Mid Month Update-May 15, 2017

Over the last month, the office has been buzzing with excitement as we worked through multiple potential opportunities. The ups and downs of due diligence kept us on our toes and we couldn’t be more pleased with how each deal is falling into place. I won’t make you wait for the details any longer, here is what we’ve been working on.

On the Horizon:

  • We are in contract to purchase a 100-unit complex in Tulsa, OK. We like this opportunity as it has a strong senior resident base with very stable occupancy. This will be a structured investment with a single 1031 investor and is scheduled to close mid-June.
  • For the last month, we have been working through the details on a 339 unit, 11 property portfolio in Norman, OK. Four members from the Altus team spent two days walking every unit, inspecting each property and getting a feel for the Norman submarket. Additionally, we had two feasibility studies completed, and received feedback from property managers. Based on the data and our analysis, we are pleased to be moving forward on this opportunity, which we believe to be similar to our Rockwell Apartment project that we purchased in early2016.   We are still finalizing the structure of this investment, but a few of the smaller properties will be separated and offered to investors wanting to own properties on their own with the same benefits of investing in the larger syndications. These properties could be the perfect fit for 1031 exchange funds or for non-accredited investors. Please let us know if you would like to be contacted with the details on this opportunity.
  • One of our brainstorming partners, who is structured very similar to Altus, approached us last month with an off market opportunity in Indianapolis they had in contract but were going to be unable to fund. We have made multiple offers on properties in the Indianapolis metro and have not had any success, so after seeing the financials on this property we became very excited about the opportunity. We will be partnering with this company on the operations of this property, which will provide substantial operating experience and a network already established in the market. We will be raising $2 M of investment for this opportunity with the investment being structured as a participatory loan, expected to produce a 15% preferred return and with the investment secured against the property as a deed of trust. This is a very similar structure as what was used for the Lamplighter project mentioned below.

Currently Repositioning:

Village on the Lake

(160 units, Oklahoma City)

  • We officially closed this property on 3/7. Exterior work began the first day of ownership and has been on schedule since.
  • All exterior painting is complete beginning the transformation of this complex. Metal work on the stairs and balconies is finished with a fresh coat of black paint. 
  • Interior renovations began May 1st with an anticipated 40 units complete by June 1st.
  • New signage, fresh landscaping and a renovated office are on schedule for completion by May 22nd, giving the onsite management team the tools to effectively lease up the complex once interior units are ready. Lease up is scheduled to begin June 1st.

AE Rockwell

(304 units, Oklahoma City)

  • 79% occupied. This is an increase of 3.7% over last month, despite the last 19 tenants at the original rental rates moving out during the month.  
  • Construction is now over 90% complete with only 25 interior units left to renovate.
  • The office staff is working diligently toward the goal of 90% occupancy by the end of May. This will allow us to complete our refinance to a 35 year fixed rate HUD loan and return a large portion of the original investment to the investors in that investment.

AE Sunset

(98 units, Edmond OK)

  • Occupancy has increased 14% in the past month and we now are preleased up to 65%! With a focus on rental rates and online marketing the property management team approved 13 leases in April. As with AE Rockwell we are well ahead of schedule on construction and the stabilization of this property.

Normandy Place

(80 units, Little Rock AR)

  • 55% occupied. This is an increase of 5% since late April, which indicates this repositioning process has likely begun its acceleration phase.
  • We’ve had four new resident leases in the last two weeks. With the new onsite manager consistently driving online marketing, we have seen traffic increase dramatically at the property.

Lamplighter

(42 units, Modesto CA)

  • This property sold last week for a 40% premium to our cost basis in less than 12 months.

Single Purpose Entity Investments:

Crosswinds and Crosswinds Cove

(194 units, Oklahoma City)

  • 93% Cove
  • 75% Crosswinds
  • Crosswinds has been a major focus this month as the occupancy took a large hit from a group of section 8 residents that moved out, which was part of our plan over the next several months, but we didn’t expect it to happen so quickly.

Cedar Hills Apartments

 (124 units, Oklahoma City)

  • 91% occupied. This is down slightly from our long term run rate and occupancy goal, but is due to our efforts in cleaning up our loss to lease as the property (long term tenants paying far below market rents).
  • The first quarter was the most profitable quarter we have ever had at this property.

AE Bodega

  1. units, Petaluma)
  • 100% occupied.
  • A unanimous approval was given at the City Council meeting for the PUD proposal.
  • We will be listing this property as soon as the agent completes their marketing package. The list price will be a 70% increase over our cost basis over only 18 months.

AE Commerce

(20,000 SF Commercial Space, Rohnert Park)

  • The property remains on the market for sale. We have struggled with getting our heads around what needs to be done with this property and continue to work on it.

AE Three -1500 Farmers Lane

(17,400 SF Commercial Space, Santa Rosa

  • We have a high credit tenant lined up for this site that just received their conditional use permit, which triggers the start of their 10 year lease. We have not yet decided if we are going to sell or refinance and hold the property.
  • We are upgrading/modernizing the exterior of the building in advance of the tenant moving into their space in early August. Construction is moving along well, with expected completion by July 15th.

405 5th Street, West, Sonoma, CA

 (7 townhomes, Sonoma)

  • Final certificate of occupancy was received Monday of this past week.
  • 5 of the 7 units have sold, with one in contract and one remaining for sale.
  • Check out the listing here: http://www.405fifthstreetwesthomes.com/

Other:

  • We have three hard money loans lined up to close this month. As we continue to work on expanding this portion of our business we are looking for more lending opportunities and debt investors. Please call our office at 707-932-5887 if you have any interest or would like more information.  

If you have any interest in discussing any of the above opportunities in greater detail, please reply to this email or 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