We are pleased to provide you with the Q3 real estate portfolio update. While there has been some chatter in the press about commercial real estate, we are seeing strong fundamentals, specifically in multi-family.
In this update:
- Summary Real Estate Commentary
- Joint Venture Partner Investments
- Direct Investments
Please note that prior performance is not a guarantee of future performance, and all commentary should not be considered investment advice.
Summary Real Estate Commentary
Steady Demand and Rent Growth
Despite economic fluctuations, the multi-family market continues to demonstrate robust demand. Nationally, rent growth improved to 2% year-over-year in the third quarter, the highest since early 2023. While this is below the pre-pandemic average of just over 4%, it’s a positive sign of recovery. (cushmanwakefield.com)
Opportunities
The current market conditions present attractive opportunities for us. The premium for an average monthly mortgage payment of a newly purchased home versus the average monthly rent is expected to remain above 35% in 2024, making renting a more viable option for many. (cbre.com)
Supply and Development Trends
While there has been a surge in apartment construction, a recent slowdown in new multi-family starting construction suggests a more balanced supply-demand dynamic in the near future. This moderation is expected to support rent growth and property values, benefiting both investors and property owners. (wsj.com)
The multi-family real estate market exhibits positive trends, with steady demand, favorable investment conditions, and a balanced supply outlook. These factors contribute to a promising environment for sector stakeholders.
JV Partner Investments
Note: Returns are at the asset level only.
506 South Apartments
Occupancy: Ended Q3 at 96.7% (up from 93.3% in Q2), with strong rent growth across new leases and renewals.
Financials: NOI increased 1.7% to $275,112. Total income rose 5.2%, driven by improved collections and higher ancillary income.
Renovations: Exterior and interior upgrades are nearly complete, enhancing market appeal.
Outlook: Positioned for a potential sale in late 2025, with proactive measures mitigating sub-market challenges.
The Retreat
Occupancy: Grew to 92.5% (up from 75.4% in Q2), aided by enhanced concessions and targeted marketing efforts.
Financials: Despite increased expenses, leasing momentum supported an increase in rental income and occupancy.
Renovations: Most exterior improvements have been completed; interior upgrades are temporarily on hold until rents can rise.
Outlook: Increased occupancy, tightened spending controls, and increased operational oversight should support overall performance improvements in the coming quarters.
Lakewood Apartments
Occupancy: Closed Q3 at 88.6%, adjusting rents and concessions to remain competitive in a high-supply market.
Financials: NOI rose 11.5% to $92,636, supported by lower expenses and improved collections.
Renovations: Key upgrades are complete, positioning the property to capture demand as market conditions improve.
Outlook: With absorption rates stabilizing, Lakewood is set for a stronger leasing environment in 2025.
Apple Lane
Occupancy: Fully leased for the 2024-2025 academic year, with a 3.3% YoY rent increase.
Financials: Delivered an annualized return of 4.9% in Q3, with NOI reaching $87,203.
Renovations: Value-add improvements have been completed, enhancing property appeal and resident satisfaction.
Outlook: Pre-leasing for the next academic year has already begun, ensuring continued stability.
Glenwood
Occupancy: 100% leased for the academic year, with steady rent growth YoY.
Financials: NOI achieved $1,400,611 in Q3, and distributions provided an annualized return of 7.77%.
Renovations: All planned upgrades are complete, with focused capital investments enhancing property value.
Outlook: With strong leasing and market dynamics, Glenwood remains a robust asset in our portfolio.
Raintree
Occupancy: Fully occupied for the 2024-2025 academic year, with further pre-leasing efforts underway.
Financials: NOI reached $1,104,292, with annualized returns of 6.94%.
Renovations: Property-wide upgrades, including concrete repairs, have been completed.
Outlook: Continued strong performance as market demand for student housing remains high.
Sabine Lofts
Occupancy: Closed Q3 at 89% leased and 87% occupied, with leasing strategies adjusted to improve performance.
Financials: NOI exceeded budget by 1.7%, driven by expense savings despite higher vacancy.
Renovations: Gym upgrades, pool resurfacing, and hurricane repairs are progressing. Unit renovations to resume in early 2025.
Outlook: Positioned to benefit from strong demand in the Houston market as urban population growth continues.
Direct Investments
Reflections at Lakeshore
We have been diligently working with the city and all the agencies to move the entitlements closer to completion.
More to come as we get ready to break ground on this development.
For accredited investors, you can invest direct into Reflections from $10,000.
Seacoast
Since acquiring Seacoast Sands just a few weeks ago, significant progress has been made to improve the property, with further updates ongoing. Completed and planned upgrades include:
- Enhanced Wi-Fi connectivity for all tenants.
- Improvements to the common areas.
- Replacing outdated paid washer and dryers with free-to-use machines for all tenants—a major tenant concern that has now been resolved.
- Adding a private washer and dryer in one unit, with plans to install hookups for an additional unit.
- Coordinating quotes for a new guttering system, roof flashing clean-up, and stucco repair.
- These are just some of the enhancements currently being addressed by the team.
Rents
We’re pleased to announce that all units are now leased at $5,400 per month, a substantial increase from previous rates.
Want to invest in Seacoast Sands?
If you are invested in CalTier Fund 1 it’s already part of your portfolio! For those that are accredited investors you can also invest directly into the asset from $10,000.
Please note CalTier Fund 1 is still in re qualification with the SEC and is not taking investments at this time.
