Srep Pvof-1 q4 Update
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Transcript of Srep Pvof-1 q4 Update
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8/3/2019 Srep Pvof-1 q4 Update
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SEQUOIA REAL ESTATE PARTNERS
10990 Wilshire Blvd Suite 420 Los Angeles CA 90024 310 312 4807
2011 Pacific Value Opportunities Fund I Update
The fourth quarter was a busy one for Pacific Value Opportunities Fund I, as we acquired two additional
assets: a 24-unit apartment building located in the Koreatown area of Los Angeles, and another single-family home in South Los Angeles. The Fund now owns two apartment buildings (85 units total,
including one non-conforming unit) and four homes. Of the original Fund equity, we have invested
approximately 95% to fund the acquisitions and various capital improvements made to the acquired
assets. As discussed in more detail below, we anticipate monetizing one or more Fund assets in the next
12 to 18 months. Details of the Fund assets are as follows:
APARTMENT ASSETS
318 S. Commonwealth Avenue, Los Angeles 90020
Three stories, 24 units (18 singles, 6, onebedroom, one bath)
Purchase price: $1.329 million ($53K perunit)
Acquired November 2011 Year built: 1927 (rent-controlled) Construction: Brick
To fund the building purchase, we secured $1.09
million of 10-year fixed rate financing from Fannie
Mae at a rate of 4.74%. The overall strategy is to hire a new on-site manager, renovate the commonareas (lobby, hallways, laundry room) and exterior (paint and landscape), renovate unit interiors, and
increase rents as tenants vacate. We have budgeted approximately $40-50K for the proposed
renovations and unit turns. The building is rent-controlled, so we will actively manage leases and
promote renter turn where feasible. We believe we acquired the asset at a very favorable price, and
plan to reposition the property for a sale in either 2012 or 2013.
245 N. Alvarado Avenue, Los Angeles 90026
Three stories, 60 units (36, one bedroom, onebathroom; 19, two bed- two bath; five two bed +
loft, one bath; and, one non-conforming)
Purchase price: $7.525 million ($125K/unit) Renovation costs to date: approximately $400,000 Acquired November 2010 Year built: 1990 (not rent-controlled) Construction: wood-frame stucco
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SEQUOIA REAL ESTATE PARTNERS
10990 Wilshire Blvd Suite 420 Los Angeles CA 90024 310 312 4807
We have essentially completed all of the common area and exterior renovation work at the 245
property, which was substantial. Many of you visited the property both "before and after" and can
testify to the extensive work that was done. We have also completed upgrades on 23 of the units, have
nine more unit renovations in progress, and have nearly finished work on a new assistant manager's unit
(the nonconforming unit) and added a small gym on the building's ground floor. The building is now90% occupied, with all rent-ready units rented. We will likely market the building for sale sometime
towards the end of the first quarter of 2012. Depending on what interest received, we may decide to
sell the building, though we may also decide to continue to own and operate the asset, with an eye
towards commencing cash distributions.
SINGLE-FAMILY RESIDENCES/OTHER ASSETS
4161 Mandalay Drive, Los Angeles 90063
Single-family home Four bedrooms, three bathrooms Acquired March 2011 Purchase price of $212,000 Renovation costs = approximately $45,000 Currently leased for $2,250 per month Estimated fair market value = $300,000
908 Frigate Avenue, Wilmington 90744
Duplex Six bedrooms, four bathrooms Acquired August 2011 Purchase price of $220,000 Renovation costs = approximately $11,000 Currently leased for $2,600 per month Estimated fair market value = $320,000
3118 Palo Verde Avenue, Long Beach 90808
Single-family home Three bedrooms, two bathrooms Acquired September 2011 Purchase price of $307,000 Renovation costs = approximately $3,000 Currently leased for $2,200 per month Estimated fair market value = $380,000
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SEQUOIA REAL ESTATE PARTNERS
10990 Wilshire Blvd Suite 420 Los Angeles CA 90024 310 312 4807
3137 W. 108th
Street, Los Angeles 90303
Single-family home Two-bedrooms, one bathroom Acquired November 2011 Purchas e price of $155,000 Renovation costs are to be determined, but likely to
range from $9,000 - $60,000. We are contemplating
adding on another one or two bedrooms and bathroom, and are soliciting bids for such work.
Estimated fair market value = $220,000 - $320,000 (pending upgrades)We are considering several alternatives for the four homes. They are all currently generating positive
cash flows and cash returns on equity of between six and 10 percent. It is likely that we will market one
or more of the homes for sale in 2012.
Overall, we continue to be pleased with the progress that 2011 has brought Fund I both in terms of
acquisitions and repositioning of assets. While the global economic picture remains decidedly uncertain
and volatile - conditions that will likely continue well into 2012 until there is greater clarity into the
situation in Europe, China (and its ability to steer itself to a "soft landing"), the toxic political climate
here at home, and the impact all of this (and more) will have on GDP both here and globally - the rental
housing market continues to perform very well for all of the reasons we have laid out in past missives.
Rising rents, declining home ownership, dropping unemployment levels, and the declining cost of core
inputs upon which we rely (e.g., labor, building materials, and capital) have launched significant interest
in multifamily assets. Not surprisingly, many are now jumping on the multifamily bandwagon. A recent
Wall Street Journal article (December 21st) noted that large commercial developers like Boston
Properties, Mack-Cali Realty, SL Green, and Macerich have all either "acquired, completed, or broken
ground on apartment buildings in recent months, or plan to do so next year". All have traditionally
focused exclusively on office and/or retail projects. Data released by the Commerce Department a day
earlier indicated that November multifamily construction starts increased 25.3% from the previous
month. For experienced players like Sequoia, we believe that favorable acquisitions will remain
available, while the markets provide significant opportunities to harvest our Fund I assets.
Meanwhile, we will stick to our knitting, seeking out value-add opportunities (as opposed to higher-risk
development and speculation), focusing on acquiring assets in need of significant repositioning and
hands-on property management, and concentrating on assets overlooked by the larger institutional
players and the Johnny Come Latelys. We look forward to reporting additional progress in upcoming
reports and news surrounding the launch of our second fund sometime in early 2012.
All of us at Sequoia Real Estate Partners and the Pacific Value Opportunity Fund I would like to wish you
and yours a very healthy, happy, and prosperous holiday season and New Year.
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