March 27, 2020
For starters, we hope that you and your family remain safe and healthy. The last three weeks have become a truly historic time in our country. This is a new time and new territory for everyone as we remain vigilant to support our public leaders and our neighbors in order to overcome the Coronavirus pandemic.
The purpose of this letter is to 1) update you on where Meadowview Apartments stands today and 2) inform you of the first 60 days of operation.
As of March 27, 2020, Meadowview Apartments is observing the requirements of the Governor’s Office Executive Order. Housing is considered to be an “essential” task. Our front office is effectively closed to walk-in traffic. We have utilized the benefits of a cloud-based phone system to forward all calls to staff cell phones. Our software program used for property management is also cloud-based, meaning we are able to work remotely from anywhere with internet access. We have retained one person on the maintenance crew to act as an essential employee, available on-site to take care of emergency maintenance needs. Generally, we have been going into the office every day to continue to perform the everyday vital tasks of Meadowview property management. Residents have not been allowed to walk in and contact with outside personnel has been all but eliminated. It’s different, but it seems to be working.
Rent is due on April 1, just a few days from now. Several government entities have put out different information regarding rent payments and evictions. It is our understanding rent is still due. However, evictions due to anything other than immediate safety and imminent danger to property have effectively been put on moratorium. At this time, we do not have any indication that the majority of our tenant base will have issues paying rent. We have received just a few phone calls inquiring about the circumstances regarding rent and tenancy issues. We have implemented an Emergency Rent Deferral Program (ERDP) to be used only on a case-by-case basis, as needed. The ERDP allows a resident to apply, qualify and then defer April’s rent payment to a balloon payment at a later date or multiple payments for up to six months. One requirement of the Program, though, is that any government or charity “stimulus” payment is to be used 100% toward rent up to the balance owed. As of March 27, we have qualified just one resident out of 98, to use the program.
We have been in communication with our lender. The lender is able to provide payment modifications, if necessary. We don’t anticipate that to be necessary. Even if rent collections fall by a significant percentage, we are in good shape for the coming months. Should rent collection remain high, as we anticipate, we are in great shape.
The Government has said a few things in the last couple of days that indicate a mindset shift that we cannot allow the economy to completely burn down. A $2 trillion stimulus package was passed that includes individual payments of about $1,200 per individual. Unemployment benefits are said to include benefits of up to 125% of lost wages. The President has also indicated that it is time to “get back to work.” It is our view that these two things will bolster resident ability to pay rent on time and we should be fine in the coming 30 days. The question is how long will the economy remain shut down and what will it look like in the three to six-month range? A lot will change, but we think being invested in Meadowview Apartments is an excellent position to be in right now.
Regarding the first 60 days of operation at Meadowview Apartments, things were going quite well… and they still are. But, unfortunately over the last three weeks, we have been forced to manage some uncertainty.
The biggest issue we have tackled is a resident base that was used to paying rent “whenever they could”. There were numerous residents who were seriously delinquent and claiming they could not pay rent on the first of the month. We took a hard stance on the first and demanded every single resident pay on the first, as their lease already stated. It was a bumpy ride for thirty days. We are happy to report, however, that from February 17 to March 17 we improved rental collection by 85%! Our delinquency rate fell from over 25 accounts to five. We sent out 27 demands for possession for unpaid rent in February and we cut that to seven in March. As of today, we collected 97% of the rent due for March, which is a vast improvement from the day of the takeover. This improved efficiency will benefit many aspects of the business going forward.
We have continued to write new leases at $675 per month. Prior to the pandemic, this was good news because the market was telling us the pricing was correct, and further, $675 per month is our two-year target. So when we continue to renew and place new leases at $675, this puts us ahead of schedule. That being said, the next few months and next year will be a bit of a challenge to figure out where everything will shake out. Unfortunately, with the Governor’s executive order in place, rental activity has come to a screeching halt. People are not looking to move nor are they able to. A lot of confusion and anxiety has been created in the rental marketplace.
We believe we continue to have a “diamond in the rough” at Meadowview Apartments. With a little spruce up, continued attention to improving exterior cosmetics, and a targeted interior upgrade plan we have no doubt we will hit our rental pricing goals. Additionally, we are in the process of updating the logo for the property in addition to creating a dedicated website for Meadowview Apartments. Marketing has not historically been a priority at Meadowview. We see a huge opportunity to market to the correct resident, start talking to them where they live and then bring them in to live in our community which will elevate the image and improve the community altogether. We have included a mock-up of the new logo… it’s not quite final, but it’s the absolute direction we’re headed for the Meadowview brand!
Lastly, barring any major unforeseen circumstances, we’re on target to deliver our first round of investor distributions in June 2020.
As the weather continues to get better, we think the American spirit will continue to overcome the health and economic issues we are facing. Unfortunately, there are going to be some winners and losers in the upheaval that has occurred. We believe we are positioned to be a winner and we will continue to work hard to protect the investment, protect our resident base and be a great community member.
Thank you for your investment and commitment to Meadowview Apartments.
Please reach out with any questions you may have.
Best regards,
Mark A. Devereaux
Founder & CEO
Stelvio Equity Group LLC