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Catalyst Fund

by Colony Hills Capital


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DEMAND

As rental rates continue to increase in top MSAs and the oversupply of qualified candidates for top paying jobs also increases, young families and adults will find it more and more difficult to maintain ‘big city’ prices and to afford $2,000+ rents.

A report done by the Joint Center for housing Studies of Harvard University stated: “With rents for Class C units about a third lower than the market average, tightness in this segment indicates both ongoing demand for modestly priced rentals as well as a persistent shortfall in supply.”

According to a different 2017 State of the Nation’s Housing study by Harvard Research, the demand for workforce housing is also described as coming from a lack of supply. As the study found, while construction of high-end Class A properties has increased in recent years, it has fallen for the Class B and C properties.

Developing new workforce housing profitably can be difficult as the rental rates are inherently lower while construction costs are only increasing. According to an analysis from RentCafe, 87% of the multifamily units delivered in 2018 were luxury.

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SUPPLY

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So how can the demand for workforce housing be met? Developing workforce housing is not the only answer.

Operators like Colony Hills Capital have found the solution: we purchase well-built Class B and C multifamily properties (1980s to early 2000s vintage), renovate and manage them effectively, and ultimately deliver what we call “affordable luxury”. New developments eventually get older, and aging properties feed the demand for workforce housing.


Percentage of American Population
that falls into workforce housing bucket

  • 50% of American population makes up middle-class according to a report from Pew Research Center

  • Available units: 138.45 million Housing units in U.S., 28.9 million units are multifamily (non-single family, or detached units) only 11.3 million units (39.1%) appropriate for middle-class income or lower

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Investors can earn 18% - 24% Annualized Projected Rates of Return by partnering with Colony Hills Capital in the acquisition & repositioning of workforce housing properties.

 

Our Investment Process

  • Source:  We develop long standing relationships with multiple individuals and channels through which we fill our investment pipeline. Our deals are usually off-market or lightly marketed which enables us to purchase properties with attractive cap rates.

  •  Renovate: The properties we target usually have room for improvement externally, internally and managerially. We create accurate, detailed and cost-effective capital expenditure budgets which we prove out via market research and numerous 3rd party quotes.

  • Manage: Our team has over 30 years in successful property management experience. We are vertically integrated so that all our properties receive hands on management. Through market research, we strategically raise our rental rates to be in line with competition and our renovations give our tenants that “affordable luxury” feel.

  •  Sale: Once we have executed our investment strategy successfully, we sell our properties, distribute the profits to our investors, and continue our search for the next great deal.

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How does workforce housing compare to other real estate asset types?

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Multifamily real estate withstands economic storms and downturns better than any other commercial asset type, as seen in Figure 4.

People will need a place to live regardless of how the single-family housing market is doing, or retail, or office, etc. Workforce housing is especially resilient because of its inherent affordability.

Even families or individuals who have upper class income rely on affordable housing to save money for the future or for near term investment.  

 

Average Annual Return and Standard Deviation by Property Type

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CHC Track Record and Success

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Catalyst Fund

by Colony Hills Capital