All Forum Posts by: Nicholas Cook

Hi Everyone,

I am a partner on a 55 unit apartment development in Portland, Oregon. The development site is an excellent location and a reason to hold the property long term.

We need to raise equity and under a typical waterfall structure, it seems that a significant portion of the building value would be given up to the LP side unless we cash out the investors down the line, which may or may not be popular. 

Does anyone have any suggestions on how to structure this? We are more than happy to give up cash flow for long period of time if that means we ( the sponsors) can capture more equity. 

Any input is greatly appreciated.

Thank you.

@Glenn Hermans

SB 608 is a major reduction in private property rights that should be alarming to all investors and property owners.

It was poorly written and focuses less on helping residents and more on redistributing power and wealth.

With that said, if you are an investor, there are positive aspects to it. How the bill impacts an investor is really a function of their goals. For long term investors they now have effectively a state mandate to increase rents to the maximum amount and may also enjoy less competition e.g. shorter vacancy and less turnover as small landlord exit the market.

@Hunter Locke

Thank you for your input. I have not heard of that software, but will take a look.

Thank you!

Hello!

I am working on a pro forma for a new construction project for 55 multifamily units.

Our plan is to bring in an equity partner that will ideally be interested in a long term investment. With that said, we want to be able to demonstrate options in our pitch deck.

My question is are:

1. The first 18 months is going to be construction and lease-up to stabilization. Do I setup year 1 and year 2 to reflect the lack of income/reduced cash flows? This would push the full schedule (12 months) of cash flows to year 3. I assume so, but wanted to confirm.

2. We plan to hold this project long term, but are open to refinancing and return capital in year 5.  Normally I forecast a sale in the pro forma, but I am not sure where to place this. Would year 7 make sense? Given that we don't plan to sell I am not totally clear on how to represent to an investor their return of capital and then future cash flows for an unknown period. 

My goal is to provide a clear NPV and IRR.

Perhaps I am over thinking it. Any input would be greatly appreciated.

Thank you! 

@Kelvin Lee; this is likely wishful thinking by the Commissioner. This is a much tougher sell and will have a lot of landlords and Realtor's groups up in arms.

The city of Portland just formed the Renter Owner Services Advisory Committee (ROSAC) which to help guide ideas and provide feedback to the Commissioners. The Mayors office selected me to be one of the committee members so I will have a better idea of what will happen moving forward. I'll keep you posted.

Andy Hahs with Bittner and Hahs is a great attorney. 

@AJ Singh, Portland is a tough market to make things cash flow, especially at retail prices. Some plexes with and multifamily does, but the rates of return can be pretty low. Cap rates are in the 4%-5% range. 

I would consider looking at surround areas outside of Portland as an alternative.

@Jarrod B., You want to be extremely careful with how you handle these situations. While most mold is not dangerous, some is. Your plumber doesn't know what he is talking about unless he personally tested the mold. Liability is really high due to attorneys who love to take on these types of cases.

For the first unit I would have the area professionally treated.

For the second unit, if the mold is only on the lines outside you can probably clean it will warm soap and water. Do not use bleach. Bleach may kill it, but does not remove the allergens.

Also, the EPA has a booklet on dealing with mold you may want to read and provide a copy to your residents.

Good luck.

@Kenneth Garrett, yes, you will need to follow the lease. Sub-meters are helpful for more accurate bill backs, but you will want to have a set time to do it because it's unlikely the electric service will track this for you.

Usually with a utility bill back there is an addendum that breaks down how the bill back is calculated. 

@Account Closed, without seeing the agreement it is hard to say, but the agreement was between the original owner and the company. It would seem that the management contract is no longer valid unless it has language stating otherwise.