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Fund Overview

The Fund is a private equity real estate, qualified opportunity zone fund designed specifically to invest into, renovate and improve, and subsequently manage underperforming and often under-maintained market rate, workforce multifamily properties in the Mid-Atlantic region.

Investment Objectives

  • Provide investors with 14% projected net returns, including the distribution of an average annual cash-on-cash income yield of almost 10% that should be shielded from income taxes by depreciation, while allowing qualified investors to capitalize on the tax benefits of the Opportunity Zone Program.


  • Provide capital to Low or Moderate Income (“LMI”) communities to begin to remedy the crisis in workforce housing caused by the shrinking housing stock and the growing population as much research indicates that housing stability significantly increases the economic productivity of a community.

Market Opportunity

Historically, institutional and HNW commercial real estate investment capital has targeted large investments in properties serving affluent communities located within the top dozen metropolitan areas. As a result, properties in most LMI communities (as all Opportunity Zones are) has not seen a major capital infusion in over 40 years. The situation has become especially dire for affordable housing in these communities where the average vintage is the early 1970s. Over the last 20 years, for every new unit of affordable housing built, two units have been lost to age or neglect. As the housing stock which is affordable for workers and their families earning 60%-100% of average median income has been shrinking, the workforce population has been expanding resulting in a severe housing crisis. That crisis continues to deepen with each passing year. The consensus among housing researchers has become that renovating aging and under-maintained properties offers the most effective method for stabilizing housing and improving community resiliency for LMI communities.


With little capital competing for properties in LMI areas, these properties have not experienced pricing appreciation during the current economic cycle. In particular, underperforming or under-maintained housing properties in mid-sized cities can be purchased at 50%-70% discounts to ground-up development/replacement cost. Even after full renovation, the total post-improvement investment basis of these properties should remain 30%-50% below replacement cost. With such a low basis, the post-renovation rent increases can be sized such that the improved units can still be affordable for current members of these communities. As a result, these significantly improved properties can be expected to achieve full occupancy without needing gentrification or more affluent individuals or families to move into the communities. Given the crisis in workforce housing, demand for affordable housing should continue to create organic rent growth of at least 3%-4%, as has been the case for the past 10 years throughout the Mid-Atlantic region into which the portfolio is investing.


After the properties are renovated, efficient property management should allow for significant annual distributions of net income to Fund investors (projected to average 10% per year over the life of the Fund), and that income should be fully sheltered from income taxation by depreciation which the Fund can pass through to investors as well. Finally, the Fund is modeled to a conservative exit with a portfolio sale to large multifamily investors such as REITs, private equity funds, pensions, endowments, and sovereign wealth funds. Upside to the base case projected returns exists in the event that the Fund portfolio can be sold into a REIT IPO such that property valuations can be increased and liquidation valuation can be greatly enhanced.

Community Impact

The planned capital improvements made to the portfolio properties should directly and positively impact tens of thousands of people living in Opportunity Zones throughout Virginia, North Carolina, and the other target areas. By renovating properties, the Fund strategy can prevent thousands of units within the focus area from being lost to the market, thereby significantly improving housing stability for residents and resiliency for their communities.


“We met with a small group of residents who shared their stories of how safe and affordable housing had improved their lives: stability in school for their children (#4), a short commute to work (#11.2), a safe place for a grandmother to care for her granddaughter (#3). We spoke with a neighborhood store owner who told us how business had improved (#1) and crime had dropped (#16.3) in the years since the redevelopment project was completed.”

—Catherine Godschalk
Calvert Impact Capital
from Dear Impact Investors: Consider Affordable Housing
(with Allagash additions of related UN SDGs) 4/24/2018

Investment Parameters

  • The fund capital target of $300 million would enable the purchase of $675 million cashflow positive but inefficiently run properties suffering from some combination of low rental rates, elevated vacancy, turnover, deferred maintenance, and extremely high expense ratios. Rents have generally not been able to sustain the 3% – 4% historic sub-market growth rates and have fallen over 20% below respective sub-market averages.
  • Modeled purchase prices are based upon Cap Rates (i.e. Property Net Operating Income / Purchase Price) of 6.25% with a range of 5.75%-8.25%.
  • For a portfolio purchasing $675 million in properties, approximately $400 million in renovation and improvements is expected to be performed which should be started within 6 months and completed within 3 years.
  • Properties are expected to be purchased and renovated with $300 million of equity and approximately $900 million of debt expected to include a 3-year drawdown feature for the funding of the renovations.
  • Rents are expected to rise approximately 35% as a result of capital improvements followed by 3.5% annually in concert with current market rent growth rates.
  • Such rent increase and growth should maintain rents within the second quartile of the rent distribution for their competitive set. As such, rents should continue to be affordable to the current workforce community within each of the opportunity zones being invested into.
  • Renovation and improvements are projected to enable each property’s currently elevated vacancy rate to be reduced to their submarket average by year 6.
  • Capital improvements and quality management reduce expense ratios from over 50% to under 40%.
  • Properties are projected to be sold at an average Cap Rate of 6.25%.
  • After-tax returns include the assumption that investors borrow the deferred initial capital gains tax from a third party when due in 2026 paying a 6% interest rate on the loan and subsequently repaying the loan from Fund liquidation proceeds in year 11.

Qualified Purchasers

Investors into the Allagash Opportunity Zone CRE Fund I must be Qualified Purchasers as defined by the U.S. Securities and Exchange Commission and applicable law.

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