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Barker Pacific bites into A.F. Evans’ portfolio
A venture that includes San Francisco's Barker Pacific Group Inc. has acquired the general partner interests in 20 multifamily properties—half in the San Francisco Bay Area—from the bankruptcy estate of Oakland's A.F. Evans Company Inc.
The 2,135 units are 90 percent affordable properties including senior-housing. They are located in California, Washington and Oregon.
The partnership, Bayside Communities LLC, also expects to acquire the general-partner interests in another 12 properties from the A.F. Evans portfolio in the next few weeks.
The assets, which include a property management company also previously owned by A.F. Evans, are being acquired all cash and are valued by Bayside at not quite $300 million.
The property management affiliate, a successor to the property management arm of A.F. Evans, will manage Bayside Communities' portfolio and provide fee-management services to another 47 affordable communities and senior living centers in California, Washington, Nevada, Oregon and Texas.
Bayside Communities and Bayside Management were formed specifically to acquire and operate the assets of the Evans company.
A.F. Evans filed for Chapter 11 bankruptcy protection in March 2009. The company estimated assets of less than $50,000 and liabilities of $100 million to $500 million. Its three largest creditors were Union Bank, Key Bank and US Bank. Union and Key banks were each owed $10 million; US Bank was owed just more than $9 million.
The Bayside Communities' acquisitions create a platform for a proposed expansion effort aimed at acquiring and securing management contracts on more than 20,000 affordable and senior rental units in the Western and Southwestern United States over the next five years. "It is a major initiative of Barker Pacific," said Michael Barker, chief executive and managing director of Barker Pacific Group. He is also the co-chairman of Bayside Communities.
Beside Barker Pacific, the Bayside companies are owned by affiliates of Southern California's Luzzatto Co. Inc. and Lion Real Estate Group LLC.
Joint venture pounces on affordable housing
The $300 million affordable housing empire built by bankrupt developer A.F. Evans has been acquired by Bayside Communities, a new joint venture between Barker Pacific Group, Luzzatto Co. and Lion Real Estate Group.
Bayside bought the general partner interests in 20 multi-family properties totaling 2,135 units in California, Washington and Oregon. Bayside Communities will acquire general partner interests in another 12 properties from the A.F. Evans' portfolio over the next few weeks. While the properties have a value of about $300 million, Barker Pacific President Michael Barker declined to disclose the acquisition price.
The deal comes two years after the Oakland-based A.F. Evans filed for Chapter 11 bankruptcy protection. The company had spent decades building and managing a portfolio of senior and affordable housing, but had aggressively moved into market-rate condominium
development just before the market crashed. The recession and real estate crash left A.F. Evans with a bloated inventory of unsold units and stalled development sites.
"Obviously it's disappointing to be in bankruptcy, but to be able to hold most of the company together and sell it to an entity with the wherewithal to continue it is something that we worked hard to do," said A.F. Evans President Art Evans.
Included in the deal was the property management arm of the bankrupt development company, Evans Property Management Inc., and it will operate as EPMI, a Bayside company, under the management of Debbie Weber. Weber previously served as president of Evans Property Management and she will continue in that role with EPMI. EPMI will manage the 20 acquired properties along with an additional 47 fee-based managed properties totaling 7,300 units.
The current 300 staff members of the firm will also join the new management company under Weber's leadership.
"We were very attracted to this transaction, as well as Debbie's leadership, because it represents an excellent business opportunity that also fulfills an important social mission," said Marc Luzzatto, co-chairman and majority owner of Bayside Communities. "We look forward to finding more ‘doing well by doing good' opportunities as we expand the EPMI/Bayside business."
The deal does not include A.F. Evans' two remaining development sites in San Francisco, 55 Laguna St. and 1688 Pine St., Evans said. The Laguna Street site, which is entitled for 450 units, is in contract to be sold to Wood Partners (see related story at right), which took over the stalled CityWalk condo project in Oakland. The Pine Street property, which RREEF was part owner of, will be taken over by Canyon Partners, according to Evans. Evans will continue to be involved in both projects.
Barker, who is co-chairman of Bayside Communities, said the firm is attracted to the stability of the affordable housing portfolio, which he said "has been well-managed to provide reasonably priced rental units for thousands of people throughout the Western states."
"Our goal is to ensure a stable management platform for the portfolio we are acquiring as well as the many properties managed for institutional investors and other owners," he said.
Over the next five years, Bayside Communities has plans to acquire and secure management contracts on more than 20,000 affordable and senior rental units. Bayside Communities LLC, EPMI and its affiliates were formed to own and manage properties in the Western and Southwestern United States and to search for additional affordable housing acquisition and development opportunities. Affordable and senior housing management fees generally range between 4 and 5 percent of gross revenue.
The deal was complicated by the fact that more than 140 parties had a stake in the 20 properties and had to consent to the transaction. Many of the original affordable developments had been ventures between A.F. Evans and a nonprofit housing builder. Other lenders, public agencies and buyers of affordable housing tax credits also had stakes in most of the deals.
"It's a real puzzle," said Barker. Barker Pacific is not entirely new to affordable development, having built a below-market
project at 2055 Mission St. in San Francisco.
"The key is to make sure you are providing service to the community and meeting all the various affordable housing guidelines of the community," said Barker. "You do good for the community, but it's a business that can be beneficial to the ownership as well."
Evans will be a board member of Bayside Communities and continue to advise the new owners.
"Art has been in the business for a long time — I highly respect him and think he's a pro," said Barker. "It's just unfortunate that the market did what it did and his company was a bit of a casualty. The underlying assets were in great shape."
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