Market-Rate Returns on Affordable Housing
15-18% IRRs with below-market rents through capital structure and tax efficiency.
60/30/10 capital stack creates 9:1 equity leverage. Access to mission-aligned subordinated debt unavailable to market-rate operators.
How we create value
Three advantages unavailable to traditional multifamily operators
We combine private capital investment with affordable housing strategies and operational discipline. This creates market-rate returns while maintaining below-market rents.
Affordable Housing Financing
Mission alignment provides access to subordinated debt at 200-400 bps below market rates, creating 9:1 equity leverage.
Tax Efficiency
Small equity base (10%) captures 100% of depreciation benefits. OZ structures deliver 25-30% after-tax IRRs.
Operational Integration
Vertical integration across development, construction, and management delivers 200-400 bps in cost savings.
The capital structure
60/30/10 stack enables 9:1 equity leverage
Traditional Multifamily
Great Expectations Approach
Example: $10M Property with Cost Segregation
Traditional Structure (65/35)
Great Expectations (60/30/10)
The 3.5x Advantage: Identical $2M Year 1 depreciation, but with $1M equity instead of $3.5M, the tax benefit is 74% of equity versus 21%—a 3.5x multiplier. Cost segregation accelerates 15-25% of basis into Year 1, creating massive immediate tax shelter that flows entirely to the small equity base.
Pillar 1: Affordable housing financing
Mission alignment unlocks capital unavailable to market-rate operators
Subordinated debt is patient capital from mission-aligned sources that sits behind senior debt but ahead of equity in the capital stack, typically comprising 25-30% of total capitalization. It carries interest rates of 2-4% (versus 6-8% for senior debt), often with deferred or forgivable payment structures tied to affordability covenants.
Sources
Public sector: Washington State Housing Finance Commission (WSHFC), city and county housing departments, housing authorities with project-based voucher programs.
Private mission-aligned: Amazon Housing Equity Fund, foundations, CDFIs, and other impact investors focused on housing equity.
Why it de-risks high leverage
While 9:1 leverage sounds aggressive, subordinated debt fundamentally reduces risk. Payment structures are deferrable during cash flow stress, eliminating forced sale risk. Lenders share our affordability mission and optimize for housing outcomes rather than maximum returns. Long-term commitments (30-99 years) mean patient capital partners, not exit-focused investors. Some structures include performance-based forgiveness tied to maintaining affordability.
Our Social Purpose Corporation status and track record provide access to subordinated capital at 200-400 basis points below market rates—financing unavailable to market-rate operators.
Who this is for
We partner with investors seeking institutional discipline and measurable social impact.
Investment opportunities
Three pathways to participate
Preservation Funds
Acquiring and stabilizing workforce housing with operational upside.
Development (OZ)
Ground-up or adaptive reuse in Opportunity Zones.
Institutional
Custom portfolio or single-asset allocations.
Target returns are goals, not guarantees. Actual structures vary by deal.
Pillar 2: Tax efficiency
Small equity base captures 100% of depreciation benefits
In our 60/30/10 structure, the 10% equity captures 100% of depreciation benefits. On a $10M property with $8M depreciable basis, Year 1 cost segregation creates $2M in depreciation—generating $740K in tax savings (at 37% rate) on just $1M of equity. This is a 74% Year 1 tax shelter, versus 21% in a traditional 65/35 structure.
When combined with Opportunity Zone structures, this creates compounding benefits that turn pre-tax IRRs of 15-18% into after-tax returns of 25-30% for qualified investors.
1. High Leverage
60/30/10 capital stack creates 9:1 equity leverage on development projects
2. Accelerated Depreciation
Cost segregation: 25% of basis in Year 1 creates 74% tax shelter on equity investment
3. Basis Reset at Year 10
Depreciation recapture forgiven—basis resets to FMV without tax liability
4. Tax-Free Appreciation
All appreciation after Year 10 permanently tax-exempt for qualified investors
Example: $10M Development Project, 10-Year OZ Hold
Capital Structure
Depreciation (Cost Segregation)
At Sale (Year 10) — Property Appreciates to $15M
WITHOUT Opportunity Zone
WITH Opportunity Zone
Tax Savings During Hold
$1.47M
147% of equity
Tax Saved at Sale
$2M
200% of equity
Total Tax Benefit
$3.47M
347% of equity
A $1M equity investment generates $3.47M in cumulative tax benefits over 10 years. Combined with 9:1 leverage and property appreciation, this structure delivers 25-30% after-tax IRRs while maintaining affordable rents.
Pillar 3: Operational integration
Vertical integration delivers cost savings and execution control
Our platform integrates investment, development, construction, and property management. This delivers 200-400 basis points in cost savings versus outsourced models while enabling rapid turnarounds impossible with third-party operators.
In-house construction
Direct cost control and real-time visibility. Track record includes Cornus House ($2M under budget, ahead of schedule) and multiple on-time rehabilitations.
Arboreal property management
Specialized affordable housing compliance (LIHTC, Section 8), rapid response maintenance, and proprietary technology platform managing 1,250+ units.
Execution track record
Rose City Flats: 60% → 95% occupancy in 12 months. Cornus House: only successful Tacoma lease-up in 2024-2025. Betula: 100% occupancy in 4 months.
Deal flow advantage
Property management operations provide competitive intelligence and off-market opportunities. Mission-aligned reputation attracts distressed sellers seeking responsible buyers.
The investment thesis
Why affordable housing in the Pacific Northwest now.
Severe housing shortage
250,000 unitsPacific Northwest needs 250,000 new affordable units by 2030 to meet demand (Puget Sound Regional Council)
Job growth outpacing supply
3:1 ratioEmployment growth exceeding housing production 3:1 in Seattle-Tacoma metro, creating sustained upward pressure on rents
Regulatory tailwinds
Multiple programsOpportunity Zones, recycled PABs, expanded LIHTC, and mission-aligned capital (Amazon HEF, etc.) create favorable financing environment
Underserved market segment
60-80% AMINaturally occurring affordable housing (60-80% AMI) receives minimal institutional capital despite strong fundamentals and mission alignment
Tax advantages and structuring
How tax-efficient structures enhance after-tax returns.
Real estate is one of the most tax-advantaged asset classes. Our expertise in Opportunity Zones, depreciation strategies, and tax-exempt financing can significantly enhance your after-tax returns.
Opportunity Zones
Key Benefits
- Deferral of capital gains invested into OZ fund until 2026 or sale of OZ investment
- 10% step-up in basis on original gain if OZ investment held 5+ years
- Complete tax exemption on appreciation of OZ investment after 10-year hold
- Effective tax rate can approach 0% on 10-year OZ investments versus 20-23.8% for traditional real estate
Example
Example: $1M capital gain invested in OZ fund. After 10-year hold, investor pays tax only on original $1M gain (deferred to 2026), while all appreciation on the OZ investment is tax-free. If OZ investment doubles to $2M, the additional $1M is permanently tax-exempt.
Depreciation & Cost Segregation
Key Benefits
- Real estate depreciation shelters cash distributions from current taxation
- Residential properties depreciate over 27.5 years (3.636% annually)
- Cost segregation studies can accelerate 20-40% of basis to 5-15 year schedules
- Bonus depreciation may be available on certain improvements and personal property
Example
Example: $10M property with $8M depreciable basis generates $290K/year in depreciation deductions. With cost segregation, first-year deductions could exceed $1M. This can shelter quarterly distributions from taxation, deferring investor tax liability.
Tax-Exempt Financing
Key Benefits
- Recycled Private Activity Bonds (PABs) provide tax-exempt interest rates to investors
- LIHTC properties may offer federal and state tax credits depending on deal structure
- Below-market interest rates (often 100-200 bps below taxable debt) enhance cash flow
- Mission-aligned financing from agencies unavailable to market-rate operators
Example
Example: Crossroads Garden utilized Washington State's first recycled PAB financing, securing tax-exempt permanent debt at rates 150+ bps below conventional financing. This rate advantage flows directly to investor returns through higher cash distributions.
1031 Exchanges (Exit Strategy)
Key Benefits
- Investors may utilize 1031 exchanges on fund dispositions to defer capital gains
- Allows tax-free rotation from one real estate investment to another
- Can be combined with OZ investments for optimal tax planning
- Preserves capital for redeployment rather than paying taxes at exit
Example
Example: Upon fund liquidation, investor can 1031 exchange into another qualified property, deferring all capital gains tax. This strategy allows wealth compounding across multiple real estate cycles without tax friction.
Important Tax Disclaimer
The information above is for educational purposes only and does not constitute tax advice. Tax benefits depend on your individual circumstances, including income level, state of residence, and overall tax situation. Consult with your tax advisor to understand how these structures apply to your specific situation. Tax laws are subject to change.
Current and upcoming opportunities
A public snapshot of opportunities currently in our pipeline. Detailed terms are shared with qualified investors.
Ground Up Pierce County Family Housing
A new-build family housing community designed to deliver long-term affordability in one of Pierce County's highest-demand submarkets.
100-125 units | Development | South Hill, WA
Preservation of Seattle Section 8 Housing
Preservation strategy focused on stabilizing existing Section 8 homes while improving property operations and resident quality of life.
100-125 units | Preservation | Seattle, WA
Great Expectations Preservation Fund IV
Our next preservation vehicle is being structured to acquire and protect mission-aligned affordable housing across the Pacific Northwest.
Fund launch target | Summer 2026
Important disclosures
- The information on this page is for informational purposes only and does not constitute an offer to sell or a solicitation to buy securities.
- Any investment opportunities are available only to qualified investors and are subject to applicable securities laws.
- Past performance is not indicative of future results. Any forward-looking statements involve risks and uncertainties.
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