LINCOLN POINTE APARTMENTS PROJECT
Highgate Capital Group has offered us the opportunity to partner with them in the acquisition of Lincoln Pointe Apartments in Bethel Park (Pittsburgh), Pennsylvania. Highgate is under a letter of intent to purchase the Property. Lincoln Pointe was built in 1993 and consists of 214 one bedroom/one bathroom units and 124 two bedroom/two bathrooms within six buildings along with a leasing center and clubhouse. There is a total of 274,641 rentable square feet located on 10.49 acres. The Property has been owned and operated by the original developer, a large pension fund advisor, for nearly 25 years that does not own any other multifamily assets in Pittsburgh. Also, because the Property was developed with union pension fund money it has been required to utilize all union labor for all out-sourced contract work, which has created significantly large operating inefficiencies. Highgate will continue its long-standing partnership with Michigan-based Village Green Management, one of the nation's largest privately held third party property managers of multifamily housing with more than 40,000 units in 21 markets, including three Class A properties in Pittsburgh. With Village Green’s deep local market knowledge and experience, the partnership will employ best-in-class management practices to significantly reduce controllable operating expenses, implement a capital improvement program and strategic marketing campaign that will drive revenue growth and significantly improve net operating income.
The Property has a history of stable performance with occupancy over the past three years. Lincoln Pointe is currently the only property in its competitive set that does not have a resident utility bill-back system (RUBS). Along with steady projected growth in the Pittsburgh area, Highgate’s planned improvements to the curb appeal and general amenities should attract an upmarket resident base with higher household incomes that will boost the ability to increase rents and should lead to significant growth in net operating income and the underlying asset value.
The current institutional owner has invested the necessary capital to maintain the physical asset extremely well and there is a limited amount of deferred maintenance. However, the Property will benefit tremendously from significant capital investment in curb appeal, amenity and interior improvements. Highgate’s budget is conservatively estimated for enhancements to the curb appeal, landscaping and amenity package, including new fitness center equipment and pool furniture, various clubhouse and interior hallway improvements, and new dog park and fire pit/gazebo areas. Furthermore, a large majority of the unit interiors are original and have not been updated since the Property was developed more than 25 years ago. Therefore, over half the capital budget will be used for a two-tiered interior upgrade package including a “premium package” that will feature new cabinet doors, resurfaced countertops, brushed nickel lighting, new appliances, two tone paint, and vinyl wood flooring. A second “deluxe” package will feature new cabinets, granite countertops, stainless steel appliances and wood flooring.