Mid Month Update-October 15, 2016

As shared in last month’s Mid Month Update, four of our team members spent three days in Wichita completing onsite due diligence for a 292 unit senior living apartment complex. It would have been our largest acquisition to date (as measured by purchase price). We loved all the physical attributes of the property but through our investigation we uncovered a variety of discrepancies between the information provided prior to us for writing our offer and the actual financials for the property.

While it was disappointing and difficult to walk away from a property that had so much potential, it was great confirmation in our company’s due diligence abilities and purchase criteria discipline. Using our combined team experience, we were able to uncover the issues and make the unanimous decision to walk away from a deal that likely would have underperformed for our investors. We pride ourselves on fully understanding each deal we present to our investors, and being able to be confident in the achievability of our projections.

On to the update.
 

Funds:

 

Altus Multi Tenant Income Fund

  • Villaggio (33 units, Sacramento) –100% occupied.
  • Shasta View (51 units, Redding) - 96% occupied.
    • The property was recently appraised for a refinance and showed a 41% increase in market value (net of improvement costs) since we purchased it a little less than two years ago.
  • Cedar Hills (124 units, Oklahoma City) – 93% occupied.

Single Purpose Entity Investments:

Normandy Place

(80 units, Little Rock AR)

  • We closed the purchase of this 80-unit complex on 10/07.
  • The complex consists of all 2 bedroom 2 bath units. Interior upgrades will include new flooring throughout, fresh paint, all new lighting package and upgraded bathroom fixtures.
  • Exterior improvements began the week after closing with interior upgrades to begin next week.

 AE Rockwell

(304 units, Oklahoma City)

  • The construction team has found its groove and to date we have completed over 175 unit with the new finishes. There are another ~25 units at punch list stage that will also come on line within the next week or two.
  • We ended September with 26 new leases, while fewer than previous months we beat ourgoal of 25 new leases for the month.
  • I am excited to share that Rockwell Plaza was nominated for Renovation of the Year at the NOVA awards. The NOVA awards are held each year by the Central Oklahoma Apartment Association where the best in the multi-family industry are recognized. Winners will be announced at the awards on December 10th.

 

AE Sunset

(98 units, Edmond OK)

  • Leasing momentum is increasing. Since beginning the lease up process part way through September we have leased 8 upgraded units at the new lease rate.
  • Construction has been progressing very well with 25 units having interior upgrades fully complete. The exterior renovations, started in June, are complete.

 

Rosewood Garden Apartments

(33 units, Sacramento CA)

  • 100% occupied
  • Property is currently on the market to sell

 

AE Bodega

(11 Units, Petaluma)

  • We are 100% occupied at this property.
  • Revisions to the PUD application for a subdivision overlay are being reviewed by the City.

 

AE Commerce

(20,000 SF Commercial Space, Rohnert Park)

  • The property remains on the market.

 

AE Three -1500 Farmers Lane

(17,400 SF Commercial Space, Santa Rosa)

  • While still negotiating terms with an interested tenant we are beginning to explore the idea selling this property.

 

Opportunity Knocks:

405 5th Street, West, Sonoma, CA

 (7 townhomes, Sonoma)

·         5 of the 7 units have been pre-sold.

·         Check out the listing here: http://www.405fifthstreetwesthomes.com/

 

Lamplighter Apartments

(42 Units, Modesto CA)

  • Window replacement continues at this property with a projected completion of all windows done by November 15th.
  • After testing rent increases on 5 units we chose to give a blanket increase to the entire complex. Based on the high interest from tenants in this property rents on original units will stabilized ~15% above our original pro forma rents for upgraded units.

On the Horizon:

  • We have a 194-unit complex in Oklahoma City in contract. This deal is comprised of two properties that share one management office. This property is in an excellent location near the affluent neighborhoodof Nichols Hills, OK. The property is stabilized at 94% occupancy. With minimal improvements and streamlined management, we expect this deal to produces steady cash flow. Like Normandy, Little Rock, this is a structured program with a single investor.
  • 1 Carousel Ln, Ukiah: Over 90,000 of light industrial in an area with severe light industrial shortage. We are currently in due diligence and working through the financing. Assuming we move forward with the purchase we expect to close towards the end of November.
  • Our broker relationships continue to bring us deals to analyze: we are currently looking at properties in Texas, Tulsa, Oklahoma City, Santa Fe, Kansas City, Little Rock, Indianapolis and Northern CA.

If you have any interest in discussing any of the above opportunities in greater detail, please call our office at (707) 932-5887.  We will gladly add you to our distribution list and/or schedule an appointment to discuss your investing needs further.

Best,

Ali Negus