Location
EXECUTIVE SUMMARY:
Cornerstone and its 473 units are situated along West Chicago Road, just west of the Southfield Freeway in Detroit. This garden and townhome-style community was built in 1956 and has received numerous updates in recent years including the complete rehabilitation of numerous units, new roofs, water heaters and parking lots. Ownership currently maintains a unit enhancement program; whereby they are upgrading units over time out of the properties existing cash-flow. To date they have upgraded 116 units and this program has proven to be incredibly successful as they’re able to command a considerably higher rent on these upgraded units.
The property boasts an incredibly competitive unit mix comprised of 232 one-bedroom apartments ranging from 585 to 594 ft.2, 170 two-bedroom units between 650 and 685 ft.2, and 71 two-bedroom townhome-style units that are 785 ft.2. The unit’s themselves are in excellent condition with many of the units upgraded through the aforementioned unit-upgrade program. To date ownership has upgraded a total of 67 one bedroom units and 49 two bedroom units. The utility structure at Cornerstone includes tenant-paid, forced-air heating systems, landlord-paid common area lighting & water, and tenant-paid in-unit electric. This utility structure is incredibly advantageous for ownership with the lion’s share of the utility expense being paid by the tenants.
Cornerstone is currently stabilized at 85% occupancy; however, this figure is on the rise. For many years this property was extremely mismanaged and fell into disrepair on both physical and economic fronts. Under current ownership Cornerstone has seen an incredible turnaround yet upside still exists for a new owner. After a detailed study of the surrounding rental market it has come to our attention that the average rents at Cornerstone are between $50-$100 below market. Such a delta between the market and in-place rents provides new ownership with an opportunity to greatly improve this assets cash-flow position through a rental rate increase. We believe an increase of a mere $25 per unit could easily be implemented immediately without causing any adverse effect on occupancy. To put it into perspective, this meager increase would result in nearly $500K in value creation without any financial investment.
