Mid Month October 2018

 

We are continuing to work through the challenges of the Property Management transition across five of our Oklahoma properties. While occupancy has dropped across the portfolio, we are receiving great feedback from the residents regarding the new company.

We have fully funded the Art House project and construction demo has already begun.

In the Pipeline:

  • We are in contract on a 133-unit townhome project in a community just north of Oklahoma City. We are excited about this deal for a variety of reasons. The seller is an older gentleman who has self-managed the project since the 80’s, giving us a terrific opportunity to increase efficiencies. The opportunity also comes with an additional 20 acres of land for further units to be built. We are working through our initial due diligence on the project.  
  • We are in conversation with a seller of an industrial property north of Austin, TX that includes additional land for future development while still providing a decent in place cap rate.
  • Using 1031s can be a great way to defer capital gains taxes and benefit from returns on a large capital base. In most cases Altus is able to fill investors’ 1031 needs while allowing the investor to take a passive role in the identification, purchase, financing, and asset management processes.  Contact our office if you are considering a 1031. Whether or not you decide to partner with Altus for your 1031 reinvestment, we are happy to provide some guidance that can greatly increase your likelihood of reinvestment success.

Current Repositioning Projects:

Norman Portfolio

(340 Units, Norman OK)

  • Charleston (160 units) – Currently leased to 54%, a 4% increase from last month.
    • As we have discussed over the last few months, leasing has been sluggish as we enter the slow leasing season. The team has been working together to come up with creative leasing ideas to drive as much traffic to the property as possible. Additional signage has been added to the front, we just signed up for a radio ad and updated our marketing campaign around the OU campus.
    • Construction has completed 125 interior unit renovations and anticipates turning 5 units per week until all 160 units are complete.
  • Other Complexes (180 units) –
    • Cherry Stone and Stratford have officially been put on the market for sale. Cherry Stone remains 100% occupied and Stratford is now leased to 67%, a 10% increase from last month. There are several parties reviewing the properties to see if they will work for their 1031 purchases.
    • Windsor Wyndham (28 units) has increased in occupancy from 64% to 75% occupancy in the last month.

Village on the Lake

(160 Units, Oklahoma City OK)

  • Currently occupied at 77.5% and leased to 81%, a 1% increase from last month.
  • While leasing has slowed, there have also been a few move outs from newer residents that did not comply with complex rules.
  • Construction is 100% complete.  

Normandy Place Apartments

(80 Units, Little Rock, AR)

  • Currently leased to 68%, a 2% increase from last month.  
  • As mentioned last month, I spent a week at the property at the end of September. While I did not crack the leasing code during my trip I was able to gain some good insight into the operations of the property and make some changes that we believe will influence the management long term.

Magnolia Apartments

(40 Units, Redding CA)

  • Occupied at 97.5% with only 1 unit vacant. Renovations are taking place on this unit before we re-lease. Rent increases sent out at the end of August will take effect November 1st.
  • We are moving forward with the refinance of this complex as we were able to secure a 12 year fixed rate loan up to 80% LTV, though we believe the appraisal will end up clarifying the loan to be 65% LTV .

Items of Note at our Stabilized Properties:

AE Hollywood

(33,580 SF Commercial Space, Hollywood FL)

  • The management/ownership transition of this property required more heavy lifting than we were expecting with several of the tenants being evicted.
  • However, this extra work has resulted in new leases higher than our pro forma lease rates. As we continue the management clean up, our revenue and net operating income run rates continue to climb. We should end up stabilizing considerably higher than pro forma.

McDonald Plaza

(95,300 SF Commercial Space, McKinney TX)

  • The property remains 100% occupied.
  • We are in the process of renewing two leases with existing tenants. We have been able to negotiate one of the leases with a 34% increase over the previous rental rate.

AE Sunset

(98 Units, Edmond OK)

  • Occupancy has dropped significantly since the new property managers have taken over, this is common as residents can look at these times as opportunities to challenge the management.

AE Rockwell

(304 Units, Oklahoma City OK)

  • Similarly to other properties with the new management company, occupancy has dropped to 84%.
  • The management team knows our expectations and is working hard to get the property leased back up quickly.

CH Apartments

(124 Units, Oklahoma City OK)

  • We are in contract to sell this asset at almost a 30% increase on our cost basis in less than three years.
  • We were not planning on selling but were approached by a buyer that gave us on offer we couldn’t turn down.

AE Commerce

(20,000 SF Commercial Space, Rohnert Park CA)

  • The front of the two buildings is in contract to sell. We should have more news on this process in the coming months.  We just sent out a lease extension for the tenant in the rear building at the tenant’s request.

Other:

  • We have several asset backed loans in process and a couple more loans looking like they will be coming into the pipeline in the coming days. If you are interested in joining our growing list of lenders please contact the office.

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