Grosvenor Investment Management US, Inc. (GIM) recently has committed approximately $93 million to fund development of five multifamily communities with a total of 1,197 rental apartments. These projects include two highly visible developments in New York City with a total of 405 apartments.
In its latest closing on behalf of a domestic public pension fund, GIM provided $6.9 million in participating mezzanine financing for the development of 288 workforce rental apartments in San Antonio, TX. This project, Vantage at Kitty Hawk, is being developed by an affiliate of American Opportunity for Housing, Inc. (AOH), and is the third such project that AOH has developed with GIM financing. The other two are in the Texas communities of San Marcos and Kyle.
"With the three Vantage projects, totaling 792 units, and two New York buildings, totaling 405 units, GIM has become increasingly focused on multifamily housing development in both primary and secondary markets," said Robert Kilroy, Managing Director, GIM. "Multifamily investing in the US has provided investors with outstanding returns on an absolute basis and also in comparison to other property types."
Speaking of the Vantage developments, GIM Director John Gaghan said: "Throughout the U.S., demand is strong for workforce housing, which usually leases up quickly and has high resident retention rates. In recent years, most new multifamily development has focused on the luxury sector, despite the fact that there is significant unmet demand at lower price points. We are pleased to be working with AOH, which has a strong track record in workforce housing development in Texas."
Both affordable and luxury rental housing opportunities as well as retail and community uses will be offered by the two GIM-financed apartment buildings in New York City, currently under development by The Dermot Company, Inc. of New York City. In a unique public-private partnership, Dermot and GIM are developing a mixed-use property on Manhattan's Lower East Side that will include 78 mixed-income rental apartments and a new 30,000 square foot headquarters for The Lower Eastside Girls Club. GIM provided $6.4 million in joint venture equity capital on behalf of a public pension fund. Additional financing came from the city in the form of tax-exempt bond financing and subsidy loans; New Markets Tax Credit financing was provided by Bank of America, Carver Bank, and JP Morgan Chase. The 12-story building on Avenue D will have 4,700 square feet of onsite retail space as well as a gym, and a rooftop deck. Ground was broken in June 2010 and the project is expected to be completed by May 2012.
Across the East River in Brooklyn's BAM Cultural District, Dermot and GIM are partnering on development of a 42-story, 457-foot-tall tower called 29 Flatbush with 327 rental apartments (20 percent of which will be designated affordable), 7,600 square feet of retail space, and a 200-car parking garage. GIM, on behalf of a public pension fund, provided $68.9 million in equity capital. In addition, the New York State Housing Finance Agency issued $90 million in tax-exempt bonds with credit enhancement and administration provided by Bank of America and Capital One. Following a December 2010 groundbreaking, this landmark structure is expected to be completed by December 2012.
"We predict continuation of the US multifamily sector's strong performance, with even better opportunities in the next five years due to rising demand for rental housing along with weak supply, deteriorating home ownership rates, and changing demographics," said Kilroy. "These trends should provide investors with very good returns, as long as risk is balanced. GIM plans to continue seeking development and acquisition opportunities in all types of multifamily housing, from affordable to luxury, including renovation and repositioning of distressed properties."
About GIM:
Grosvenor Investment Management US, Inc. serves as Grosvenor's real estate investment management platform in North America. GIM is part of Grosvenor Fund Management, which was established in 2005 as a vehicle for third-party participation in Grosvenor-managed investments. As of year-end 2009, Grosvenor Fund Management had total funds under management of approximately USD$5.7 billion internationally. Grosvenor is a privately owned property group with offices in 18 of the world's most dynamic cities. It has five regional investment and development businesses in Britain & Ireland, the Americas, Continental Europe, Australia and Asia Pacific. Its international fund management business operates across these markets. As of December 31, 2009, these six businesses had total assets under management of US$16.4bn. Unusual for a private company, Grosvenor publishes a full Annual Report & Accounts, available at www.grosvenor.com.