Comunidad, an Austin, Texas-based real estate investment manager, has secured a $400 million Tenant Advance Commitment through Freddie Mac to create and preserve affordability in an estimated 4,000-5,000 housing units over the coming quarters.
The January 24 deal represents an ongoing initiative among real estate investment managers to source and deploy more capital to address the undersupply of affordable housing units in the US where there is an estimated 4 million unit shortage.
Comunidad, which worked with New York-based advisory Newmark to arrange the financing, is already plotting the first transaction under the TAC in the form of a $21 million loan to finance and renovate a 176-unit apartment complex in Austin.
Notably, the firm is using the TAC specifically to deploy more capital toward affordable housing investments. TACs, as described by Freddie Mac, are a contemporary form of financing for private-sector operators who agree to self-impose rent restrictions to help preserve or create affordability at assets without regulatory rent or income restrictions. As part of the Freddie Mac program, multifamily borrowers also provide resident social impact services at each property.
Antonio Marquez, founder and managing partner at Comunidad, said Newmark’s work on the TAC will be a value-add to his firm’s social impact multifamily investment strategy.
On January 23, Comunidad outlined its plans to launch a new impact credit platform – dubbed Comunidad Credit Capital – in Spring 2023. The inbound platform will be run by Debby Jenkins, CEO and partner of C3.
“Given [the Federal Housing Finance Agency’s] strong focus on affordable and equitable housing, I believe this is an opportune time to introduce a platform that will keenly focus on these important issues,” Jenkins said in a written statement. “Despite the significant increase in interest rates and economic uncertainty going into 2023, we believe the rental housing sector, and specifically workforce housing, is positioned well.”
Jenkins joined C3 after most recently working as Kayne Anderson Real Estate’s head of housing during the first half of 2022. She brings nearly 14 years of experience from Freddie Mac where she worked as head of the agency’s multifamily business as well as its national head of multifamily underwriting and credit during her tenure from 2008-2021. Jenkins was also previously a senior vice president at Wells Fargo, where she worked from 2001-2008, according to her LinkedIn profile.
“The chronic lack of capital being invested into workforce and affordable housing threatens the existence of these properties, which ultimately negatively affects the diverse tapestry of residents who reside in these communities,” Jenkins said.
She noted the market sector has proven its resiliency during the Global Financial Crisis as well as the covid-19 pandemic. As part of its strategy, C3 intends to be a consistent source of capital for the workforce and affordable housing borrowers. Increased interest in ESG investing, lack of capital available for diverse borrowers, and changing market conditions present ideal circumstances for launching C3, Marquez added.
As part of the TAC deal, Comunidad agreed to self-restrict rent prices for a portion of homes in communities across its portfolio in exchange for advantageous loan terms and favorable pricing. The firm did not specify terms or pricing on its initial TAC deployment in Austin.
Tarter said Comunidad also receives reduced pricing and spreads as part of the TAC, which he noted is beneficial in a challenging market. “These factors lower the cost of capital, helping investors increase their returns,” he said.
The rent protections align with the FHFA’s affordable housing preservation initiatives, specifically for workforce housing. Tarter said Freddie Mac is looking to partner with housing providers aligned with the government sponsored entity’s mission of preserving rent in workforce housing communities.
“A sponsor must be willing to self-restrict rents, which can be easily accomplished by executing a loan document modification,” he explained. “More importantly, this rent restriction is not recorded on the title. There is also a basic annual reporting requirement. In some cases, resident services may be part of the TAC.”
Units will be set aside for residents earning at or below 80 percent of the area median income, at or below 60 percent of the AMI or a mixed-income combination of the two, according to the firms. The protections will be maintained throughout the loan term and the included social impact services will feature virtual healthcare services, after-school tutoring, job and economic advancement opportunities and other equity-building programs for residents.
Comundid plans to create and preserve affordability in 4,000-5,000 units in 20-25 communities through the new TAC. Andrew Tarter, vice chairman and head of workforce housing at Newmark, represented Comunidad in the TAC transaction.
Comunidad previously worked with Freddie Mac in 2021 to secure a $300 million master financing commitment through the same TAC model.