Located in Oakland, California, Northgate Terrace is an 11-story Sec. 202 affordable seniors housing property consisting of 180 efficiency units and 20 one-bedroom units. Originally constructed in 1969, the property was aging and in need of substantial rehabilitation. Facing the prospect of significantly rehabilitating the property, ownership decided it would prefer to sell the property rather than undertake the rehabilitation process.
The current management agent of Northgate offered to assume the existing HUD debt and ownership of the property for a nominal sum and take care of the rehabilitation and any other issues associated with the property, effectively relieving ownership of the entire situation but not exactly offering a beneficial financial outcome to the existing nonprofit owner. Before pursuing such an outcome, however, the board of directors recommended that Lancaster Pollard be contacted to see if they could sell the property to a quality operator that would not only renovate and maintain the property as an affordable housing facility for the long term but also provide ownership with a fair purchase price.
Relying on its status as the nation’s leading Sec. 202 lender, as well as its extensive knowledge of both seniors housing and affordable housing finance, Lancaster Pollard put together a sell-side M&A package and solicited targeted and competitive bids for the purchase of the property. As many of the potential buyers were housing providers who sought to use low-income housing tax credits (LIHTCs) in the purchase, Lancaster Pollard’s experience structuring transactions with tax credits allowed for a keen understanding of how to value the asset and set expectations for pricing.
In addition, since the property was originally built for retired graphic arts union employees and currently has existing union contracts with several employees, Lancaster Pollard sought a solution that would keep all union employees as well as its resident council in place.
Lancaster Pollard ultimately advised on the sale of Northgate Terrace for $27.5 million to WNC, a national investor in real estate and community development initiatives. WNC will perform a complete renovation of the existing property at a total cost of $47 million, including the acquisition and renovation. The comprehensive renovation to the 11-story high-rise will include: a new facade, seismic upgrades, general plumbing improvements, a new community room, medical exam space and gym, as well as upgrades to the building’s elevators. All of the property’s units will receive new appliances, lighting, fixtures, cabinets and other upgrades. In addition, the union employees and resident council will remain and provide guidance for specific renovations.
Lancaster Pollard’s ability to find the right buyer for the property’s original ownership resulted in a closed transaction that benefited the buyer, the seller, and the current and future residents of Northgate Terrace.
Jason Dopoulos led the transaction for Lancaster Pollard.
