Q2 Real Estate Summary

[Jonathan McKay]

Below you'll find a summary of our real estate investing activities, mainly consisting of properties in the Spokane, WA and Cleveland metros. Would love any feedback that people have! 

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tl;dr: In Q1 of this year, we completed 5 purchases, for a total of $6.1m in acquisitions for a total addition of 71 multifamily units. We also entered into a partnership to purchase a vacant warehouse in Cleveland, bringing the total number of units under management to 166. We exited from two properties. We also increased capacity by hiring 3 new people in the construction and management teams, and increased construction throughput by over 50%. In Q2 we aim to put another $5m of deals in the pipeline with partial external funding, hire an additional 7 people primarily for construction, and continue to stabilize properties purchased in Q1.

Mission: Improve urban infrastructure while providing quality investment returns.

2021.Q1 Summary

Acquisitions

Q1 Highlights

• Absorbed Multiple New properties: We nearly doubled the size of our portfolio with minimal hiccups. Since we now have experience acquiring properties with rougher tenant bases, onboarding has been smooth and we have been able to make much more rapid progress with inherited focus tenants.
• Continued to scale construction: We improved throughput from 4 projects completed in Q4 2020 to 7 completed in Q1 2021. This allowed us to purchase multiple distressed buildings at the same time while minimizing vacancy costs. At the same time, in comparison to externally bidded contracts, we have discovered that our unit renovation cost is roughly 50% what it would cost if we were to use outside contractors.
• Found and closed h218: We were able to act quickly on the 33 units available in Spokane Valley, putting together a competitive offer that worked for the seller, and closed the deal early with 70% LTV financing.

Q1 Lowlights

• New employee retention: On construction we had multiple attritions from people that joined in 2021. While each case seems specific, we want to ensure that new hires are people that we can invest more in to improve retention.
• Market expansion: While we did close on a warehouse in cleveland, we were not able to find any deals at a sufficient return threshold in other markets such as Colorado Springs, Missoula, Boise, or Reno. We will continue to search for properties outside of Spokane in Q2.
• Construction Accounting was duplicative: Our bottoms up method of project tracking for construction projects turned out not to be exhaustive and did not match quickbooks records. Going forward we will be using quickbooks as a universal source of truth with faster updates to alleviate this problem.

Dashboards

Q2 Goals

[Jonathan McKay]

None of the Spokane deals were on-market. The Cleveland deal was on-market. 

I'm doing standard commercial lending, usually getting 25% down, often financing construction value add, although h218 had to be 30% down due to poor financials.