Birmingham 4 Pack Birmingham, AL

Investment Highlights

• Birmingham's Solid Multifamily Fundamentals
• Immediate Scale in the Market Segment
• Multiple Value-Add Opportunities at Each Property, Including Day-One Upside
• $4.9M CAPEX Recently Invested
• Effective, Affordable Management Team Willing to Remain
• Opportunity Zone
• Attractive Unit Mix
• Proven Resident Placement Program by Local Nonprofit

Birmingham’s Solid Multifamily Fundamentals

The metro area boasts a low unemployment rate of 2.7% as of June 2024, indicative of its economic stability, which is bolstered by significant government employment. The city’s tech sector has seen exponential growth, attracting both startups and established companies. Notably, in June 2024, CModel Data announced its decision to relocate its headquarters from San Francisco to Birmingham. This move is expected to generate over 80 high-paying tech jobs by 2025. 

Central to Birmingham’s economic vitality are its educational institutions, including the University of Alabama at Birmingham (about nine minutes from the portfolio) and Samford University (about 15 minutes from the portfolio). This academic influence seamlessly integrates with the business landscape, where major corporations such as Vulcan Materials Company (about seven minutes from the portfolio) and Encompass Health (about 15 minutes from the portfolio) are key players, contributing to a diverse and robust economy. 

Despite a modest 0.2% annual increase in rents across the broader Birmingham multifamily market, workforce housing properties are demonstrating notably stronger performance. Rents in this segment have risen by 4.1% over the year ending in June 2024, demonstrating resilience to the pressures of new supply that have affected the higher-end market segments.

The portfolio is strategically positioned along a clear path of redevelopment, with revitalization efforts extending toward all the assets. This trajectory offers investors a unique opportunity for substantial long-term returns, particularly with a long-term hold strategy that aligns perfectly with Opportunity Zone requirements. As the area continues to develop, property values are poised to appreciate significantly, allowing investors to capitalize on both the immediate benefits of the Opportunity Zone tax incentives and the long-term value created through the surrounding redevelopment. This combination makes the portfolio an ideal fit for investors with a focus on sustained growth and wealth building over time.

Immediate Scale in the Market Segment

The Birmingham 4 Pack portfolio, consisting of 258 units, allows an investor to acquire a significant presence in a single transaction. The advantages of acquiring the entire portfolio are clear: it creates ideal economies of scale and maximizes operating efficiencies. By spreading fixed costs like landscaping, maintenance, and administrative expenses across a larger number of units, investors can reduce the cost per unit, enhancing profitability.

Additionally, acquiring the full portfolio establishes an immediate geographic footprint within the Birmingham market. This rapid market penetration enables new ownership to gain visibility among potential tenants, competitors, and local stakeholders swiftly. With a strong presence from the outset, investors position themselves for future growth, making expansion more efficient and strengthening their market position over time. This portfolio is an attractive investment for those looking to establish or expand their operations in Birmingham.

Multiple Value-Add Opportunities at Each Property, Including Day-One Upside

Eastmont Plaza

Eastmont Plaza offers significant upside through proven lease trade-outs and utility reimbursement opportunities. The property consists of 56 two-bedroom, one-bathroom units currently achieving an effective rent of $710. However, 11 units have already been successfully leased at $800-$825. By simply aligning all units to the consistently achieved rent levels, new ownership will see a notable increase in revenue. This adjustment alone will result in a $60,351 boost in top-line revenue, representing a 12.65% increase.

Additionally, there is substantial utility reimbursement potential. While the property has collected approximately $18,000 in utility reimbursements over the last 12 months, new ownership can easily increase this to $32,000 by implementing a $50/unit/month charge. This adjustment would drive a $13,000 or 69% increase in utility reimbursements, further enhancing the property’s profitability.

Fountain Blue

Fountain Blue presents a compelling lease-up and renovation opportunity, with over $1 million already invested in capital improvements. Recent upgrades include roofs, all HVAC systems, the parking lot, all windows, fencing, and landscaping, significantly reducing future capital expenditures. The focus now shifts to the remaining interiors of the units. Of the 22 vacant units, four are down and require full renovation. Ten units have been renovated, while the remaining units need either full or light interior renovations. Completing these interior renovations will increase the property’s value and attract quality tenants, further boosting rent and occupancy rates.

In addition, there is untapped utility reimbursement upside at Fountain Blue. The property is currently underperforming in this area, with minimal collections. New ownership can easily implement a $30 charge for one-bedroom units and $50 for two-bedroom units, significantly increasing revenue while aligning with standard market practices.

Highland Park

Highland Park offers a proven interior renovation strategy that has already yielded impressive results. 32 units have been renovated with high-end upgrades, and by continuing this approach across the remaining units, new ownership can raise effective rents to the proven average of $959. This represents a $152 or 18.8% increase over the current effective rent of $807. Completing the renovations will not only enhance the property’s appeal but also increase its value and income potential.

There is also room for significant improvement in utility reimbursements at Highland Park. Over the last 12 months, the property has collected just $9,700 in reimbursements. By introducing a consistent flat rate of $50 for two-bedroom units and $60 for three-bedroom units, new ownership can generate an additional $23,355 in revenue, further driving top-line growth.

Pointe Arlington

Similar to Fountain Blue, Pointe Arlington South benefits from over $1 million in recent capital investments, including updates to roofs, HVAC systems, and exterior improvements. With most major exterior work completed, the focus now turns to the interior units. 54 units have been recently renovated. Among the vacant units, some require full renovation, while others only need light updates. Completing these renovations will create substantial leasing potential, positioning Pointe Arlington South for higher rents and increased occupancy.

Utility reimbursements present an additional revenue stream for new ownership at Pointe Arlington. Like Fountain Blue, the property is underutilizing this opportunity. By charging $30 for one-bedroom units and $50 for two-bedroom units, ownership can significantly boost revenue, further enhancing the property’s financial performance.