklyn has emerged as the second most rent-burdened borough in New York, Williams said. He noted that average monthly rents range from $3,000 to $5,500 in the area.

Avanath acquired the properties from a private investor for $73 million. Peter Von Der Ahe, Joseph Koicim and Shaun Riney of Institutional Property Advisors and DJ Johnston of Cushman & Wakefield represented the seller. Andrew Dansker of Marcus & Millichap arranged the financing.

“This acquisition will allow us to maintain housing affordability in one of the most expensive submarkets in the country, while also doubling our existing Brooklyn portfolio and amassing economies of scale in ownership,” Williams said. “Based on strong market fundamentals, this portfolio is well-positioned to capitalize on the growing demand for quality affordable housing, thereby generating attractive risk-adjusted returns to our investors.”

The properties include 115 rent-stabilized units, 79 free-market units and four commercial spaces in Prospect Heights, Crown Heights, Williamsburg and Bedford-Stuyvesant. Average rents in these properties range from $1,700 to $2,500–half the cost of rental comps in the Brooklyn submarket, Avanath reported. 

“Most of the new housing developments that have come online in Brooklyn have been primarily focused on targeting the affluent renter demographic, thereby neglecting a large segment of the market consisting of working-class families and individuals,” Williams said. “Our strategy is to cater to this underserved demographic by preserving the dwindling supply of affordable housing through capital improvements that enhance quality without sacrificing affordability.”

The portfolio’s four commercial spaces are currently leased by local tenants including local restaurant/bar Sunday Routine, independent hip-hop/electronic record label store Fool’s Gold Records and a day care center, among others.