Lincoln Avenue Capital, a leading, mission-driven investor in and developer of affordable housing, has signed an agreement to acquire the majority stake in a social purpose real estate investment fund, the Housing Partnership Equity Trust (HPET), which invests in affordable housing across the United States. The transition is expected to be complete by the end of this year, after which Lincoln Avenue Capital will serve as one of the largest, single private investors in affordable housing.
HPET was originally founded nine years ago by major Wall Street banks, prominent foundations, and nonprofit housing organizations that came together to pioneer an innovative approach to affordable housing investment and preservation. Until now, HPET has been principally owned by some of the nation’s largest and most respected not-for-profit developers and operators of affordable and workforce housing for low- and moderate-income individuals and families. In partnership with HPET nonprofits, Lincoln Avenue Capital plans to purchase at least $150 million annually in workforce and affordable housing to expand HPET’s investments.
The company will continue HPET’s traditional focus on largely unsubsidized affordable housing (what is also referred to as “naturally occurring affordable housing” or “NOAH”). Their rents are lower than those of the area’s housing market.
“Building and preserving affordable housing is one of the most important social causes of our time,” said Jeremy Bronfman, CEO and founder of Lincoln Avenue Capital. “HPET has pioneered and proven a powerful model for bringing together private and nonprofit partners to develop and sustain affordable and workforce housing that strengthens communities. Lincoln Avenue Capital is well equipped to build on this success. We are delighted to be partnering with leading nonprofit and philanthropic organizations that share our mission to increase HPET’s impact across the country.”
“Affordable housing is tangible and essential for individuals, for families, and for communities. Lincoln Avenue Capital’s work aligns deeply with that of HPET’s, and we look forward to their stewardship,” said HPET CEO and president Anne McCulloch. “This transaction is a new chapter for HPET with a leading impact investing partner that brings expertise in affordable housing. It’s a milestone in our industry and a preview of the path forward in making housing more accessible in our nation.”
Established in 2012, HPET was built on an idea first proposed by the Housing Partnership Network (HPN), a collaborative of 100 leading affordable housing and community development nonprofits, and other housing advocates. The group advanced the idea that more private capital would be attracted into affordable housing if a real estate investment trust (REIT) could be formed with some of the nation’s largest and most respected nonprofit developers and operators of affordable multifamily housing. To put the concept into action, HPN and its members worked with the John D. and Catherine T. MacArthur Foundation and other major investors including Citibank, Charles Schwab Bank, the Ford Foundation, Prudential, and Morgan Stanley Bank. Today, HPET serves nearly 3,000 households in seven U.S. states.
“Expanding access to safe, affordable homes is key to our country’s fight against inequality and racial injustice,” said Debra Schwartz, MacArthur’s Managing Director for Impact Investments. “We are proud to have supported HPET’s groundbreaking work since inception and excited that Lincoln Avenue’s partnership with HPET’s leading nonprofit housing organizations promises even greater scale and impact in the years ahead.”
Lincoln Avenue Capital is expected to close on the purchase by the end of 2021. It will acquire a majority interest in HPET, which it will own alongside the other institutional investors, including the MacArthur Foundation. HPET’s nonprofit partners will retain ownership of 7.5 percent of the company. Other investment partners include Prudential Impact Investments Private Equity LLC, Citibank, N.A., Morgan Stanley Bank, N.A., and Charles Schwab Bank, SSB. Under Lincoln Avenue Capital’s leadership, HPET will continue to aggressively seek out new housing investment opportunities and additional private capital. Beekman Advisors acted as investment banker for HPET in the transaction.
“In nearly every U.S. market, naturally occurring affordable housing is disappearing,” said Tom Bledsoe, HPN’s president and CEO. “The most effective way to address this challenge is through more impact investment. This acquisition is a clear demonstration of that idea and transforms the entity into becoming one of the industry’s premier workforce housing platforms.”
“This acquisition is the culmination of a vision, almost a decade in the making, to truly scale up and expand social impact investment in affordable housing,” said Linda Mandolini, HPET board member and CEO of California’s Eden Housing, one of HPET’s 14 not-for-profit developers. “Now nonprofits will have an even greater set of tools to expand investment in the development and preservation of critically needed housing.”
“At Lincoln Avenue Capital, we’re focused on advancing solutions in affordable housing and creating impact for generations to come,” said Jeremy Bronfman. “More than ever, the need for quality, sustainable, affordable homes is clear. This new chapter for HPET represents what is possible when mission-driven businesses, nonprofit organizations, and foundations come together to tackle the pressing need for affordable and workforce housing.”
About LAC: Lincoln Avenue Capital is one of the nation’s fastest-growing developers and investors of affordable housing, providing high-quality, sustainable homes for low-income individuals, seniors, and families nationwide. LAC is a mission-driven organization with a portfolio that includes 88+ properties, comprising 15,000+ units and serving more than 43,000 residents across 14 states.
About HPET: Housing Partnership Equity Trust (HPET) is a national, social-purpose real estate investment fund created by nonprofits to raise capital for affordable housing. HPET collaborates with its partners to acquire and preserve affordable rental housing in opportunity neighborhoods with the components critical to household success. HPET’s nonprofit members are AHC Inc., Aeon, BRIDGE Housing Corporation, Chicanos Por La Causa, Inc., Eden Housing, Inc., Enterprise Community Development, Inc., Hispanic Housing Development Corporation, Homes for America, Housing Partnership Network, LINC Housing Corporation, Mercy Housing, Nevada HAND, Inc., NHP Foundation, NHT Communities, and POAH.