Portfolio Property Update Part II

September 20, 2022

The Capital Stack

  Portfolio Property Update Part II

The Quarterly portfolio property update continues…

The Cambridge Apartments (Ferndale, MI)

  • The Cambridge apartments are mid renovation. We are completely transforming this archaic 1940’s property into luxurious high-end apartment homes. We are expecting the first few residential units to be ready for final finishes in the next 90-days. Throughout the renovation process we’ve retained one retail tenant which is a hair salon, and the second was a shoe store which has moved out. The first retail tenant is paying $1600 a month. We are in negotiations with a new tenant for the second retail space and will lease it for $2,500. The previous tenant in this space was paying just $1,200.

The Piney Grove Townhomes (Columbia, SC)

  • Piney grove recently received a fresh coat of paint and we’ve perfected our interior renovation plan. We captured new marketing photos and implemented virtually staged which has drastically increased leasing activity. We purchased this property in 2021, the transition of ownership has proven more difficult than anticipated. The prior management company tried to evict tenants after we had purchased the property, which they had no authority to do. After the purchase they also collected and would not return rent payments owed to us. We had to get our attorneys involved to recover these payments. The transition of ownership is finished, and we are resuming business as usual, turning units as they come available. In the last 2 weeks we’ve leased 3 units for our target price of $1,399. These units were previously leased for ~$1,000.

Hangar development (Salado, TX)

  • The 3 plots of land we own at the Salado airport remain raw land as we continue to wait for the taxiway and main infrastructure to be completed. Once this is completed, we will pour the concrete pads and begin developing our hangars. We chose premium locations on the runway so I’m excited to see how this comes together. 

The Raintree Condos (Austin, TX)

  • The renovations on the Raintree Condos are roughly 30% complete. We have 4 full units renovated and ready to sell once final inspections are completed by the city. The property has suffered from permit delays much like our Royal Oak project (Harvard lofts). We’re working with architects, engineers, and permit expeditors to navigate the politics of the City of Austin permit department. For a straightforward cosmetic only upgrade, this project has proven to be more of a hassle than initially expected.
  • With that being said we originally targeted a sale price of $550,000 for the duplex on the property, it sold for $617,500. We already have 4 condo units presold. We initially targeted an average sale price of ~$250k and are now expecting a average sale price closer to ~$350k. We attribute the significant rise of pricing to the increased demand for housing in Austin over the past 12-months.
  • We have been working on the Raintree Condos for just over a year. We’re expecting the community to be fully sold out by spring of next year. A spring of 2023 completion date puts us 6-months ahead of our original targeted timeline.

Major Market News


Austin, TX & SpaceX

It is a great time to own real estate in Austin. According to the ReaDeal’s Instagram post “Musk’s SpaceX filed an application to construct a 522,000 square-foot “shell building” facility in rural Bastrop County, east of Austin.” According to the post the project will cost $43 Million dollars and be completed in July of 2023. Check out the post for more SpaceX projects near Austin. 

Link to Post: https://www.instagram.com/p/CiNqQSOObvw/

Tips and Tricks

Tip
The permitting process has held up a few recent renovation projects. 
In the future we will:

  1. Have architects begin drawings for gut renovations while under contract. Drawings will take 3-4 weeks to complete and then will be ready to submit for permits right away after closing. 
  2. Get city inspections as soon as possible to address any concerns they may have. Like it or not, these inspectors have 100% control over a project being completed with full permit approval. I’m not surprised that many were convicted of accepting bribes in Detroit during the Kwame Kilpatrick era: https://www.reuters.com/article/usa-crime-detroit/seven-detroit-building-inspectors-charged-with-taking-bribes-idUSL2N0GU0VV20130829
  3. Build strong relationships with local building inspectors.  

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