Scope of Work: As we mentioned in the previous update, we started retrofitting the fire communications throughout the building. All of these life safety measures (including fire alarms and strobes) have been installed. The lender performed a property inspection and appraisal, which came in higher than our predicted value.

All residents are using the new, in-unit, and resident-controlled-electric heat, after we successfully decommissioned the boiler at the end of November. Residents are now able to better control the temperature in their own apartments. For example, when running off the natural gas boiler system, some of the ground-level units would experience cooler temperatures than the units located on higher floors. The electric panels reduce this effect and make it a comfortable living space for all residents.

Net Operating Income for the building was also impacted in a positive way. The residents were not paying for the use of natural gas, so the elimination of the boiler has lowered our operating expenses around $5,000 annually.

Commercial Space – Permit Update: Our drywall installers have completed the hanging of the Sheetrock, and they are currently in the mud/tape phase. The unit is on pace to be completed by late December. We have started marketing the unit to accept lease offers for this office space.

Financing: Since we received a positive report from the lender, we were able to start the application for our loan approval. We are targeting late December for the funding date. Proceeds will be used to payoff investor notes of $380,000 and short term payables of $355k+. Those proceeds will be used to pay the Preferred Returns for each investor to date.Before we started rehabilitation to Bugge Apartments, we were anticipating the Expected Value upon completion to be $4.8M. The appraisal came back with an Appraised Value of $5.7M. The higher value is fantastic, but it doesn’t have an impact on the amount we are able to borrow from the bank. That amount is still constrained by the Debt Service Coverage Ratio*.

Occupancy: We are still at 100% occupancy for the residential units at Bugge.

Upcoming Projects: We will continue to work on the common area throughout the building; patching, painting, and carpet. The Seattle Fire Department will have final inspections of the completed retrofit.

*Debt Service Coverage Ratio – compares a business’s level of cash flow to its debt obligations. Calculated by dividing the business’s annual net operating income by the annual debt payments. In the case of Bugge Apartments, we are capped at a 1.2% DSCR.