How this Charlotte group put together an affordable-housing deal with funding help from the city

Sharon-oaks website

Charlotte Business Journal, Ashley Fahey, April 19, 2019

The first naturally occurring affordable housing deal in Charlotte to receive some public investment has closed.Sharon-oaks website

A joint venture between Charlotte firms Ascent Real Estate Capital and Laurel Street this week acquired Sharon Oaks apartments off North Sharon Amity Road, between Monroe Road and Independence Boulevard, for $8.2 million, according to Mecklenburg County real estate records. The group plans to do some unit and property improvements over the next six months and has committed to 15-year deed restrictions that will keep rents affordable to specific income brackets.

The crisis around NOAH in Charlotte has been talked about more frequently as older market-rate apartments across the city are razed for redevelopment or purchased by institutional buyers who invest capital and, subsequently, raise rents to generate a return. The loss of NOAH is heavily contributing to Charlotte’s affordability crisis, in particular because a bulk of the city’s affordable-housing stock is in older market-rate apartments rather than subsidized units.

The city’s new housing framework calls attention to NOAH deals, and council is looking at a policy that provides guidelines on what types of those deals will receive public investment, with Sharon Oaks being the first of its kind. Council approved the city investment at Sharon Oaks in February.

At Sharon Oaks, 48 units will be restricted for households earning at or below 60% of the area median income, 10 units for those at or below 50% AMI, 20 units for those earning 30% AMI with vouchers or other rental assistance, and 20 units with no restrictions. The 98-unit property sits on a nearly 6-acre site and was built in two phases, in the 1960s and 1990s.

Ascent and Laurel Street received a $2.1 million loan from the city’s Housing Trust Fund, combined with investor equity and a Fannie Mae loan originated by Bellwether Enterprise. Voters in the fall approved bolstering the HTF, the city’s primary source of financing affordable housing, from $15 million to $50 million.

Although Laurel Street’s business is in the mixed-income housing sector, this is the first affordable multifamily deal for Ascent Real Estate Capital, which has primarily done adaptive-reuse office and retail projects in Charlotte.

“We like to acquire and rehabilitate old buildings — mostly that’s been in commercial real estate,” said Mark Ethridge, partner at Ascent.

Ethridge said the firm felt embarking on a NOAH acquisition would make sense with the company’s existing expertise and had been working with Laurel Street over the past 18 months to put together a deal.

s many in the acquisitions game here know, it proved challenging to find a property that checked the boxes and wasn’t already snapped up by another group. Sharon Oaks was an off-market transaction, which made it easier to close.

Ethridge said Ascent and Laurel Street evaluated the housing framework, approved by council last year, and thought the policy on funding NOAH deals would fit in with the proposal at Sharon Oaks.

Having HTF dollars helps offset the costs of acquiring and completing upgrades at the property, Ethridge continued.

“It allows us to implement renovations as quality housing stock for years to come without having to raise rents to make the economics work,” he continued.

Ethridge said there are other groups in the market trying to put together a similar deal but noted it boils down to finding properties that can be closed on and that are in the right neighborhood. The area around Sharon Oaks, although quickly changing, is a mixed-income neighborhood, an important consideration for Ascent and Laurel Street.

Ethridge said Ascent is interested in doing more NOAH investments around Charlotte beyond Sharon Oaks.

“We’re really committed to having this be a strategy we can replicate on multiple deals,” he said. “We have really enjoyed the platform we’ve created (with Laurel Street).”

Dionne Nelson, president and CEO of Laurel Street, said in a statement that preserving NOAH “protects opportunities” for families at all income levels to live, work and thrive in Charlotte.

“Properties like Sharon Oaks are increasingly vulnerable to investment that displaces tenants and alters the fabric of mixed-income neighborhoods,” Nelson said. “Our investment is a response to those dynamics, serving existing residents while ensuring long-term affordability in communities that are experiencing significant change.”