Income Property Organization is pleased to present the University Green Portfolio, which consists of 468 units in three properties, and is located in Ypsilanti, Michigan. The bid deadline for this offering is November 8th, 2017; however, Ownership will take into consideration all offers received prior to the expiration of the bid deadline. If an acceptable offer is received prior to the deadline, Ownership reserves the right to forgo the remaining bid process.
The City of Ypsilanti is located in eastern Washtenaw County, approximately 35 miles west of Detroit, and eight miles east of Ann Arbor. Washtenaw County is Michigan’s fifth most populated county and as of the 2014 census estimate has a population of 356,874, whereas the City of Ypsilanti has a total population of 20,081. Notable for investors is the population growth over the last four years, which amounted to 2.6% in Ypsilanti and 3.4% in Washtenaw County. The median family income in Ypsilanti was most recently reported at $50,083 and the average home value is estimated at $155,300. The primary driver of the local economy is Eastern Michigan University (“EMU”), which has made its home in Ypsilanti since 1849 and currently employs nearly 2,000 people. Other major employers that reside in the greater Washtenaw County area include: The University of Michigan (in neighboring Ann Arbor), University of Michigan Medical Center, Trinity Health, Ann Arbor Public Schools, Toyota Technical Center, Thomson Reuters, and Washtenaw Community College.
EASTERN MICHIGAN UNIVERSITY:
The Eastern Michigan Eagles are part of the Mid-American Conference and current enrollment at the University is approximately 22,430 graduate and undergraduate students. EMU is comprised of seven colleges and schools which include: the College of Arts & Sciences, College of Business, College of Education, College of Health & Human Services and the College of Technology. Beyond this there are two other colleges: an Honors College and the Graduate School. EMU has had a long tradition of developing educators since its founding and the University prides itself as being the largest producer of educational personnel in the country since 1991.
The University Green Portfolio is comprised of three properties, two located on Green Road at the intersection of Green and Leforge Road, and the third located on the opposite side of Leforge off Villa Drive. As a result of this exceptional location residents have an abundance of employment, higher education, dining, shopping and entertainment options surrounding the community. Most notably is the property’s proximity to Eastern Michigan University (¼ miles), Downtown Ypsilanti (1½ miles), St. Joseph Mercy Hospital (2 miles ), Ford Motor Company Rawsonville Plant (2¼ miles), Washtenaw Community College (2¼ miles), General Motors Willow Run Plant (5 miles), and Willow Run Airport (5 miles). In addition to these nearby schools, hospitals and employers, the University Green Portfolio is located just under eight miles southeast of downtown Ann Arbor, which is home to the world renowned University of Michigan.
The flagship of the portfolio is the 162 unit University Green East Townhomes (“UG East”), which were built in 1972 and consist of a mix of twenty-seven single and two-story townhome and ranch-style buildings, an office and a large maintenance garage. This property contains a very attractive unit mix of eighteen 645 ft.2 ranch-style one-bedroom units, twelve 700 ft.2 loft-style one-bedroom units, one hundred and twenty-four 870 ft.2 two-bedroom townhome units, and eight 1,070 ft.2 three-bedroom townhome units. Notable for investors is the exceptional condition of this asset and the numerous upgrades it’s received over the last few years, such as new windows, new entry doors, exterior painting, and numerous unit upgrades including flooring and kitchen cabinets. Residents of UG East also enjoy exceptional landscaping, an abundance of greenspace and full basements with washer & dryer hookups. The utility breakdown of UG East includes tenant-paid, gas-forced air furnaces, individual hot-water tanks and tenant-paid electric.
On the opposite side of Leforge Road the remainder of the portfolio can be found with the two garden-style complexes known as University Green North & South. University Green North (“UG North”) is comprised of 144 units in six buildings and is the location of the portfolio’s pool. The unit mix at UG North is very competitive and includes thirty-six 657 ft.2 one-bedroom units, thirty-six 860 ft.2 two-bedroom units and seventy-two 1,000 ft.2 two–bedroom one and one half bath units. The heat and hot-water at UG North is supplied by Landlord-paid, gas-fired boilers; however, the electric is separately metered and the responsibility of the tenant. In addition to large units UG North also affords its residents with on-site laundry facilities in each building.
Adjacent to UG North is University Green South (“UG South”), which is comprised of 162 units in six buildings and includes the leasing office of the portfolio. The unit mix at UG South is incredibly diverse and comprised of one hundred and fourteen one-bedroom units ranging in size from 575-675 ft.2, forty 865 ft.2 two-bedroom units, and eight 965 ft.2 three-bedroom units. The heat at UG South is supplied by gas-forced air furnaces and the hot water is supplied by gas-fired boilers, both of which are landlord-paid. The electricity at UG South is separately metered and the responsibility of the tenant. As with its neighboring property, UG South affords its residents with the convenience of on-site laundry, which is located in each of its six buildings.
All three properties comprising the University Green Portfolio are outfitted with Landlord-paid water; however, notable for investors is the long-established water reimbursement program. Per the current program, residents of one-bedroom units pay $25 per month in a water surcharge, two-bedroom units pay $35 per month and three-bedroom units pay $45 per month. In addition to this fee, tenants are also responsible for a $5 per month utility processing fee. Based on trending occupancy levels, this program will allow ownership to recover nearly 85% of the $230K annual water expense.
Please note, in January of 2017 a fire occurred at the South property which affected an entire building and 30 units. In May of 2017 a second fire occurred in the North property, which affected 12 units. The repairs to the South property are expected to be completed by the end of the first quarter 2018 and the repairs to the North building are expected to be completed by the end of 2017. Both repair schedules are dependent upon permit timing; however, the insurance claims have been completed and ownership will transfer any remaining insurance proceeds and prorated loss-rents to the purchaser in the event the repairs are not completed by closing.
The University Green Portfolio is performing well with physical occupancy at 90% and pre-leased occupancy at 94% (not including fire damaged units). However, even in light of this solid level of performance upside still remains for a multifamily investor. Based on our carefully conducted rent comparable study, it was determined rents are considerably below market when analyzed under both the price per square foot and Street Rent metrics. Our study found that one-bedroom units are a staggering $49-$187 below market average Street Rents and two bedrooms are approximately $80-$253 below market. Such a delta between existing and market rents provides a new owner with the unique opportunity to greatly improve this assets cash-flow position without making any financial investment in the property. For example if a new owner were to increase average rents on one-and-two bedroom units by a mere $25 per month it would increase this portfolios value by nearly $2M.
From an underwriting standpoint, our Pro Forma is based on actual T-12 Operating Expenses, and we have also included a professional management fee, a Replacement for Reserve and adjusted taxes to the SEV. Income was projected with the use of average rents, which does not factor in the previously mentioned “upside” of a rental rate increase. Since it is our expectation that once the down units are brought back online they will lease quickly, we have based our vacancy & bad debt estimates on historic levels. The University Green Portfolio is being offered to the market as an unpriced new debt opportunity, allowing for an operator to lock in a 10-year deal before the all-time low interest rates begin to rise.
IPO has seen drastic improvement in pricing over the course of the last 36 months and it is our professional opinion that values will continue to trend upwards into 2018 as a result of historically low multifamily inventory. The University Green Portfolio represents a collection of stabilized multifamily assets with considerable upside potential that can be acquired at attractive pricing and provide handsome and steady returns to a multifamily investor for many years to come. Please contact IPO to arrange a confidential tour before this opportunity is gone.