Private REIT Invests in Affordable Housing Communities

The Community Development Trust, a private REIT formed to preserve and enhance the affordable housing stock, is working to improve local communities.

John Divers, the company's chief financial officer and chief operating officer, sat down with REIT.com at REITWise 2012: NAREIT's Law, Accounting and Finance Conference in Hollywood, Fla., last month to discuss the affordable housing market.

Divers said the company has seen improvements in the performance of both its debt and equity portfolios, which he attributed to increased rents and stable vacancies.

"Both markets have continued to improve. On the debt side, there's been a reasonable increase in the lending opportunities, and on the equity side, we are starting to see transactions developing again," Divers said.

He added that the company closed last month on its first property in more than 18 months, a 150-unit senior housing property in the Boston area.

The company has been in the secondary market for affordable housing mortgages since its inception 10 years ago, according to Divers. Community Development Trust combines the capital of institution investors to acquire or provide financing for affordable housing.

"In 2011, we saw a new niche develop in the community development financial institutions (CDFI) marketplace," said Divers. "These are typically non-profits that operate in local markets in local communities, where they look to buy both job opportunities and affordable housing."

He said that it's important to note that Community Development Trust is not just a REIT--it's also a CDFI. The Treasury Department has created an association called the CDFI Fund that provides grants and other financial incentives to CDFIs to continue their work in local communities.

The company received three grants in the last three years from the CDFI Fund. Divers said the grants are used to subsidize purchases from CDFIs.

"We purchase their mortgage portfolios. Sometimes that's slighter better than the market would dictate, and that gives them liquidity and the ability to do better in their local market," he said.