Colliers Closes 15 Month Delay Senior Housing Project
Christ Unity Manor High-Rise in Koreatown Sells for $22.5 Million
After more than a year of waiting and wondering whether it would ever be sold, a team of Colliers International brokers got their answer recently when the lengthy escrow finally closed, signaling the long-anticipated $22.5 million sale of the 156-unit Christ Unity Manor apartments that has provided affordable housing to seniors with very low incomes for more than four decades. But that was just the end of the story.
The actual 15-month sales process – and eight-month escrow -- is a saga that traces a complex and at times harrowing path that included volatile interest rate changes in the capital markets, arcane state and federal tax credits and bond guarantees, and even the federal government's shutdown due to sequestration, among other issues.
These factors and other challenges played roles in threatening to derail completely or delay the deal, but the Colliers team, led by Vice President Jeff Gould, remained steadfast even as it time and again found itself scrambling for fixes. In addition to Gould, the Colliers team that navigated and closed this complex transaction included Vice President David Casper, Senior Vice President Mark Tarcynski, and Vice President Adam Tischer.
Just getting to know the players in this transaction was a challenge. They included a faith-based and non-profit seller with strong ties to the community, the federal government through its Dept. of Housing & Urban Development (HUD), and scores of qualified bidders who all competed to be the new owner of this well-known affordable housing tower.
Key to the transaction was Christ Unity Church, the non-profit owner of the property that had originally developed it in 1973 and which insisted that it would sell only to a developer that would agree to keep the property as it was intended – affordable housing for seniors. The church decided to sell the property in order to focus on its urban-based mission work throughout the community.
By “affordable” the church meant units that would continue to be priced, after subsidies from the federal government based on age and income of the occupants and a host of other factors, somewhere about $375 per month for each of the one-bedroom, one-bath units. Although market rents in the area average about $1,275 per month, any new owner would realize the rent differential through tax credits and subsidized long term debt. As part of the sale, a contract was struck ensuring the property will remain an affordable housing property for at least another 55 years.
The transaction team -- comprised of the five Colliers brokers and the buyer, seller, and their attorneys – had to face a number of unexpected challenges during the lengthy sales process and managed to effectively adjust course each time and keep the deal moving forward.
As an example, when the local HUD office was shuttered during the federal government shutdown known as sequestration, the team was able to switch gears seamlessly by simply going to the source -- the HUD office in Washington, D.C. Additionally, when the capital markets began swinging wildly at one point, threatening financing options, the team had to wait and time its move so the project could close with sound financing.
“This was the perfect storm for the right buyer,” said Gould, the lead member of the Colliers team that represented both parties to the transaction. “This project provided an opportunity for the right buyer to keep HUD-subsidized rents on the property at about the same level they are now and still maximize its investment through the extension of the HUD contracts, tax incentives, building upgrades, and other inducements.”
After leading some 43 prospective buyers on tours of the 12-story property, which is comprised of 156 one-bedroom, one-bath units at 615 S. Manhattan Place, and then sifting through 27 qualified offers, the Colliers team, along with board members of Christ Unity Church, settled on a final group of 13 prospective buyers. Following a marathon round of 90-minute presentations by each of those lucky 13 groups, the finalist was selected.
A partnership led by San Diego-based Vitus Group made the winning presentation and, despite the comprehensive bidding process that took place among the qualified buyers, it wasn’t just price that got everyone’s attention. Gould stressed that Vitus was selected based on its experience with acquisitions and rehab on similar affordable housing projects, its commitment to renovating the existing structure and implementing other programs that would benefit the tenants, as well as its demonstrated competence in property management.
“Like so many other areas of the city, Mid-Wilshire suffers from a lack of affordable housing and this is just one step in preserving this stock of housing and ensuring that multifamily buyers do not try and convert these rare assets to high rent market rate projects ,” said Gould. “With the aging of the Baby Boomers and the demand never greater for such housing, I think we will be seeing many more opportunities for development and conversion to age-restricted communities in the years ahead.”
Vitus has pledged to make some $5.45 million in building upgrades and renovations to the property, which has long been a contemporary Los Angeles landmark of sorts. Built in 1973, the modern building has always contrasted sharply with its residential neighbors in both its towering height and its contemporary architecture. It is located amid low-rise duplexes and spacious single-family homes in one of Los Angeles’s oldest neighborhoods a block north of Wilshire Boulevard.
“There are so few HUD towers like this still in the government’s program because many of the original developers wanted to convert their properties to market-rate properties when they had fulfilled their contract with the government,” said Vitus Group Principal David Beachem. “We are losing them all the time to market-rate developers. So, for someone like us to acquire it and keep it affordable is something we were eager to do. Not only will this be the premier affordable housing project in the Mid-Wilshire District, we believe it will serve as a model for others who deliver affordable housing.”
Meantime, members of the board of directors at Christ Unity Church said they sold the property in order to re-deploy some of the church’s assets to mission work and other faith-based pursuits. The board was quite satisfied with the sale outcome and with the fact that Christ Unity Manor would continue to operate as an affordable housing property for many years to come as it had insisted and required of the new owner.
“The board members wanted to ensure that the legacy of the property remain intact,” said Christian Ziegler, whose law firm, Rodnusky & Associates, represented the church in the transaction. “That was their first and foremost goal – that and to ensure that tenants would not be adversely affected by the sale.