The Real Deal New York

Jonathan Rose pays $500M for Forest City’s affordable arm

Portfolio includes about 8,500 units across seven states
March 01, 2017 01:00PM

Jonathan Rose (credit: STUDIO SCRIVO) and David LaRue

Jonathan Rose Companies is about to double its portfolio with the purchase of Forest City Realty Trust’s affordable housing business. The deal is valued at more than $500 million.

The developer will acquire 48 affordable housing communities with nearly 8,500 units across seven states, the Wall Street Journal reported. The sales are expected to close throughout the first and second quarter of 2017.

Many of the buildings are in need of repair, and Rose plans to invest $1 million to $15 million worth of repairs at each property.

“I’m not the only one who has figured out that affordable housing is a great investment and frankly there is a very competitive market,” Jonathan Rose told the Journal. “The … work that we’re doing gives us a bidding advantage.”

Rose said about 10 to 20 percent of the renovation costs will be financed with low-income housing tax credits. The company also assumed the debt on the assets.

Earlier this month, Rose’s company was selected to build a 751,000-square-foot mixed-use development in East Harlem. The company will be working alongside L+M Development Partners on the project, which will include 163 permanently affordable apartments and 79 units for senior citizens.

The latest deal is part of Forest City’s efforts to shed parts of its portfolio in order to focus on market-rate apartments and office space. The real estate investment trust had a tempestuous 2016. Bruce and Charles Ratner resigned from the board, and other structural changes took place at the urging of activist investors who said the shares were grossly undervalued. Late last year, REIT executives also announced a $307.6 million impairment — a drop in asset value — largely due to shortcomings at Pacific Park Brooklyn. [WSJ] — Kathryn Brenzel