Sleep at 35,000 feet, breakfast in Orlando, lunch in Ft. Lauderdale and dinner in Miami; that’s only the first day of Portfolio Manager Elias Bachmann’s most recent property visit tour, which concluded its dizzying pace in Washington DC.
In 2008 the Florida apartment housing market suffered as home foreclosures and unemployment sky-rocketed. Three years later, the situation has changed dramatically as the average occupancy rate has climbed to 93% in Orlando and 95% in South Florida. Concessions such as the first month’s free rent are disappearing as apartment owners enjoy renewed pricing power, exemplified by a higher level of asking rents (fig1.). Harbor Group’s experience has verified these trends at our Florida properties where average occupancy has reached over 95%. “A rising tide of better fundamentals has been the key to our decision to invest in Florida” says Harbor Group’s Samuel Reichmann.
In addition to the improving fundamentals in the Florida market, Harbor has also been able to identify value-add opportunities like Sun Lake Gardens, one of our more recent investments in the Orlando area. When Harbor initially contracted to purchase this property, a substantial construction project on the property kept occupancy at 50%. Finalizing the acquisition took much longer than expected however, during this time, the seller completed construction and increased occupancy to over 80%. This effectively executed on much of the value add strategy Harbor had outlined and simultaneously rents benefited from an improving regional market. Harbor has since continued to invest in the property through interior upgrades and common area amenity improvements such as expanded fitness facilities and business centers.
The Villages of Morgan Metro in Landover, MD was originally intended to house active duty military personnel and is currently undergoing a phased transformation to traditional civilian housing. A new staging program has generated positive feedback as model units look occupied and creatively decorated. The multi-use trails on the 180acre property meander through forests and open space and give the property a park-like feel. An adjacent metro station allows residents to access alternative transportation to job centers in Washington DC and the surrounding areas.
Who knew an oversized closet could be marketed as a study room(figure 2)? But seeing is believing and this type of out of the box thinking is best appreciated in person. With visits we can see things that don’t come across in phone conversations or in investor presentations. And so I am happy to be the weary traveler, hitting the road to see for myself how our partners are managing portfolio properties. I hope they will begin considering beach locations in the near future!
Figure 2: Oversized closet converted to study room
–Elias Bachmann, Portfolio Manager