Income Property Organization is pleased to present the exclusive marketing of the Urbane on Thirteen Portfolio (“Urbane Portfolio”), which consists of two apartment communities totaling 52 units in Royal Oak, MI. The Portfolio is a rare and exciting value-add opportunity, entailing minimal infrastructure risk and a chance to be part of the remarkable renaissance of the City of Royal Oak. The assets are being presented on a portfolio basis, but ownership will consider individual bids. The offering is unpriced and will be determined by market with a bid deadline of 5:00 pm, March 7th, 2018.
The city of Royal Oak is located in Oakland County, approximately 15 miles north of Detroit. Royal Oak is a progressive and dynamic community with a focus on family-orientation, higher education and healthcare. Royal Oak is conveniently located with access to several major thoroughfares in the area. Several interstates and highways converge on this region, including I-696, I-75, M-1 (Woodward Ave.), and M-24 (Telegraph Ave.). This excellent location facilitates commutes and enables convenient access to all of metropolitan Detroit for residents and businesses alike. Additionally, Royal Oak is located approximately 25 miles away from Detroit Metropolitan Airport, which services more than 32 million people a year. Royal Oak is a diverse community that offers residents a dynamic living environment with a great mix of urban conveniences and suburban comforts and tranquility. It has claimed its fair share of national accolades in the past few years, in 2014 alone, Movato Real Estate named Royal Oak one of the 10 Best Small Cities in America for Education and one of the 10 Happiest Small Places in America. Also in 2014, Livability named Royal Oak one of the Best 10 Cities in America for Kids. This year, Royal Oak was named The Best City in Michigan. Royal Oak has a mix of employers, entertainment, eateries, and public venues, such as The Detroit Zoo.
The Urbane Portfolio is comprised of two properties: Urbane on Thirteen, a 24-unit apartment community, and Urbane on Fairmont, a 28-unit apartment community. The properties are almost adjacent to one another, both fronting on 13 Mile Rd, with access to Urbane on Thirteen from 13 Mile Rd while access to Urbane on Fairmont is from Fairmont Rd. a single parcel. Both properties, consisting of one and two bedroom units and they are currently 100% occupied. Located west of Woodward, the main thoroughfare through metro Detroit, you’re close to the action of downtown Royal Oak, Berkley, Birmingham, and Ferndale. These are all areas overflowing with intimate cafes, fine restaurants, pubs and clubs, and a wide variety of retail shops and salons. The Urbane Portfolio curb appeal is unique; its funky, angular metal entrance with iridescent glass that displays subtle hues of purples, greens, and blues with the changing evening light is not easily overlooked. The properties have had over $110,000 of capital improvements done within the last two years. Some of these improvements include newly concreted parking lot, newly renovated internal designs.
The Urbane Portfolio represents a well-located, turn-key asset with a very steady historical performance in a tidy submarket. Furthermore operations are currently at 100% occupancy and have maintained outstanding historical occupancy. IPO has seen drastic improvements in pricing over the course of the last 36 months and it is our professional opinion that values will continue to trend upwards throughout 2018 as a result of historically low multifamily inventory and an abundance of equity and debt in the marketplace. The Urbane Portfolio represents a stabilized asset with considerable upside potential that can be acquired at attractive pricing. When calculating the NOI under the Income Approach, IPO utilized the current rents less a 2% vacancy and 4% for the management fees as the benchmark for the Pro forma income. Our underwriting methodology for the majority of the expenses was to employ the 2017 operating expenses, with minor adjustments being made. Contact IPO to set up a confidential tour before it’s gone.
IPO has projected a combined NOI for the portfolio of approximately $459,965, which is based off approximately $1.243M in Income and $783K in Operating Expenses. The above figures are based on average occupied rental rates, annualized YTD expenses and estimates of payroll, management and insurance expenses. This underwriting approach was utilized due to ownerships hands-off management approach that results in above average payroll costs. Since it is our expectation that most investors will seek to operate this portfolio themselves, we have utilized payroll expenses that are consistent with market averages. It is our professional opinion that even in light of these estimates our underwriting is still extremely conservative. Specifically, we have maintained current average rental rates when our market survey has indicated these rents are consistent with the low-end of the market average. If a new owner where to impose even a modest rental rate increase of $20 per unit, the NOI of this portfolio could easily eclipse $500K and a new owner would have effectively added over $500K in value without any financial investment into the assets (based on a 9% cap).