April 28, 2004
Page B6
Genesis Fund Help Builds Affordable Housing
By QUEENA SOOK KIM
Staff Reporter
Work-force housing, or homes for families with earnings near the U.S. median income, is getting its first big lift from major financial institutions. Citibank, Washington Mutual Inc. and other banks are committing a total of $57 million to a private equity fund dedicated to building homes in Los Angeles's inner city. The Genesis Workforce Housing Fund will provide equity investments to developers constructing single-family homes and condominiums in Los Angeles, where the median home price has skyrocketed to $375,000. Genesis will fund "infill" development, or construction on parcels of land inside cities. Most homes will be priced between $200,000 and $400,000. The fund was created by Genesis LA Economic Growth Corp., a nonprofit dedicated to sparking economic development in Los Angeles, and is being led by New York-based real-estate investment company Phoenix Realty Group. Northwestern Mutual Life Insurance Co., Milwaukee, and Los Angeles-based Far East Bank also are contributing to the fund. If successful in Los Angeles, the Genesis fund is expected to catch in other cities with affordable-housing crunches, including Boston and San Francisco. "I think we're going to see these kinds of funds pop-up in urban areas," says Evelyn Kenvin, director of investments for Citibank community development, a division of Citibank. The bank, which is a unit of New York-based Citigroup Inc., will contribute as much as $10 million to the fund. Institutional investors have been reluctant to fund such projects in major metropolitan areas.
In hot housing markets like Los Angeles, the homes often are built in abandoned industrial neighborhoods where land is more affordable. Such sites often require environmental cleanup. For example, the Genesis group's first project entails building 165 condominiums in Lincoln Heights, a neighborhood just north of downtown Los Angeles where two major freeways cross. The site, once the home of a furniture factory, was contaminated. Junkyards and vacant buildings surround the site. One of the development's main draws is its proximity to a light-rail station that opened in 2003. The homes will be priced to be affordable to families making between $44,000 and $110,000 a year, or 80% to 200% of the median income, which is $55,100 in Los Angeles. "Most investors are reticent about going into these areas because it's a pioneering effort," says Percy Vaz, the president of AMCAL Multi-Housing Inc., the Westlake Village, Calif.-based developer that will be constructing Genesis' first project. The Genesis group believes that if the Lincoln Heights development is successful more builders and investors will take an interest in the area.
The fund plans to raise an additional $43 million. Institutional investors like Seattle-based Washington Mutual will meet obligations as set out by the Community Investment Act, a federal regulation that requires institutions to invest in low- and moderate-income neighborhoods. "Builders have been trying to develop these sites for years now but there was no traction," says Debbie La Franchi, a consultant and former chief executive of Genesis LA. "Hopefully we're helping developers build a track record and showing other people that there's a money to be made in these investments."