July 25, 2025
Dear Investors, Underwriters and Friends,
The second quarter of 2025 was a mirror of Q1, as we renovated units and executed
leases. The net income for the quarter went back into renovating a unit and thus
delayed distributions, but it took advantage of the departure of a legacy tenant and
now has us standing at 18 of 24 units fully renovated. Meanwhile, a property down
the street without much done in the way of renovations and with seven twenty-year
old roofs (7 different buildings, compared to our 3) sold for $240,000 per unit. That
would bring the value of our property to $5.8 mm, which seems low given our
trailing 12-months Net Operating Income, since that would be a 7.1% cap rate.
Though CoStar assigns a 5.0% Cap Rate to the West Palm Beach multi-family
market, a more conservative 6.0% rate would mean a valuation of $6.9 mm. Here is
a look at the trailing 12 Month income by quarter:
We expect to see another jump to NOI and Net Income as our current two vacancies
lease and we increase rents on our remaining legacy tenants. Expenses warrant an
eye, though some of the quarterly increase is due to a billing mistake by our pest
control firm, which saw us get billed for two extra quarterly billings when they switched payment processors. Since it occurred at the end of the quarter, the
refund will show up in Q3.
Though we received a quote to install impact glass, there is a good chance we will
proceed with our plan to finance the windows with Wright Windows once the
property is fully stabilized.
Currently, there is only one scheduled renovation (Unit #20, in the demo phase, as
of writing), which will bring us to 19 renovated units and a rent roll somewhere near
$56,000 per month. Accrued preferred return for the partners, collectively, is
roughly $190,000, as of 6/30/2025, meaning that return of capital will be coming
from either another refinance or a sale. Given the trajectory of our NOI and cap
rates, there is a distinct possibility we will begin considering a sale next year with the aim of actual disposition occurring at some point at the end of 2026 or in 2027.
For now, we will continue to work on our property and endeavor to generate larger
earnings for all of you. Thank you again for your trust and support.
-Clem
