UD+P News: November 2021
Introducing OUr NEW BLOG: BUILT TO LAST
We are excited to introduce our new Built to Last blog. Launched in October, the blog will provide thought leadership and engaging content focused on issues such as private equity real estate investing and urban development. We chose the name “Built to Last” as a nod to our commitment to building high quality projects that will stand the test of time. Check out our latest post, below, and let us know what you think.
PROJECT UPDATES
550 SE MLK - PORTLAND, OR
550 SE MLK won unanimous approval from the City of Portland's Design Commission in November. Commissioners present at the hearing on 11/18/2021 voted 6-0 to approve GBD Architects’ design for the 7-story mixed-use residential project, which will feature 132 apartments, ground-floor retail and below-grade parking.
Due to Commissioners’ concerns about the building fitting into the neighborhood context, getting to "yes" was an endeavor that took multiple hearings and some design modifications. For example, the final, approved design eliminated dark metal panels, regularized the windows, and simplified the building façade.
We are currently vetting potential lenders and anticipate securing financing by the end of Q1 2022. The project was submitted for permit in September. We expect to obtain permits in March or April 2022 and plan to start construction in Q2 2022. 550 SE MLK’s projected delivery date is late Q3 2023.
1201 J STREET - SACRAMENTO, CA
In preparation for its planned opening in January 2022, flex office operator, CENTRL Office, hired a general manager who is actively leasing space to prospective tenants. Cora Coffee is also slated to open in January. The rooftop tent structure is up and will be ready for our first event, anticipated in Q1 2022.
LAKE OSWEGO NORTH ANCHOR - LAKE OSWEGO, OR
In September, our hotel and multifamily residential projects in downtown Lake Oswego won design review approval from the city. The residential project, which includes 66 apartments in two buildings and ground-floor retail totaling approximately 6,000 square feet, was submitted for permit in late September and is under city review. The project should obtain its building permit in early 2022.
The hotel project, a 77-room boutique property with a ground floor restaurant/lounge/outdoor patio, has completed the design development phase and will continue design in the new year with a projected permit submittal in late February. We are preparing to select a marketing/branding firm that will help us with the name/identify for the new hotel and restaurant. We also recently completed a market study to review and confirm our projected revenue and expenses for the property. We expect to begin seeking construction loan partners early next year. Both projects will be ready to start construction by summer 2022, subject to securing all required financing.
New rendering of the SW corner of 550 SE MLK. The image incorporates subtle design modifications made to gain approval from Portland’s Design Commission in November.
Roof tent installation at 1201 J Street, Sacramento
COMMERCIAL RENT COLLECTIONS UPDATE
The table below summarizes office and retail collections from Q4 2020 through November 2021 (as of 11/24/2021). Monthly rent collection data is provided for the current quarter and quarterly averages are provided for past quarters.
COMMERCIAL RENT COLLECTIONS SUMMARY
Office rent collection has remained consistently strong during the second half of 2021. We collected 95% of office charges (rent and pass through expenses) assessed in November, down from 99% in October.
In October and November, we collected 87% of charges from retail tenants, higher than the average collection rate of 80% in Q3. Our operations team continues to work closely with tenants who have faced ongoing operations and financial challenges due to the pandemic.
residential rent collections update
The table below summarizes residential delinquency (i.e., past due rent) attributed to both current and past residents as of November 29, 2021. Across our residential portfolio, delinquencies of 31 days or longer totaled $90,706 in November. Approximately half of the delinquency is owed by past renters. The other half is owed by current renters, the majority of whom have not paid rent, or who have been paying only a small portion of their rent, since the pandemic began. As described in more detail below, most current renters with large arrearages have applied for rent assistance to cover their outstanding balances.
RESIDENTIAL DELINQUENCY BY PROPERTY: AUGUST (as of 8/29/21)
Portfolio-wide, 12 residents have applied for up to six months of rent assistance through the Oregon Emergency Rent Assistance Program (OERAP) to cover past-due rent owed for July through November 2021. In addition to back rent, OERAP will pay for up to three months of future rent for qualified applicants, whose household income may not exceed 80% of the Median Household Income. One application for $5,829 has been approved and funded thus far. We will keep you apprised of the status of outstanding OERAP applications and awards in future newsletters.
As you may recall, prior to July 2021, UD+P applied for $209,612 in rent assistance through Oregon's Landlord Compensation Fund, which covered back rent owed by residents from March 2020 through June 2021. We have been approved for the full amount requested and have received $208,002 to date.
RESIDENTIAL LEASING UPDATE
As of November 27, an estimated 96% of units across all stabilized properties are leased. We are experiencing the customary seasonal slowdown that occurs every autumn as we head into the holidays and the colder winter months approach. Our leasing team processed eight lease applications and executed four new leases in November. In recent months, as multifamily rents across the nation have recovered from pandemic lows, lease turnover (LTO) has enabled us to increase rental rates across our portfolio. In November, LTO yielded substantial rent growth of 12.12% — an average rent increase of $174. For comparison, LTO resulted in 11.79% rent growth in October and 10.36% rent growth in September.
The table below shows average residential lease rates for individual properties, as well as the portfolio-wide average lease rate across all stabilized properties.
AVERAGE LEASE RATES - STABILIZED RESIDENTIAL PROPERTIES
The portfolio-wide average lease rate was 97% in November (as of 11/28/2021), down 2% from October (99%) and 1% from Q3 (98%). With the exception of The George, average lease rates for individual properties ranged from 94% to 100% in November. Disruptions caused by waterproofing repairs underway at The George led to two move-outs. After careful consideration, due to the considerable impacts of repairs to the building exterior as well as unit interiors, we are keeping the vacated units off line. We will add them back to market about 45 prior to the work ending. All remaining residents have received eight to 10 weeks free rent for the duration of the repairs.
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
In November, the portfolio-wide average occupancy rate was 96%, down two percent from October (98%) and up one percent from Q3 (95%). As noted in the leasing overview, occupancy at The George is down temporarily due to waterproofing repairs, which are projected for completion in April 2022.
At this time, we are not offering rent concessions for new leases. We continue to offer a zero deposit at move-in policy.
Hotel GRAND STARK - write-ups and accolades
Hotel Grand Stark continues to garner positive press and recognition as one of the best new hotels of 2021.
Below, are a few of the latest in a growing list of write-ups and accolades:
Sunset Magazine named Hotel Grand Stark one of the best urban hotels in it’s Sunset Travel Awards 2021 Directory.
In November, Suitcase Mag included Hotel Grand Stark in its line-up of Nine New US Hotels Worth Flying For.
Financial Times’ latest Travelista Travel column praises Hotel Grand Stark as one of the West Coast’s chicest new hotel experiences.