The BLVD Distribution October 27, 2023
Turning Parking Into Profit
In May 2022, we successfully acquired the Eat Street Portfolio, which comprises 67 units situated along Nicollet Ave, famously known as the culinary capital of Minneapolis. These 67 units are housed within three buildings, which were completely remodeled resulting in a unique product that displays the vintage charm of turn-of-the-century architecture while presenting finishes that can rival those of class-A competitors.
The key opportunity within this acquisition lies in the improved management of the buildings, the implementation of a utility bill-back program, and the potential for increased additional income. One significant source of additional income is parking.
In this particular region of Minneapolis, parking is a scarce commodity. In fact, many new developments no longer include parking in their plans, as it is not mandated by the city. The Eat Street Portfolio features 18 parking spots. We took immediate action by restriping the lot and numbering each parking spot. Upon completion, we extended the offer to our tenants, allowing them to rent these spots for $100 each. As a result, we now generate $1,800 in monthly parking revenue. Let's take a look at the value this creates.
The monthly parking fees of $1,800 translate into an impressive $21,600 in annual revenue. What makes this particularly appealing is that 95% of this amount contributes directly to our bottom line, as there are minimal ongoing costs associated with providing these parking spaces. The resulting boost to our Net Operating Income (NOI) stands at $20,520.
As you may be aware, the value of an apartment building is closely tied to the cap rate at which it's traded. The formula is straightforward.
NOI / Cap Rate = Value
In this case, since all of the additional income directly contributes to the NOI, we can calculate the increased value as follows:
$20,520 / 6.5 = $315,692
This translates to an impressive increase in value, exceeding $300,000, all thanks to the simple act of billing for these much-needed parking spaces.
The acquisition of the Eat Street Portfolio provided us with an exciting opportunity to optimize building management, introduce a utility bill-back program, and explore new income sources. This strategic approach highlights the remarkable potential of diversifying income streams, ultimately adding over $300,000 in value to the property.
As of today, this deal has reached a 97% occupancy rate. Although we encountered challenges with our third-party management company upon the initial acquisition, transitioning to in-house management under BLVD Management has proven to be a game-changer. Our team has delivered substantial increases in income, and we're rapidly closing in on our proforma projections. This success stands as a testament to the exceptional capabilities of the top-notch group we've assembled, particularly in optimizing asset performance.