IRVINE, Calif., June 2, 2008 – Avanath Capital Partners and MacFarlane Costa Housing Partners have acquired Simpson Housing Solutions (“SHS”) and its portfolio of 273 properties, which totals 26,000 affordable rental apartments in 33 states, the District of Columbia and Puerto Rico, according to Daryl Carter, Chief Executive Officer of Avanath Capital Partners.

Earlier this year, SHS was ranked by Affordable Housing Finance magazine as the fifth-largest owner of affordable housing in the United States.  It owned the most units of affordable housing in California.

The firm, which was a wholly owned subsidiary of Simpson Housing LLLP, specialized in the development, rehabilitation and management of rental apartment communities that qualify for the federal low-income housing tax credit (“LIHTC”), an indirect subsidy to facilitate private-sector investment in affordable housing. More than half of its 273 properties are located in California.
In the initial phase of what will be a two-phase transaction, ownership of the former SHS portfolio will be jointly held by Avanath Affordable Capital, a wholly owned subsidiary of Avanath Capital Partners (“Avanath”), and MacFarlane Costa Housing Partners (“MCHP”).

Avanath is a real estate investment firm focused on affordable housing, urban real estate investment, mortgage services and specialty finance.  Headquartered in Irvine, California, Avanath was formed in November 2007 by Daryl Carter, co-founder and former principal of Capri Capital Limited Partnership, who grew its assets under management to $7.4 billion. He later served as CEO of CharterMac Mortgage Capital.

MCHP is a newly formed joint venture between Michael Costa, the long-time president of SHS, and MacFarlane Partners Affordable Housing (“MPAH”), an affiliate of MacFarlane Partners, a real estate investment management firm headquartered in San Francisco that pioneered the urban investment concept among institutional real estate managers.

In the transaction’s second phase, which is expected to occur later this year, Avanath will acquire sole ownership of SHS’ general partnership interests in the investment funds or partnerships that own the 26,000-unit portfolio, as well as an experienced staff of SHS’ asset management and partnership accounting professionals. In completing the transaction, it will be one of the largest owners and managers of affordable housing in the country.

“Avanath is creating a new business model in the affordable housing industry,” explains Carter, who will direct Avanath’s initiatives under its affordable housing platform. “For Avanath, the size and complexity of this transaction represent the strong impact we anticipate creating in the affordable housing business.  Our ability to house deserving residents across the United States, with a particular focus on urban projects, exemplifies our mission to ‘add values to investments.’”

To facilitate this acquisition, Avanath is conducting a fund offering for which real estate investment banking firm Presidio Partners is serving as the placement agent. The acquisition of SHS’ general partnership interests in the 273 affordable housing communities will represent an immediate deployment of a portion of the equity to be raised in this fund, and will serve as the initial platform for Avanath’s affordable housing endeavors.

Following the second phase of the transaction, MCHP will retain SHS’ property development, finance and corporate accounting functions and continue to develop affordable housing. MCHP will be led by Costa, who founded the firm’s predecessor entity in 1994, and will be fully staffed by former SHS employees, working from their headquarters in Long Beach, California.

As MCHP, the former SHS development and finance team will focus on developing affordable housing communities in California, Arizona, Nevada, New Mexico and Colorado, according to Costa, who has supervised the development and financing of more than 37,000 units of affordable and market-rate multifamily housing during his career. Currently, the team is developing eight properties, all of which are located in California.

“We are extremely pleased to be affiliated with the two companies that have been leaders in the investment community in deploying institutional capital to help revitalize urban areas, promote smart growth and build affordable housing,” said Costa.

Costa expects that MCHP will develop 1,000 to 1,500 apartment units each year. Properties will consist entirely of affordable housing financed through the use of the LIHTC or will feature a mix of market-rate apartments and affordable units that qualify for the LIHTC and/or are financed with proceeds from the sale of tax-exempt bonds issued by government agencies.

According to Victor MacFarlane, managing principal, chairman and chief executive officer of MacFarlane Partners, “This is an outstanding investment for our firm. Because Daryl Carter and I have had the pleasure of working together in the past, this has been an exciting transaction, albeit a complex one. MacFarlane Costa Housing Partners is looking forward to developing new affordable housing in markets where it is sorely needed.”

The ownership interest in the affordable housing developer held by MPAH will be separate and distinct from MacFarlane Partners’ investment management activities.