Price Reduced! Upgraded 16-Unit Multifamily | Below-Market Lease Rates

PRICE REDUCED! At a $70,000 discount,  the revised in-place (Aug-24) cap rate is 6.23%. The Skylight Apartments satisfy common multifamily investment criteria: Well-below-market lease rates (45.08%), 100% 2 Bedroom-1 Bathroom units, fully renovated interiors, individually metered gas & electricity, minimal deferred maintenance, and an improving submarket. The four adjacent fourplexes include sixteen (16) sizable 2 Bedroom-1 Bathroom configurations (± 750 SF), which furnish in-unit washers and dryers (93.75%), vaulted ceiling skylights, private enclosed courtyards (75%), dishwashers, garbage disposals, and upgraded finishes.

Value-Add Potential: Based on like-kind units leased after December 2023, the current (Aug-24) average lease rate is 45.08% below its competitors. Assuming an annualized market rate rent roll ($1,222.50/mo.), a 5% vacancy/credit loss factor, June 2024 T-12 expenses, and a 1.00% lender reserves expense, the resulting cap rate is 10.49%.

Submarket Economic Growth: The Skylight Apartments are well-positioned to benefit from locational appreciation. The property is equidistant (0.5 Mile) to the upscale Ridgecrest residential neighborhood (NE) and the Max Q @ Kirtland, a 70-acre mixed-use development positioned to support the Air Force Research Lab. Max Q, which is undergoing Phase One of its development, is slated to include a one million square foot campus. In recent news, Northop Grumman, a publicly traded multinational aerospace and defense technology company, has completed a 27,000-square-foot building on the site. Northrop Grumman’s Phase One of its four-phase project will include a mixed-use town center style development. To follow suit, several of the multifamily properties on Vail Ave SE are either new construction or have undergone major renovations.

Improvements & Amenities: Between 2014-2017, plumbing, electrical, appliances, and roofs (2016-2017) were upgraded. Additional exterior improvements include double-pane vinyl windows, wrought iron and cinder block permitter fencing, security doors, and well-maintained common courtyards.

The interior upgrades include new doors, newer bathroom appliances, showers, and vanities, tile or stained concrete flooring, and upgraded kitchen cabinetry. The kitchens and bathrooms are equipped with Ground-Fault Circuit Interrupter Outlets (GFCI) and smoke detectors.

Each unit furnishes a contemporary vaulted ceiling skylight. Twelve (12) or 75% of the units offer private enclosed courtyards, and fifteen (15), or 93.75% of the units are equipped with in-unit washers and dryers. 

Utilities & HVAC: All units have individual electricity and gas meters. Half of the units include roof HVAC condensers for centralized AC with the remainder cooled by evaporative AC units. For all units, the heating source is wall-mounted gas furnaces. Each fourplex includes a sewer line, which connects to the main city line.

Investment Highlights

Acquisition 

• Cap Rate: 6.23%
• Gross Rent Multiplier (GRM): 10.04.
• Gross Potential Income: $161,792 *August 2024 Rent Roll.*
• Net Operating Income: $101,252 *June 2024 T-12 Expenses + 1.00% of GOI Reserves Expense.
• Pre-Tax Cash-on-Cash Return: 2.97% ($14,974).
• After-Tax Cash-on-Cash Return: 5.10% ($25,713).

Year-End 2 Pro Forma 

• Cap Rate: 10.02%
• Gross Rent Multiplier (GRM): 6.94.
• Gross Potential Income: $234,720 *$1,223/Unit/Month. *
• Net Operating Income: $162,837 *June 2024 T-12 Expenses + 24.97%. *
• Pre-Tax Cash-on-Cash Return: 15.20% ($76,560).
• After-Tax Cash-on-Cash Return: 13.66% ($68,823).

Year-End 5 Pro Forma (Sale)

• Valuation: $2,612,704 *6.75% Disposition Cap Rate. *
• Appreciation: + 60.30%

*Financing Assumption: 70% Loan-to-Value (LTV), 7-Year Term, 6.50% Fixed Rate Loan Amortized over 30 Years. *

*Assumed Taxable Income Deductions Captured: Loan Interest, Assessed Improvements Cost-Recovery (Depreciation), Loan Cost Amortization, and a 30% Ordinary Income Tax Rate. *

Property Highlights

• Excellent Unit Mix: 100% 2 Bedroom-1 Bathroom Units (± 750 SF).
• Value-Add Potential: 10.02% Market  Pro Forma Cap Rate. 
• 2014-2017 Improvements: TPO Roofs (2016-2017), Electrical, Plumbing, Vinyl Double-Pane Windows, and Appliances. 
• Renovated Units & Amenities:  In-Unit Washers & Dryers (94%), Private Enclosed Courtyards (75%), Skylights, and Gated Property.
• Well-Below Market Lease Rates: Avg. In-Place Lease Rates are 45.08% Below Competitors.
• Improving Submarket: Equidistant to 70-Acre Max Q Development & Upscale Ridgecrest Neighborhood.
•  Individual Unit Gas & Electricity Meters (Tenant Responsibilities).