By Jon Peterson
Los Angeles-based Kennedy Wilson has made a major increase to its holdings in Seattle with a $78 million equity investment in Newport Beach, Calif.-based Vintage Housing Holdings. For its equity investment, Kennedy Wilson will get a 61 percent ownership stake in the company.
Vintage Housing owns a portfolio of tax credit funded apartments in the state of Washington totaling 3,796 units. A good portion of this portfolio is based in the secondary and tertiary sub-markets of Seattle.
“This is a new business line for Kennedy Wilson in that Vintage Housing is a tax credit owner and developer of apartments. This is company is a very well respected player in this sector, and they have assembled a high level portfolio,” says Kurt Zech, president of Kennedy Wilson’s Multifamily Management Group. He works out of the company’s regional office in San Francisco.
The location of the existing portfolio was an important factor for Kennedy Wilson. “The portfolio represents an overlap for the market rate apartments that we own, and that made it a good fit for us. This will allow us to have our third-party management company, FPI Management out of Fairfield, Calif., to manage these assets going forward. We are already active in Seattle, Northern California, which is also where the portfolio of Vintage Housing is located,” said Zech. The number of units in Northern California is 756 and 544 in Nevada.
The cap rate on the investment made by Kennedy Wilson is projected to be 7 percent, according to Zech. This return is based on the existing rent coming out of the portfolio. The properties are rented by families or individuals that make 60 percent or less of the area’s medium income.
Vintage Housing has been an investor in tax credit apartments for a long time. The company is led by executives Mike Gancar and Ryan Patterson.
Kennedy Wilson does plan to make some improvements to the existing portfolio. “Once the property has been a tax credit asset for 15 years it can be re-syndicated to new tax credit investors. At that point our plan would be for us to invest $25,000 per unit to make improvements to the property,” said Zech.
Vintage Housing has three parcels of land under contact where it will be developing new projects going forward. At least one of these is located in Seattle.
Kennedy Wilson does have plans to grow the portfolio with Vintage Housing in the future. “Our idea is to grow the portfolio by 500 to 1,000 units on an annual basis going forward in the West Coast. This would include the markets of Seattle and Northern California. We are very much interested in buying land in those areas,” said Zech.