Help Analyzing a Deal/Market

[Anuj Khosla]

Hi BPers!

I'm currently analyzing a deal in Powelton Village in University City Philadelphia. The deal is a portfolio of 3 buildings on 33rd and Baring. Building 1 is a new construction Tri-plex with large 3br/2ba units, sub-metered utilities besides cold water, and communal laundry. Building 2 is a 10 unit building with mix units (2-2br/1ba 2-studio 5-1br/1ba), sub-metered utilities besides cold water, and communal laundry. Building 3 is a 9 unit building with mix units (2-2br/1ba 2-studio 5-1br/ba), landlord pays all utilities, and communal laundry. Buildings 2&3 are older buildings and need some work. Both buildings common spaces (floors replaced, walls painted, light fixtures replaced) need some work. Some of units have awkward lay-outs so they would need to be some re-design there. Building 3 has some sketchy plumbing and wiring design/scheme. I have had my property manager along side his team (leasing director, maintenance guy, and GC) walk thru the buildings and we have some rough estimates for the work that needs to be done and what the operating cost should be. We ran the numbers assuming the current sub-market vacancies but there is a flaw in this assumption because there has been a lot of large new construction 100+ units buildings that are now on the rental online and on the market. The new supply is new construction with high-end finishes and super prime campus locations (rents are significantly higher). I fear this new supply will push down rental rates and increase vacancies in the short to medium term (2-3 years). If this is true then my valuation is off and I need to build in lower rents and higher vacancies into my model. If they are any experienced BPers who would like to chat over a coffee (my treat of course) about the particulars of this current deal am I working on that would be great.


What I am doing to solve this problem:
1) I drove around taking pictures of all the for rent signs in powelton village and I am calling them to ask them more about their units, concerns going forward with supply, and where they see rents/area going in the short/medium term.
2) Talking to residential brokers who specialize in leasing in the area about the current environment, leasing season, and supply demand picture.
3) Posting on BP to meet some landlords in the area who can give me some wisdom.
4) Talking to students walking around the area about their preferences, affordability, walkability, and safety concerns.

If there is anything else I should consider doing to get a better idea of the sub-market's supply and demand picture? I would appreciate any insight. Thanks!