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MAY 2008


Michael Costa and Partners Buy Simpson Housing Portfolio

by Donna Kimura

Simpson Housing Solutions, a subsidiary of Denver-based Simpson Housing and one of the nation's largest affordable housing developers, syndicators, and operators, has been purchased by the newly formed venture of MacFarlane Costa Housing Partners (MCHP). Terms of the acquisition were not disclosed.

The deal involves the acquisition of a portfolio of 270 properties, with 27,000 low-income housing tax credit (LIHTC) apartments throughout the United States and Puerto Rico. In addition, there are eight properties that are ready to begin construction this year, according to Michael Costa, the longtime president of Simpson Housing Solutions. Costa teamed with MacFarlane Partners, a San Francisco-based real estate investment firm, to purchase the portfolio.

The new entity, MCHP, owns 80 percent of the current venture. Avanath Affordable Capital, led by Daryl Carter, a co-founder of Capri Capital, owns 20 percent and has an option to purchase the majority interest in the portfolio from MCHP.

"We're excited about the whole group," said Costa, noting that he, Carter, and Victor MacFarlane, head of MacFarlane Partners, are longtime friends.

Costa said he had tried on two occasions in the last five years to purchase the company. The third time was the charm, but it wasn't easy. After signing a letter of intent in 2006, the parties began lengthy negotiations and set about acquiring the necessary approvals for the sale. The many layers of financing involved in affordable housing made for a complex transaction, Costa said.

The new team will follow in Simpson Housing Solutions' footsteps, developing affordable housing throughout the West. The goal is to produce about 1,500 LIHTC units per year.

In a new move, the firm will also look at developing 80/20 deals financed with tax-exempt bonds. These are projects where 80 percent of the units are market-rate and 20 percent are affordable. Costa said he would like to work up to building about 1,000 of these 80/20 units per year.

Simpson Housing Solutions, which was based in Long Beach, Calif., is relocating to nearby Carson, where the firm has purchased a 25,000-square-foot warehouse that it will convert into office space. The new business has about 75 employees.

Earlier this year, Simpson was ranked No. 5 on Affordable Housing Finance's Top 50 owners list.

Donna Kimura is deputy editor of AFFORDABLE HOUSING FINANCE, a sister publication to MULTIFAMILY EXECUTIVE.