452 Linden Avenue (“Property”) is a 12-unit apartment complex split between 3 main buildings in the prime submarket of East Village. Situated 5 blocks from the Pacific Ocean, this asset has been meticulously renovated, leased, and offers strong cash-flow with long-term appreciation. 452 Linden offers tenants Class B, luxury apartment amenities with a creative Farmhouse façade. Property was acquired in 2019 for $1,877,500 ($187,750/unit), with leases approximately 60% below market rate. Quail Canyon Venture Partners (“Sponsor”, “we”, “us”) began executing an extensive redevelopment plan that included entitlement, permitting and construction of two (2) ADUs. The improvements made to the Property comprised all new building systems inclusive of: new plumbing, new electrical, new HVAC throughout, new fire life and safety and modern interior units. Further exterior renovations included exterior paint, landscaping work, and new wood fencing to private and secure the Property. The interior was completely overhauled and renovated to a modern chic farmhouse. Kitchens were completely overhauled with new cabinetry, arctic white quartz countertops, farmhouse sinks, stainless steel appliance packages. Bathrooms were completely remodeled with modern contemporary designed finishes including tile flooring, fixtures, and modern Spanish tile in the tub/shower enclosures. We budgeted approximately $695,000 for capital improvements under the value added multifamily asset plan. The renovations and repositioning program were executed on-budget and ahead of the time. The Property was rebranded and repositioned from a strategic renovation plan to improve operating income. In Q1 2022, we finished construction and lease-up of 2 new additional dwelling units by converting existing detached garages, to new units.
Proforma rents were set at an average stabilized rent of $1,565 per unit. We outperformed that rental projection with the average stabilized rents being $1,671 per unit. The Property was leased up and stabilized ahead of schedule as well. As of November 2022, the property was listed for sale with a valuation of $4,700,000 ($391,666/unit). The project has out performed the initial projections by nearly double. We have outperformed our initial projections for the exit, and are projected to realize nearly a 60% premium of returns over the baseline projection metrics. Our proforma assumed we would exit the Property for $3,000,000 ($250,000/unit), and our current valuation is a substantially above that at $4,700,000 ($391,666/unit), a positive delta of $1.7M or $140,000/door on the reversion analysis.
