2828 E. 6th Street (“Property”) is a stabilized 2-story, 9-unit apartment building on a c. 0.15 acres (6,751 sq. ft.) of lot size and c. 6,008 sq. ft. of building area, nestled in the tree-lined neighborhood of Rose Park, approximately 3/4 of a mile from the Pacific Ocean. Property was acquired in 2018 for $1,850,000 ($205,000/unit), with leases approximately 30% below market rate. Quail Canyon Venture Partners (“Sponsor”, “we”, “us”) began a major redevelopment plan in Q2 2018 comprised of churning the units and complete renovation of the exterior façade. Each interior unit has undergone major interior improvements, incorporating sleek and modern finishes, including new engineered hardwood floors, high-end quartz countertops, as well as new gas lines for in-unit washer and dryers. The exterior renovations consisted of creating two private patios in the rear of Units 3 and 9, fresh landscaping, exterior façade work and new garage doors throughout. We budgeted $342,000 for capital improvements under the value added multifamily asset plan. The renovations and repositioning program were executed under budget and ahead of the time. The Property was rebranded and repositioned from a strategic renovation plan to improve operating income.
Proforma rents were set at an average stabilized rent of $1,860 per unit. We outperformed that rental projection with the average stabilized rents being $1,980 per unit. The Property was leased up and stabilized ahead of schedule, as well. We have outperformed our projections and effectively almost doubled our Project Level return metrics, upon exit. Our proforma assumed we would exit the Property for $2,900,740 ($322,304/unit), we have substantially outperformed the baseline projections by exiting at $3,150,000 ($350,000/unit).
Long Beach is a major population and employment hub, and is one of the biggest cities in America, home to the Ports of Los Angeles and Long Beach. Long Beach plays a key role in the global supply chains. New apartment supply in Long Beach has been largely limited to the Class-A segment, causing a shortage of mid-priced rental housing, which has hindered further household creation by middle income tenants. These pocket neighborhoods in Long Beach have retained visual improvement and value-enhancement, providing a long runway for investors seeking value investments relative to surrounding Coastal communities of Huntington Beach, Seal Beach, and the South Bay. We retain that coastal assets are a niche specialty that we find ourselves extremely knowledgeable and profitable from.
