Property Details
Stabilized Cashflow  Below Market Rents  Repositioning Opportunity  NOI Growth 
Asset Profile
Value Add

Oak Grove

Middle River, MD

Multi-Family Property
OneWall Partners Stamford, CT
OneWall Partners
  • IRR 17%
  • Equity Multiple 2.7x
  • Hold Period 3-7Y
  • Minimum Investment $50K
  • Year 1 Cash on Cash 10%
  • Stabilized Cash on Cash 8% in Y4
  • First Distribution Jul 2021
  • Distribution Frequency Quarterly
  • Co-Investment 8.4% ($815K)
  • Preferred Return See Note
  • Investor Profit Share See Financials
  • Asset Profile Value Add
  • Loan-to-Value 77%
  • Current Occupancy 97%

About this Property

"High demand, middle-class apartments in top performing suburban Maryland submarket with 5%+ year-over-year rent growth during COVID."

-Nate Kline, OneWall Partners

 

Address 303 Holly Drive
Square Footage 278,000
# of Units 347
Year Built 1943
Year Renovated 2008-2012
Market Occupancy 96%
Current Average Rents $947
Average Market Rents $1,042
Purchase Price $32,500,000
Price/Sq. Ft. $117

Top Questions

All answers are provided by the sponsor, OneWall Partners, or its representatives.

Why are you buying this property?

Nate Kline, OneWall Partners: “OneWall has been targeting opportunities in suburban Baltimore and DC for more than 12 months due to attractive multifamily fundamentals. The employment markets are stable and diverse with a significant percentage of essential workers including healthcare, education and defense/government employment along with burgeoning industrial and manufacturing activity anchored by the Port of Baltimore."

"These areas have proven resilient in economic downturns, maintain high occupancy and offer affordable housing options for workers and families. In the current environment, this property and its submarket have experienced high occupancy and significant year-over-year rent growth. There is no multifamily residential supply planned within a 5-mile radius of the property."

"Finally, at less than $94,000 per unit, the property is being sold for just 50% of replacement cost and a more than 30% discount to comparable sales. This provides significant cushion for investing capex dollars to drive rents and exit value. Comparable renovated units nearby can derive rental premiums in excess of $200/month whereas OneWall is only seeking $75-125 premiums initially."

 

What are the most important aspects of this investment opportunity for the investors?

Nate Kline, OneWall Partners:

  1. "Attractive Acquisition Basis: OneWall had been tracking this deal for several weeks after dropping out of the bidding process due to broker/seller expectations. Due to the Sponsor’s stellar reputation with the brokerage and history of working with institutional sellers, the deal was awarded at a significant discount to asking price and below other bids. Additionally, this price represents a substantial discount to comparable sales."
  2. "Rent Growth: According to Yardi Matrix, the Middle River submarket has far exceeded Baltimore in YOY rent growth since April 2020 and was #1 of 62 submarkets in December. Oak Grove’s current in-place rents average only $947 and are 32% below average rents for comparable properties. The conservative underwriting assumes 1.5% annual rent growth in year one with 2.5% growth in year two and 3% on going. This growth is on in-place rent and does not include our average renovation premiums of $90/unit. Average post renovation rents for Oak Grove are still 10% below today’s market rents for comparable properties."
  3. "Conveniently Located: Residents can enjoy a peaceful neighborhood setting that has easy access to major thoroughfares I-695 and I-95. This provides residents with the ability to enjoy their natural surroundings while quickly accessing major employment centers within a few miles."
  4. "Affordability: The property is currently affordable at 50% of median household income (“MHI”) for the county, which should only improve as the state of Maryland recently increased the mandatory minimum wage from $10/hr to $15/hr by January 2025. A significant portion of the Oak Grove tenant base works in service, administrative, retail, and industrial and will directly benefit from this mandated increase. Our current rents would still be affordable at 60% of MHI by year 5 even with no income growth."

 

What is your investment strategy/business plan?

Nate Kline, OneWall Partners: “Occupancy at Oak Grove has consistently been around 95% since 2012 yet rents trail neighboring comps by as much as $140 to $300 per month/unit. The current ownership group has maintained the property while making some exterior enhancements but has not focused on unit renovations. OneWall will implement a three-pronged value-add strategy for Oak Grove as follows:"

  1. "Management: OneWall Management will immediately take over property management, retain the best on-site employees, implement its processes and procedures, and provide the necessary resources to maintain positive resident relations. OneWall will begin implementing cost saving and revenue enhancement programs. On-site staff will also coordinate with our regional and asset management teams to finalize and execute on the property improvement and unit renovation programs."
  2. "Value-add Capex and Deferred Maintenance: Approximately $1.2 million (excluding unit renovations and equipment replacements) is projected to be spent from reserves and cash flow over 5 years to eliminate deferred maintenance, make improvements throughout the property and enhance curb appeal. This work includes immediate asphalt repairs, roof replacements, refreshed landscaping, hallway renovations, AC units and new signage and branding."
  3. "Unit Renovations: Renovations begin immediately on vacant units upon acquisition and will be evaluated case by case to meet leasing demand and generate 15-20% return on cost. Sponsor expects to renovate at least 34 units per year at an initial average cost of $6,800 with average monthly rent increases of $75-125. The proposed renovations include new flooring, appliances, countertops, sinks, cabinetry, hardware, fixtures, lighting, and blinds."

     

    How has COVID-19 impacted your business plan?

    Nate Kline, OneWall Partners: "To mitigate any remaining COVID risk and lingering economic impacts, underwriting assumptions include lower rent growth, higher collection loss and fewer renovations in the early years than would have been assumed pre-COVID."

     

    What are the risks and how are you mitigating those risks?

    Nate Kline, OneWall Partners:

    "Value-Add/Renovations: The business plan contemplates a unit renovation program spend of approximately $250,000 per year translating to 15-20% ROI from approximate 10% increases in rents. Construction materials and appliances have been experiencing inflation and supply issues. However, the scope, plans and budgeting are being directly translated from other currently active projects at similar properties operated by the Sponsor. Additionally, by projecting to renovate only 10% of units annually, overall rent growth is moderated and the rents themselves will still be affordable according to area median income."

    "Physical Obsolescence: The Property was built in the 1940s so great care is being taken to assess and address any building systems or structural components that could be physically obsolete. The property has been well maintained by current ownership and physical diligence and engineering studies indicate the vast majority of deferred maintenance is cosmetic and regular equipment replacements. Sponsorship has planned more than $3 million of capex to refresh and improve the asset to drive significant upside income potential and this work will be overseen with in-house construction management resources."

    "COVID/Economic Recovery: The COVID shutdowns created an unprecedented economic impact that is still being felt in many areas of the country. Naturally some residents have lost jobs and had difficulty paying rent. Court shutdowns and eviction moratoriums have limited landlord options to remove non-paying residents. The business plan has underwritten year 1 collection loss of 8% with a slow burn off in subsequent years until normalization. With additional stimulus coming and courts reopening, this should be a conservative assumption that property management is seeking to outperform. Additionally, recent occupancy trends are meaningfully higher than underwritten."

     

    NOTE: All answers provided by the sponsor, OneWall Partners, or its representatives.

About this Property

"High demand, middle-class apartments in top performing suburban Maryland submarket with 5%+ year-over-year rent growth during COVID."

-Nate Kline, OneWall Partners

 

Address 303 Holly Drive
Square Footage 278,000
# of Units 347
Year Built 1943
Year Renovated 2008-2012
Market Occupancy 96%
Current Average Rents $947
Average Market Rents $1,042
Purchase Price $32,500,000
Price/Sq. Ft. $117

Top Questions

All answers are provided by the sponsor, OneWall Partners, or its representatives.

Why are you buying this property?

Nate Kline, OneWall Partners: “OneWall has been targeting opportunities in suburban Baltimore and DC for more than 12 months due to attractive multifamily fundamentals. The employment markets are stable and diverse with a significant percentage of essential workers including healthcare, education and defense/government employment along with burgeoning industrial and manufacturing activity anchored by the Port of Baltimore."

"These areas have proven resilient in economic downturns, maintain high occupancy and offer affordable housing options for workers and families. In the current environment, this property and its submarket have experienced high occupancy and significant year-over-year rent growth. There is no multifamily residential supply planned within a 5-mile radius of the property."

"Finally, at less than $94,000 per unit, the property is being sold for just 50% of replacement cost and a more than 30% discount to comparable sales. This provides significant cushion for investing capex dollars to drive rents and exit value. Comparable renovated units nearby can derive rental premiums in excess of $200/month whereas OneWall is only seeking $75-125 premiums initially."

 

What are the most important aspects of this investment opportunity for the investors?

Nate Kline, OneWall Partners:

  1. "Attractive Acquisition Basis: OneWall had been tracking this deal for several weeks after dropping out of the bidding process due to broker/seller expectations. Due to the Sponsor’s stellar reputation with the brokerage and history of working with institutional sellers, the deal was awarded at a significant discount to asking price and below other bids. Additionally, this price represents a substantial discount to comparable sales."
  2. "Rent Growth: According to Yardi Matrix, the Middle River submarket has far exceeded Baltimore in YOY rent growth since April 2020 and was #1 of 62 submarkets in December. Oak Grove’s current in-place rents average only $947 and are 32% below average rents for comparable properties. The conservative underwriting assumes 1.5% annual rent growth in year one with 2.5% growth in year two and 3% on going. This growth is on in-place rent and does not include our average renovation premiums of $90/unit. Average post renovation rents for Oak Grove are still 10% below today’s market rents for comparable properties."
  3. "Conveniently Located: Residents can enjoy a peaceful neighborhood setting that has easy access to major thoroughfares I-695 and I-95. This provides residents with the ability to enjoy their natural surroundings while quickly accessing major employment centers within a few miles."
  4. "Affordability: The property is currently affordable at 50% of median household income (“MHI”) for the county, which should only improve as the state of Maryland recently increased the mandatory minimum wage from $10/hr to $15/hr by January 2025. A significant portion of the Oak Grove tenant base works in service, administrative, retail, and industrial and will directly benefit from this mandated increase. Our current rents would still be affordable at 60% of MHI by year 5 even with no income growth."

 

What is your investment strategy/business plan?

Nate Kline, OneWall Partners: “Occupancy at Oak Grove has consistently been around 95% since 2012 yet rents trail neighboring comps by as much as $140 to $300 per month/unit. The current ownership group has maintained the property while making some exterior enhancements but has not focused on unit renovations. OneWall will implement a three-pronged value-add strategy for Oak Grove as follows:"

  1. "Management: OneWall Management will immediately take over property management, retain the best on-site employees, implement its processes and procedures, and provide the necessary resources to maintain positive resident relations. OneWall will begin implementing cost saving and revenue enhancement programs. On-site staff will also coordinate with our regional and asset management teams to finalize and execute on the property improvement and unit renovation programs."
  2. "Value-add Capex and Deferred Maintenance: Approximately $1.2 million (excluding unit renovations and equipment replacements) is projected to be spent from reserves and cash flow over 5 years to eliminate deferred maintenance, make improvements throughout the property and enhance curb appeal. This work includes immediate asphalt repairs, roof replacements, refreshed landscaping, hallway renovations, AC units and new signage and branding."
  3. "Unit Renovations: Renovations begin immediately on vacant units upon acquisition and will be evaluated case by case to meet leasing demand and generate 15-20% return on cost. Sponsor expects to renovate at least 34 units per year at an initial average cost of $6,800 with average monthly rent increases of $75-125. The proposed renovations include new flooring, appliances, countertops, sinks, cabinetry, hardware, fixtures, lighting, and blinds."

     

    How has COVID-19 impacted your business plan?

    Nate Kline, OneWall Partners: "To mitigate any remaining COVID risk and lingering economic impacts, underwriting assumptions include lower rent growth, higher collection loss and fewer renovations in the early years than would have been assumed pre-COVID."

     

    What are the risks and how are you mitigating those risks?

    Nate Kline, OneWall Partners:

    "Value-Add/Renovations: The business plan contemplates a unit renovation program spend of approximately $250,000 per year translating to 15-20% ROI from approximate 10% increases in rents. Construction materials and appliances have been experiencing inflation and supply issues. However, the scope, plans and budgeting are being directly translated from other currently active projects at similar properties operated by the Sponsor. Additionally, by projecting to renovate only 10% of units annually, overall rent growth is moderated and the rents themselves will still be affordable according to area median income."

    "Physical Obsolescence: The Property was built in the 1940s so great care is being taken to assess and address any building systems or structural components that could be physically obsolete. The property has been well maintained by current ownership and physical diligence and engineering studies indicate the vast majority of deferred maintenance is cosmetic and regular equipment replacements. Sponsorship has planned more than $3 million of capex to refresh and improve the asset to drive significant upside income potential and this work will be overseen with in-house construction management resources."

    "COVID/Economic Recovery: The COVID shutdowns created an unprecedented economic impact that is still being felt in many areas of the country. Naturally some residents have lost jobs and had difficulty paying rent. Court shutdowns and eviction moratoriums have limited landlord options to remove non-paying residents. The business plan has underwritten year 1 collection loss of 8% with a slow burn off in subsequent years until normalization. With additional stimulus coming and courts reopening, this should be a conservative assumption that property management is seeking to outperform. Additionally, recent occupancy trends are meaningfully higher than underwritten."

     

    NOTE: All answers provided by the sponsor, OneWall Partners, or its representatives.

Offered By

OneWall Partners

OneWall Partners

Stamford, CT

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Assets Under
Management

Currently
$534MM 20+ assets
Exited
$145MM 20+ assets
Portfolio LTV
65%  
Historical
Realized Returns

Total IRR
26.3%  
Equity Multiple
1.9x  
Annual Cash
N/R  
Years Of
Experience

As Principals
30+ years  
In Business
12 years  
Size
10 Staff * Dedicated investor relations
* All information is reported by OneWall Partners as of 3/5/2021.
Assets Under
Management

Currently
$534MM 20+ assets
Exited
$145MM 20+ assets
Portfolio LTV
65%  
Historical
Returns

Total IRR
26.3%  
Equity Multiple
1.9x  
Annual Cash
N/R  
Years Of
Experience

As Principals
30+ years  
In Business
12 years  
Size
10 Staff * Dedicated investor relations
* All information is reported by OneWall Partners as of 3/5/2021.

Financials

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Location Details

Middle River, MD

Nate Kline, OneWall Partners: “The property offers tremendous highway access to nearby employment, retail and cultural amenities throughout the region and is convenient to recreational opportunities on the Chesapeake Bay waterfront. Employers include Franklin Square Med Center, Lockheed Martin and numerous industrial/distribution facilities. Retail includes White Marsh Mall as well as other shopping centers anchored by Target, Kohl’s, supermarkets and restaurants. The Dundee Natural Environment Area and Gunpowder Falls State Park (with a beach and kayaking) are within minutes. Lastly, the MARC-PENN train stop at Martin State Airport gets to Baltimore-Penn Station in 15-20 minutes and DC Union Station in about 75 minutes.”

Documents

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Offering Agreement Documents

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