The buyer will have a say in future rent prices
Park’s Edge Apartments sits on about 3.3 acres on Whitewood Road. It’s a short drive off U.S. 29, minutes from downtown Charlottesville and near Albemarle High School. The complex sits across the street from Charlotte Yancey Humphris Park, giving its residents various wooded walking paths as their front yard. Park’s Edge also features amenities like a playground, computer center and a community room. It features rents set for residents earning 40% or 50% of Area Median Income that are tethered to a tax credit program through Virginia Housing Development Authority and guaranteed to remain affordable for at least the next 12 years. All this could be yours for $7.7 million.
Having been on the market for about a month, and with about nine interested buyers, the property is for sale by the Albemarle Housing Improvement Program, a nonprofit organization that usually specializes in single-family homes. CBRE is the broker to handle the sale, and VHDA will have to approve the buyer.
The property has been subject to a 30-year affordability period, with the first 15 having also included investors. The investors who purchased the tax credits have received their allocation of the credits over time and exited the partnership in December 2018, said Jennifer Jacobs, AHIP’s executive director.
“We could have kept this, but we don’t have the infrastructure to do this,” Jacobs said.
In the late 1990’s, Jacobs said, Albemarle County had approached the organization to take on the property, as the apartment complex was federally subsidized and that subsidy approaching its expiration date.
“At that time, a lot of apartments were converting to condos in that area or into student housing,” Jacobs said. “The county didn’t want that to happen. At the time, the property was troubled. It was distressed and had an absentee landlord. It was affordable, but not a nice place for the residents who lived there. [Albemarle County] wanted not only to preserve it but get it in the hands of an organization that would handle it and keep it local.”
Jacobs reflected on the different landscape of nonprofit organizations in the Charlottesville and Albemarle area than the many organizations in existence today.
“It’s not like it is now where there’s a lot of entities doing this work,” she explained. “Even though we did home repair in alignment with our mission, they approached us.”
While AHIP specializes in repairing homes, there are other nonprofits that specialize in affordable multifamily unit management, work that Jacobs said AHIP no longer needs to dabble in.
While a large portion of conversation around affordable housing in the area focuses on development of more less-than-market-rate units, Jacobs said that home renovation and repairs for low-income homeowners is part of affordable housing preservation.
AHIP used tax credit programs to renovate the property in the early 2000s. The organization also once owned the land on East Rio Road near Charlottesville Catholic School but sold the property to Pinnacle Construction and Development for $900,000. The site now is Treesdale Apartments.
“In 2009, we decided that we didn’t want to be a nonprofit developer and operator,” Jacobs explained. “We transferred Treesdale over to Pinnacle, which owns and operates affordable housing around the state.”
Jacobs said it was around that time that AHIP knew it wanted to sell Park’s Edge when its investor period expired.
“Rehab and repair is not quite as sexy as building the multifamily stuff. We had thought that getting into that, we would feel more significant … we would command more attention, and that’s not what is needed,” she said. “We have lots of nonprofits working on that. This little organization over here is trying to keep rehab and repair going.”
An interested buyer with a similar mission
The current sale also coincides with a dip in some funding for AHIP. Selling Park’s Edge can help allow AHIP to continue the work that it was founded to do.
With the sale in motion, interested buyers recently had to submit their bids. After AHIP choses their preferred candidate, the potential buyer is subject to VHDA approval.
“The first layer is who we chose, and a second layer is VHDA approval,” Jacobs said.
The process of evaluation by VHDA could take up to 60 days.
Park’s Edge Apartments are still within a compliance period with VHDA until 2032, meaning it will maintain affordable rents for the next 12 years, regardless who buys it.
As for this sale, Jacobs said her organization wants the apartments to remain affordable.
“Like VHDA, we are prioritizing high quality, reputable organizations who want to preserve affordability for the long term,” she said. “We want the property well taken care of now and into the future. We’ve poured 20 years of our organizational heart and soul into this community.”
Piedmont Housing Alliance, a nonprofit that owns and manages affordable apartments, is among the nine interested buyers. PHA currently manages the property for AHIP.
Housing alliance CEO Sunshine Mathon said he worries that some of the potential buyers might not have his organization’s goal of keeping the property affordable long-term.
“I don’t know who the other competitors will be, but I suspect they may not have the same set of lenses as we do,” Mathon said. “That may mean we are not in as competitive of a position as others. We did our best to be competitive on one hand but also keep the residents and community overall front and center.”
On the current partnership between AHIP and PHA at Park’s Edge, Jacobs said “they are a good partner” and that they “are familiar with the community there now, which is great.” That said, AHIP still has other bids to contemplate.
Mathon said being able to best satisfy the residents, the buyer and the seller is not a simple solution.
Mathon noted the challenge of creating a competitive bid that can also leave enough cash flow in the property so that the rents can go back into the property through maintenance and personnel.
“We are highly cognizant of how the sale can impact the residents in the long term,” he said. “The more we put in a sale price, the less there is for the ability to maintain the property over the long term. If you have more debt on the property, the rent is going towards that and less towards maintenance.”
Financing options for affordable housing can include seeking loans or teaming up with an equity investor who has partial stakes in the property, which is the route AHIP took when it first purchased Park’s Edge.
AHIP is also adjusting to different funding patterns than what it has received in the past. The part of the pie that came from the city of Charlottesville has been reduced in recent years. In fall of 2019, AHIP had requested $600,000 and received $42,000.
“Losing a couple hundred thousand, no matter how you slice it, is hard to replace,” Jacobs said.