Avanath Capital Management has closed its fourth affordable housing fund on $760 million, PERE has learned, more than double the size of the previous vehicle in the series.
The fund, Avanath Affordable Housing IV, is the largest commingled fund targeting US affordable housing specifically, according to PERE records.
Thanks to newfound international support – including Dutch pension investor Bouwinvest – the California-based manager surpassed its target of $550 million for the fund. More than half of the fund’s capital came from Europe and the UK, primarily from first-time investors. Returning investors included the State of Michigan and New York-based Church Pension Fund of the Episcopal Church. Other investments came from pensions, foundations, corporations, banks and family offices.
Avanath Affordable Housing III, which closed $338 million on a $300 million target in 2018, was the first fund in the series to secure commitments from Europe. Avanath employed placement agents from San Francisco-based Accord Group and Selinus Capital of Frankfurt to assist with its European fundraising efforts.
More than 40 percent of commitments to Fund IV were made during the pandemic through due diligence processes that were largely finalized remotely, Avanath chief investment officer John R Williams said. The disruption of covid-19 has made the need for affordable housing more apparent, he noted, adding that the fund’s focus on the environment, social issues and governance was of particular interest to investors last year.
“Foreign investors also continue to find US affordable housing particularly attractive given its ability to act as a stable and durable portion of their portfolio because of its increasing demand and limited supply across the US,” Williams said in a statement. “Our European and UK, as well as our US investors, are also extremely attracted to Avanath’s strong commitment to ESG and Social Impact programs and goals.”
Fund IV, a value-add vehicle, will be used to acquire workforce apartments, many of which are subsidized through the Low-Income Housing Tax Credit program. Thus far, Avanath has deployed $387 million of equity to acquire 16 properties for the fund, all of which are in cities with large populations of renters from racial minority communities.
“Our focus has always been on preserving affordability in underserved markets across the country,” Avanath founder, chairman and chief executive Daryl Carter said in a statement. “We plan to continue this mission by bringing institutional capital to these communities, many of which are communities of color. In fact, our entire Avanath team is extremely diverse, which we believe allows us to better serve residents and our investors.”