In September 2020, we acquired Midtown Point Apartments, an apartment complex located in Augusta, Georgia, featuring a total of twenty-nine units. These units consist of twenty-seven two-bedroom apartments, a single one-bedroom unit, and one spacious three-bedroom unit. The property offers easy access to an array of amenities, including parks, schools, shopping centers, and a varied selection of dining options. Strategically positioned near many popular employers and educational facilities such as Augusta University, Paine College, and the Medical District, the property provides residents with a well-connected and central living experience.

How We Found It

The owner of the Midtown Point Apartments was also acting as both the property manager and the broker when they decided to put the property up for sale. While the owner had held ownership for several years, they had not been providing the property with the necessary attention it deserved. Our local property manager in the area brought this opportunity to our attention. Although it wasn't strictly an off-market listing, it was also not widely marketed. The invaluable local insights provided by our property manager played a vital role in helping us secure this deal.

Why We Like It

The thriving Augusta market played a significant role in our decision to purchase the Midtown Point Apartments. In May 2020, the US Army Cyber Command Center made its pivotal move to Ft. Gordon in Augusta, bringing with it substantial investments and a surge in cybersecurity job opportunities. Augusta welcomed the impressive $100 million Georgia Cyber Center, which functions as a satellite office for major defense contractors like Northrop Grumman. Initial estimates projected around 5,000 jobs resulting from this transition, but the actual number nearly doubled. Midtown Point Apartments found itself strategically positioned just three miles away from the Cyber Center.

Midtown Point enjoys a convenient location that extends beyond its proximity to the newly constructed Cyber Center. Situated just under a mile from the property, is Augusta's healthcare hub, anchored by Augusta University Medical Center. This healthcare hub is known for its world-class medical facilities and services, making it a magnet not only for healthcare professionals but also for patients seeking top-tier healthcare solutions from across the region.

Our Business Plan

Our renovation budget totaled $240,000 for capital expenditures. Our complete plan included various exterior and interior improvements. On the exterior, our plan involved updating the building's aesthetics with a new coat of paint, enhancing the landscaping and completely repaving the parking lot for improved functionality and curb appeal. Our interior unit renovations included new luxury vinyl plank (LVP) flooring, modern appliances, and a fresh coat of paint for both the walls and cabinets. Additionally, we have introduced an onsite laundry facility to increase income and provide enhanced convenience for residents. When we acquired the property, the average rent stood at $645. Our strategic business plan revolved around gradually increasing rents over the course of three years, targeting an average rent of $825.

How We Financed It

We purchased the Midtown Point Apartments for $1.4 million with a renovation budget of $240k. To secure financing for the property, we opted for a Fannie Mae agency loan featuring a 10-year fixed rate set at 3.7%. This loan structure provided us with the flexibility of interest-only payments for the initial five years. We chose a 65% leverage ratio and incorporated a step-down prepayment schedule into our capital stack to create a more flexible exit option. Our total equity raised from investors for the deal was $850,000.

How It’s Going Today

Roughly three years into the project, we're pleased to report that our in-place rents now average $829 per unit, slightly surpassing our initial proforma expectations. Furthermore, our most recent leases are being signed at $850 per unit, reflecting the increasing demand for our updated living spaces. Our most recent official broker's opinion of value has estimated the property to be worth $2.4 million, and with our new leases exceeding our projections, we remain confident in our potential to achieve an even more favorable valuation in the future.

Managing a property with a relatively small unit count from a distance has presented challenges. In response, we've taken a proactive approach by transitioning to a new management company and streamlining our operations by combining payroll with another nearby asset. This strategic move aims to enhance efficiency and allow for a more hands-on approach to property management, ultimately ensuring the continued success and growth of our investment.

Insights & Perspectives

Current Opportunities in Multifamily Real Estate

At the core of this newsletter lies our attempt to connect with potential investors to educate them on where the opportunity exists in acquiring multifamily real estate. To do that it’s important to understand recent history. According to Forbes Magazine, there is about $1 trillion of multifamily debt set to mature by 2027. During the 2020 and 2021 timeframe, many loans were either originated or refinanced into low-interest-rate products. In some cases, operators chose bridge loans. Essentially this is a short-term loan where the operator is planning to increase rents or reduce expenses with the intent to secure a more permanent loan when the property can justify it from a revenue and expenses standpoint. This is a risky proposition and adding even more risk to this scenario would be taking on floating-rate debt. We've already witnessed scenarios where floating rates have caused significant challenges, leading to forced property sales.

In the coming years, well-positioned buyers may be uniquely positioned to take advantage of “fire sales” caused by bridge loans and floating rate debt. This is why we remain committed to our deal flow activity. Analyzing deals weekly and sending at least several offers per month. We want to be prepared to take advantage of any softening in prices that may occur because of increased interest rates or poor financing strategies. If you’d like to take a look at these deals with us, make sure to register using the button below.

Source: Forbes Magazine. Understanding The Coming Wave Of Multifamily Debt Maturities.https://www.forbes.com/sites/forbesbusinesscouncil/2023/08/04/understanding-the-coming-wave-of-multifamily-debt-maturities/?sh=53bd7f327e5a

Thank you for reading and your interest in BLVD Ventures. We look forward to having you follow along. Feel free to reach out anytime with questions and connect with us further using the button below.