The Fund is a private equity real estate, qualified opportunity zone fund designed specifically to invest into, renovate and improve, and subsequently manage underperforming and often under-maintained market rate, workforce multifamily properties in the Mid-Atlantic region of the United States.

• Provide investors with generous total returns, including the distribution of annual cash-on-cash income yield representing 50% of total returns, while allowing qualified investors, while allowing qualified investors to capitalize on the tax benefits of the Opportunity Zone Program.

• Provide capital to low- or moderate-income (“LMI”) communities to begin to remedy the crisis in workforce housing caused by the shrinking housing stock and the growing population as much research indicates that housing stability significantly increases the economic productivity of a community.

Historically, institutional and HNW commercial real estate investment capital has targeted large investments in properties serving affluent communities located within the top dozen metropolitan areas across the United States. As a result, properties in most LMI communities (as all Opportunity Zones are) have not seen a major capital infusion in over 40 years. The situation has become especially dire for affordable housing in workforce communities where the average vintage is the early 1970s. Over the last 20 years, for every new unit of affordable housing built, two units have been lost to age or neglect. Concurrently, the workforce population, comprised of people and families earning 60%-100% of their state’s average median income (“AMI”), has been expanding. Not surprisingly because growing demand is being confronted by shrinking supply, a severe workforce housing crisis now exists and is continuing to deepen with each passing year. The consensus among housing researchers has become that renovating aging and under-maintained properties offers the most effective method for stabilizing housing and improving community resiliency for LMI communities.

With little capital targeting workforce housing in LMI communities, these properties have not experienced significant pricing appreciation during the current economic cycle. In particular, underperforming or under-maintained housing properties in mid-sized cities can be purchased at 50%-70% discounts to ground-up development/replacement cost. Even after full renovation, the total post-improvement investment basis of these properties should remain 30%-50% below replacement cost. With such a low basis, the post-renovation rent increases can be sized such that the improved units can still be affordable for current members of these communities. As a result, these significantly improved properties can be expected to achieve full occupancy without needing gentrification or more affluent individuals or families to move into the communities. Given the crisis in workforce housing, demand for affordable housing should continue to create organic rent growth of at least 3%-4%, as has been the case for the past 10 years throughout the Mid-Atlantic region into which the portfolio is investing.

After the properties are renovated, efficient property management should allow for significant annual distributions of net income to Fund investors. Finally, the Fund is modeled to a conservative exit with a portfolio sale to large multifamily investors such as REITs, private equity funds, pensions, endowments, and sovereign wealth funds. Upside to the base case projected returns exists in the event that the Fund portfolio can be sold into a REIT IPO such that property valuations can be increased and liquidation valuation can be greatly enhanced.

The planned capital improvements made to the portfolio properties should directly and positively impact tens of thousands of people living in Opportunity Zones throughout Virginia, North Carolina, and the other target areas. By renovating properties, the Fund strategy can prevent thousands of units within the focus area from being lost to the market, thereby significantly improving housing stability for residents and resiliency for their communities.

“We met with a small group of residents who shared their stories of how safe and affordable housing had improved their lives: stability in school for their children (#4), a short commute to work (#11.2), a safe place for a grandmother to care for her granddaughter (#3). We spoke with a neighborhood store owner who told us how business had improved (#1) and crime had dropped (#16.3) in the years since the redevelopment project was completed.”

—Catherine Godschalk
Calvert Impact Capital
from Dear Impact Investors: Consider Affordable Housing 4/24/2018
(with Allagash additions of related UN SDGs)

Investors into the Allagash Opportunity Zone CRE Fund I must be Qualified Purchasers as defined by the U.S. Securities and Exchange Commission and applicable law.