This is KDF’s third affordable project in the City of Huntington Beach, supporting our history of being excellent partners in the cities in which we operate.
The Property is reserved for seniors 55+ years of age and 20% of the units are rent and income-restricted at 50% of Area Median Income (AMI) levels by the City of Huntington Beach. Built in 1993, the Property is a four-story midrise with wood framing and stucco siding. The Property offers studio, 1-bedroom, and 2-bedroom unit types and is the low-cost provider for market-rate senior housing in Huntington Beach.
In-place rents trail competing properties by $200-$300+, while the 50% AMI restricted rents have a gap to market of $600+. This investment reflects a Core+ execution strategy utilizing KDF's expertise in affordable housing and key relationship with the City of Huntington Beach. KDF plans to work with the City to extend affordability to the remaining market-rate units at the Project to 80% AMI in order to qualify for the California Property Tax Welfare Exemption, which is projected to save ~$540,000 annually in property taxes.
Since market rents at the Project are already well below market due to operational errors from previous ownership, the loss in rent revenue by reducing market rents to 80% AMI levels is only ~$14,000 annually. The Property Tax Welfare Exemption created a sizeable underwritten NOI and yield advantage over competing market-rate buyer groups while at the same time expanding affordable housing units in the City.
The all-in basis of $299,496/unit reflects a significant discount to both replacement cost and comparable sales of multifamily properties in the area. At the time of purchase, recent sales of 100+ unit market-rate properties in Huntington Beach averaged $407,275/unit.
Purchased by KDF with its own equity in September 2020.
166-unit multifamily community located in Huntington Beach, California.