As New York prices continue to climb, a pair of real estate investment firms sees potential in the affordable housing market.
Taconic Investment Partners and Clarion Partners have teamed up for a joint venture called Quality Communities, which will focus exclusively on non-subsidized workforce housing.
The partnership recently purchased a five-property portfolio from the Related Companies for $71 million and it’s willing to spend up to $400 million on similar acquisitions.
Taconic also tapped Ty Barnes, a former senior acquisitions manager at Related, to spearhead the Quality Communities effort as vice president of acquisitions.
Barnes, who previously held portfolio and asset management positions with Winn Residential and the Manhattan Maintenance Company, made the switch in July.
He told Real Estate Weekly that affordable housing has been a strong suit for Taconic and the outlook only stands to improve as the city grows more crowded and expansive.
“There is very limited affordable housing in the city, in general,” Barnes said. “There’s demand for it as more and more people move to the city and it’s only going to increase as buildings leave Mitchell-Lama.”
Christopher Balestra, Taconic’s senior vice president in charge of investments, said Quality Communities will target rent-stabilized buildings but not rent controlled or public housing properties.
He said the goal is not to destabilize the affordable market but rather keep vacancy rates low and rents at the high end of the affordable spectrum by modernizing older buildings that can be acquired for a competitive price.
“People will pay more than their paying today for a more modern building with up to date security and better-maintained grounds,” he said. “The goal is to update the affordable options that out there, it’s not to destabilize units and make rents go crazy.”
Taconic first entered the affordable market more than a decade ago when it acquired Eastchester Heights, a 1,400-unit complex on five city blocks in the northeast Bronx.
Through significant investments, the firm’s in-house management team was able to bring the property up to code, Balestra said, giving him confidence in the Quality Communities business plan.
“We already have a significant infrastructure in place,” he said. “We’re not really shifting gears or changing focus, we’re expanding on a part of our business that is already in place and has a successful track record.”
Barnes said having a willing partner in Clarion also bolsters the venture’s prospects.
Although Quality Communities’ first acquisitions are all in the Bronx, with the Related portfolio encompassing 368 units spread between the Fordham, Belmont and Concourse areas, Barnes said he plans to expand his search citywide.
“There’s rent stabilized in all five boroughs and we want to pursue them all,” he said. “There’s significant competition right now but we have a great partner, great infrastructure in place and a team that has cut their teeth in the Bronx for a decade now, so I feel good about our chances.”