UD+P News: March 2022
2021 TAX REPORTING UPDATE
2021 Schedule K-1s for all UD+P funds are now available for review and download electronically on your investor portal.
Thank you for your patience as our accounting team diligently worked to prepare the K-1s. We will mail out hard copies to all members this week. They should arrive within the next 7 to 10 days, so please keep an eye out.
Please be sure to carefully review instructions, as well as all footnotes, in the cover letter on page one of your K-1.
If you have questions about your K-1, contact Investor Communications Manager, Tina McNerthney, by email or by phone at (503) 318-6588 for assistance.
APRIL INVESTOR WEBINAR
UD+P is hosting an investor webinar in April. We hope you can join us!
DETAILS
WHEN: April 13, 2022 10:00 AM PST
TOPIC: Project Selection Case Study: How we decide a project is a Go vs. a No
OVERVIEW: UD+P's founder, Eric Cress, will share our decision-making and underwriting process for two projects. First, our Framework office building, which recently sold in February 2020, achieving an IRR of 30.66%. Second, our Lake Oswego North Anchor residential project, which is currently in pre-development. UD+P's process for choosing projects for our funds includes several rounds of financial modeling and cash flow analysis, cost and bid proposals and market studies. Eric will walk through the steps we took on both projects and share insight into how UDP finds clarity in a challenging set of data.
After registering, you will receive a confirmation email containing information about joining the webinar.
QUESTIONS? Contact Theresa Nute at theresa@udplp.com or (425) 351-0935
PROJECT UPDATES
LUELLA - SACRAMENTO, CA
MIDTOWN
Luella’s construction is progressing on schedule. In March, site grading was completed and piping for the project’s onsite stormwater detention basin was installed. We completed our property management partner vetting / selection process and executed a Property Management Agreement (PMA) with FPI Management, a company with local residential knowledge and expertise.
1201 J STREET - SACRAMENTO, CA
DOWNTOWN
It is exciting to see 1201 J Street abuzz with renewed activity following the recent completion of the building renovation.
Flex office operator CENTRL Office opened for business at 1201 J Street on March 1. Cora Coffee bar has enlivened its space and taken advantage of expansive windows and abundant natural lighting with the addition of plants of various shapes, sizes and colors. Loyal Legion hired a General Manager and a Kitchen Manager in March. Its buildout is nearing completion and it is projected to open in May. Our marketing/PR campaign for the Aurora event space is underway and we are fielding more inquiries as public awareness grows. Aurora will host its first event at the end of April.
Cora Coffee bar greened up its space in March with the addition of an assortment of plants.
Building repairs that commenced last fall at The George are approaching completion. Scaffolding on the west side of the building along NW 23rd Avenue was removed in March, revealing a gleaming facade with freshly installed stucco and new windows and doors that will maximize energy efficiency.
THE GEORGE - PORTLAND, OR
NORTHWEST PORTLAND / NOB HILL
Waterproofing repairs at The George are nearing completion and are on track for completion in April. In addition to repairing the building facade and bringing it up to current building standards, we have replaced the majority of windows and all patio doors residential units, which will improve energy efficiency. Scaffolding along the west side of the building on 23rd Avenue was removed in mid-March.
In the next two to three weeks, we will wrap up facade repairs on the east and south sides of the building, including the installation of new stucco. Additionally, we will replace stair treads on the main staircase to the upper level residences. All scaffolding is scheduled to come down on April 19.
To date, we have recovered $1,811,134 (including attorney and expert fees) through a legal settlement with the building’s former owner. We are still in legal proceedings with the prior owner’s contractor and the broker.
Negociant, an urban market offering gourmet wine and a delicatessen with a menu that includes cheese & charcuterie, sandwiches, soup, salad, sweets, snacks and more, opened at Àlmr in March.
ÀLMR - PORTLAND, OR
NORTHWEST PORTLAND / NOB HILL
After much anticipation, Negociant, a gourmet wine shop and deli owned and operated by the team behind Bar Diane, opened for business in March at Àlmr. Stop by to pick up for a bite to eat and a bottle of wine from their thoughtfully curated selection next time you are in Northwest Portland.
Calle 2021 will begin buildout of its restaurant space along 21st Avenue in Q2 2022.
Following a prolonged period of pandemic-induced financial and operational challenges that led Kyra Bakery’s to close its 21st Avenue location a year ago, we executed an early lease termination agreement in March. Under the terms of the agreement, Kyra’s Bakery will pay an early termination fee of approximately $76,000. We have engaged commercial broker Urban Works to market the vacant retail space along 21st Avenue.
Negociant wine shop and deli
RESIDENTIAL LEASING UPDATE
Spring has arrived! Leasing activity is beginning to pick up as it does this time every year. As detailed in our February newsletter, multifamily rents in Portland and most major US cities have recovered from pandemic lows and have risen dramatically over the 6 to 12 months. In March, our leasing team received 17 lease applications, executed 15 new leases, and assisted with 8 new resident move-ins. Lease turnover (LTO) continues to support strong rental rate increases across our portfolio. In March, as shown in the tables below LTO yielded noteworthy average rent growth of 14.00% — an average rent increase of $158.63. Looking back on Q1 2021, average rent growth on new leases was event stronger at 15.94% — an average rent increase of $199.43.
In addition to LTO rent growth, we track rent growth attributed to lease renewals. Fewer landlords are offering concessions to entice renters and, if concessions are offered, they are typically much less generous relative to a year ago. As concessions dry up and the market grows more competitive, there is less of an incentive for renters to chase incentives and relocate — especially when you factor in the cost and effort required to move. While it is too soon to observe a pattern, we had a notable uptick in lease renewals in March. Eleven residents renewed their leases compared to six in February. As shown below, these March renewals yielded average rent growth of 10.35%, significantly higher than rent growth in Q1 2022 (5.94%) and Q4 2021 (4.42%). This translates to average rental increases of $149.27 In March, relative to $82.48 in Q1 2022 and $50.67 in Q4 2021.
Lease Turnover and Renewal - AVERAGE Rent Growth (%)
Lease Turnover and Renewal - Average Rent Growth ($)
The table below shows average leased rates at individual properties, as well as the portfolio-wide average leased rate across all stabilized properties.
Average LeaseD RateS - STABILIZED RESIDENTIAL PROPERTIES
The percent of units leased averaged 97% in March and 96% in Q1 2022 — up 7% from Q1 2021. (Note that average leased rates for Q1 2021 are not shown for Cassi and Lyra, which were still in lease-up a year ago.) At individual properties, average leased rates in March ranged from a low of 70% at The George, where leasing has been temporarily impacted by building repairs, to as high as 100% at Cassi. At Slate, the lack of secured on-site parking continues to challenge our ability to lease 2-bedroom units. Our leasing team is exploring alternative parking solutions to meet resident needs.
The table below shows average residential occupancy rates for individual properties, as well as the portfolio-wide average occupancy rate across all stabilized properties.
AVERAGE OCCUPANCY - STABILIZED RESIDENTIAL PROPERTIES
The portfolio-wide average occupancy rate was 96% in March and 95% in Q1 2022 — up 10% from Q1 2021. Notably, average occupancy increased dramatically at Àlmr (11%) and Fairmount Apartments (9%) between Q1 2021 and Q1 2022. As detailed in the leasing overview, average occupancy rates for Q1 2021 are not shown for Cassi or Lyra, which were in lease-up at that time, and occupancy at The George is down temporarily due to building repairs. We are actively marketing the remaining vacant units as the end of the repairs, projected for April, is in sight. Our Operations team has arranged for a photographer to take new photos of our residential properties in about a month, after repairs are completed at The George. We will incorporate the updated images into our advertising and marketing campaigns for the properties. Slate’s occupancy rate continues to lag relative to other properties. As described in the leasing overview, the lack of available secured on-site parking is the primary challenge.
At this time, we are not offering rent concessions for new leases. We are requiring a security deposit for all new leases.