Q4 Portfolio Update

January 2, 2024

The Capital Stack

This week will feature the fourth quarterly update of 2023. The portfolio updates we share every quarter highlight each property we own and share a bit of what we are working on each day.

Suburban 36

Both Plymouth Gardens and the Donovan Townhomes are currently 100% occupied, with $0 delinquency. Our present rent roll stands at $48,719, just $731 shy of our projected full market rent for both properties. While we initially anticipated reaching full market rent in year 3, we are approaching this milestone much earlier than planned, having owned the property for only 17 months. Additionally, the in-place Net Operating Income (NOI) of $374,493 surpasses our Year 2 projections.

Plymouth Gardens

Upon acquiring Plymouth Gardens, the property was fully occupied, and its rent roll stood at $17,790. The previous owner’s focus on maintaining high occupancy rather than maximizing lease rates gave us the opportunity to implement cosmetic renovations and adjust pricing to the full market rate.

The units at Plymouth Gardens typically rent quickly, often securing an approved applicant within a few weeks of the existing resident giving their notice to leave. We are consistently implementing light cosmetic renovations during unit turnovers, typically involving new paint and flooring.

The property’s T12 gross income when we closed was $201,107 with an NOI of $128,217. Using our T3 annualized, we have a gross income of $262,800 and NOI of $166,992. We’re extremely happy with how this property is performing and look forward to owning it for many years to come!

Donovan Townhomes

The Donovan Townhomes were completely occupied at the time of purchase, generating a rental income of $19,623. Like Plymouth, the previous owner focused on maximizing occupancy rather than maximizing revenue.

The property’s T12 gross income when we closed was $244,293 with an NOI of $150,746. Using our T3 annualized, we have a gross income of $292,895 and a NOI of $163,076. This is down from last quarter’s update due to turn costs and vacancies on units being turned.

The Donovan Townhomes have several units without laundry. Because of this, these units are taking longer than desired to lease. After some trial and error, we have decided to immediately install laundry amenities in the next available unit lacking them. This worthwhile investment will cost around $5,000 per unit and is expected to yield significant savings by reducing our vacancy over the life of the deal.

Creekside at Fenton Heights

Creekside is 100% occupied and continues in autopilot mode. One unfortunate miss is looking at the signed term sheet from a bank for a refinance in May of 2022 that would have returned ~50% of investor equity. The bank dragged its feet and withdrew the term sheet offer as rates went from 5.08% at the time to a peak of around 8%. Despite the unfortunate timing and the bank not following through on the term sheet, the property maintains fixed rate debt at 4% for another 2 years. We have maintained 100% occupancy for the past several months, with gross monthly income now at $27,680 compared to $10,400 when we originally purchased the property in 2020.

Royal Oakland

No major changes as this property runs on autopilot. We’re currently at a very healthy 11% UYOC in a market cap environment that’s in the low 6% range.

Major Market News


Billionaires & Multifamily

According to The Real Deal the ultrawealthy are diversifying their investment strategies away from traditional office spaces and towards the thriving multifamily real estate market. This shift is fueled by a decline in commercial property values and an ongoing demand for housing. Notable examples include Israeli billionaire Eyal Ofer, whose Global Holdings Management Group recently acquired a 56-unit building in Manhattan for $30.7 million, contributing to their expanding luxury multifamily portfolio. Fashion mogul Amancio Ortega, best known for Zara, also made a noteworthy entrance into the multifamily market, with his family office, Pontegadea, investing $232 million in a prominent Chicago apartment tower. This trend marks a departure from the traditional preference for office properties, as uncertainties in the post-pandemic office market persist. Meanwhile, the multifamily sector remains strong, benefitting from high demand and housing market inventory challenges, making it an attractive choice for the ultrawealthy seeking stability and growth

Source: TheRealDeal. (2023, Sep 26th) Billionaires bank on multifamily market. https://therealdeal.com/national/2023/09/26/billionaires-like-zara-founder-banking-on-multifamily-market/

Tips and Tricks

Terms-

T12: A Trailing 12 Months statement provides a summary of financial performance over the most recent 12-month period. It’s a way to analyze data continuously over a rolling one-year period, offering a more comprehensive view than just a snapshot of a single month or quarter.

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