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Real Estate - Residential

For $10.6M, Cape Fear Collective Buys Affordable Housing Units

By Cece Nunn, posted Jan 31, 2022
The house at 1205 Orange St. was one of those listed in the Terra Property Holdings portfolio. (Photo courtesy of Intracoastal Realty Corp.)
A Wilmington organization purchased 71 residential units in the Port City last week for $10.6 million, with plans to keep the rental housing available at affordable rates.

The 71 housing units in 66 properties are located mainly in or near downtown Wilmington, west of 17th Street. Sixty-one of the properties are houses.

A social impact investment initiative created by nonprofit Cape Fear Collective bought the portfolio from Terra Property Holdings in a deal that closed Friday afternoon. Cape Fear Collective created Collective Ventures in 2021 with goals that included attracting $10 million in investments in the first year and boosting the amount of affordable housing in the city.

"With social impact investing, we're able to be a competitive buyer in the marketplace and preserve these units as affordable housing," said Meaghan Dennison, interim CEO of Cape Fear Collective.

About 70% of the existing renters in the units receive some type of rental assistance to keep their housing costs at or below 30% of their income, which is the threshold for housing to be considered affordable, Dennison said. The banks involved in the Friday purchase were Live Oak Bank, First Bank, First National Bank and First Citizens Bank.

Jeff Hovis, a broker with Wilmington-based Intracoastal Realty Corp., represented the seller in the transaction with CFC.

The value of the rental portfolio has increased over the years, Hovis said. Members of the Olson family bought 83 properties with more than 90 rental units for $5 million in 2016, then sold it for $6.3 million in 2018. The larger portfolio sold again in 2020, this time for $9.8 million, Hovis said.

This time, Hovis said, he separated 25 of the units from the original portfolio to sell in smaller packages, and in total, the larger portfolio brought in about $13 million.  

The 71 units CFC purchased could easily have sold to owners planning to sell or charge more in rents for all the units, Hovis said.

"I could have taken the [smaller] portfolio and split it up and sold them more in a retail capacity for them, just because of the demand for housing, but it ended up being something that works together," he said.

Last year, in another effort to address the region's lack of affordable housing, CFC bought Driftwood, a 15-unit apartment complex off Princess Place Drive in Wilmington.

Driftwood, a tax credit project developed 16 years ago to provide housing for chronically homeless residents, sold to CFC in a $1.2 million transaction in June 2021.

In a separate affordable housing effort, the Wilmington City Council is expected to consider granting $250,000 of its nearly $26 million in American Rescue Plan Act (ARPA) funds to allow Cape Fear Collective to buy two to three dwellings from its investment arm to keep as permanent supportive housing in perpetuity, Dennison said.

She said the investment fund can then redeploy capital to buy properties that can serve as inventory for first-time homebuyer programs.

"An important program within the plan staff recommended to Council is for housing assistance to protect the Naturally Occurring Affordable Housing (NOAH) existing within the city. NOAH is existing housing that is currently affordable to low-to-moderate income households or that was once affordable before becoming blighted and uninhabitable. Current housing inventory shortages often result in the loss of these houses as they are converted into market rate rental and homeowner housing," city agenda documents state. "This further exacerbates the city’s workforce/affordable housing shortage, as well as contributes to the displacement of lower income and minority residents."

The council meets at 6:30 p.m. Tuesday at Wilmington City Hall, 102 N. Third St.
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