Apartment Investments

Our Apartment Investing or Multi Family Asset Management (MFAM) consists of the acquisition of medium to large Multi-family Apartment Buildings. The beauty of this program is that it creates investment opportunities that are normally only available for those with very high net worth. The MFAM Program pools money (generally $50K minimum) from individuals, investment groups and institutions to provide the capital necessary to leverage the purchase of a larger building. By the way, corporations and people with deep pockets also often partner this way so that they can diversify their portfolio both fiscally and geographically. The end result is a small, like minded group of people who rely on a management team (like 37th Parallel) to orchestrate the deal.

We will locate the property based on healthy macro-economics and scrutinize the property with our proven due diligence process. If it meets our guidelines, we lock up the property and create an opportunity for our investors to benefit from the value-add large properties create. Do this two or three times over a 10 year period and you are well on your way to millionaire status. The leverage offered by our MFAM Program creates cash flow and upside appreciation to our investors, it also passes tax benefits on to them through depreciation. If you wish to obtain professional real estate status, talk to us. The benefits can be even greater.

What do we look for? What kind of parameters do we set for our properties? The city must have a positive growth trend. Employment must be on the rise, and it doesn’t hurt to have a big fallout in real estate like we are having. People who lose their homes always need a place to live and this makes the rental market exceptionally good for the next 3 to 5 years. We ask questions like: Where are the freeways and roads being built? Where are new shopping centers planned? Where are the locations of the schools and ones to be constructed? What is the projected number of individuals or families migrating into the city and what infrastructure is planned to support this new anticipated growth? These are the types of questions we ask ourselves to maximize income and thus increase (or ‘force appreciation) on the value of the property.

We look for properties that are 80 to 200 units in size, and have become sub-standard due to: 1) Poor management, 2) Rents that are under market and 3) have deferred maintenance. To do the necessary rehab on the property and implement the changes that are needed to a property, it will usually take a 1 to 3 year holding period to complete those tasks. During this period we are rehabbing as necessary and correcting the business and management problems that allowed the property to “be a great deal.”

MFAM Properties will be selected based on a combination of the following criteria. Note, weightings will vary based on market and strategy. Where real estate often focuses on highest and best use (HIBU), especially during development, 37th Parallel will focus on highest and best return (HIBR) on a property by property basis.

• Cap Rate of 8.0 or higher (safety)
• DCR of 1.2 or higher (safety)
• Available NOI increase of conservatively 20%. For example, based on a million dollar property with a $75,000 NOI. At a 20% down payment, this would equate to a $200,000 increase in property value and a 100% ROI exclusive of cash flow, tax benefits and principal reduction
• Value optimization cycle time of 24 months or less. This is consistent with our intended holding period of 3-5 years. Year 1 and 2 are for optimization and years 3 through 5 are for stabilization and disposal preparations
• All investments will be structured to optimize depreciation benefits and to ease 1031 transitions for the investors

The basic formula to increase NOI (the bottom line) is to find properties whereby we can increase occupancy, improve property management, and reduce expenses. In sum, the value of a large property is a function of the income it produces; we capitalize on that potential. When that potential is maximized, it’s usually time to sell it and either distribute profits to investors and/or leverage up to a larger property.