The Core Apartments

http://thecoreapts.com/  The Core Apartments developed by the Morgan Group is located in the vibrant "New Heights" which is experiencing tremendous re-development in residential and retail along Washington ave.  Washington Ave is a short, straight drive into downtown from the West.  Michael Morgan met us at the property for a sit down discussion about himself, his company and The Core.   Michael is in his 50's with a strong work ethic that started when he worked with his father taking care of their apartments.  He did everything including sweeping floors and cleaning toilets.  He has a construction background and therefore pays particular attention to the construction and more specifically the budget.  Speaking of budgets, Micheal was one of the only a few who actually provided detailed numbers on his development.  He also shared the structure of how it was financed and who his partners are.  To give you some of the highlights, The Core had a budget of $45 million and was completed for $42.9 million at a cost of $131,613 per unit for a savings of 5.42% of budget. His proforma gross rents were $1.52 but currently the gross market rents are at $1.62 and are 98.8% leased.  His equity partner is Archstone who put in $10.2 million to his $170,000 and has a 50/50 partnership with them.  The equity partners get an 8% return and the anticipated accumulated preferred returns are $2.6 million.  Other than the 50% ownership, Morgan received a 3% developer fee, a 6% general contractor fee and they are the on-site management company.  The debt was provided by JP Morgan Chase for $32.5 million.  What was particularly interesting to me is Michael keeps a close eye on his debt information and has a category titled "maximum recourse" which as of this date was $1.8 million.  Basically this is a category that tells him that if the project failed at anytime, this is what he has personally to lose at any given point in time. Also, from an operations perspective, Michael tracks his NOI with particular attention to trailing debt service and cash flow to monitor his cash on cash yield which is 18.43%.  Finally, he tracks the valuation of the property with trailing 3 months and cap rates at 5.5%, 6%, and 6.5%.  Michael's attention to detail from the construction, operations and financial perspectives have served him well as evidenced by his success.  He is also very transparent in his reporting of the details and this is good to see.  

From a real world perspective, I would rate this visit the best.  Thank you Michael and continued success in all your ventures.

J2M