🔒Improvements start on 140-unit Munjoy South affordable apartment complex

The buyers of Munjoy South Apartments in Portland — 140 units spread across 29 townhomes on nearly nine acres at the base of Munjoy Hill  — have a plan underway to address significant long-term capital needs across the portfolio.

“Our goal is not simply to make cosmetic improvements, but to address the underlying building systems so the property can operate more efficiently and reliably over the long term,” said Collin van der Veen.

Van der Veen and Rylee Knox are the principals of Gurnet Real Estate Group, a Boston and Portland real estate investment and management company whose mission is to deploy capital into multifamily investments by creating high-quality, attainable living spaces, while generating risk-adjusted returns for investors.

The $18.75 million deal was the largest multifamily sale so far this year, brokered by Joseph Porta, Vince Ciampi and Timothy Millett of Porta & Co.

“Tim Millett, Joe Porta and Vince Ciampi all contributed to a very smooth closing process, and we greatly appreciate their hard work throughout the transaction,” said van der Veen.

Built in 1967 as an affordable housing project, it was at the time Maine’s largest housing project funded by U.S. Housing and Urban Development’s low-income housing tax credit program.

Major improvements

Today, the assets are in need of major capital improvement.

Enter Gurnet, which has other multi-family projects in Portland, Lewiston and Bucksport.

“Munjoy South is a unique property because of its scale, its location and its importance as a source of affordable housing in Portland,” said van der Veen.

With 140 townhome-style apartments on nearly nine acres, the portfolio is difficult to replicate in a market like Portland.

“We were attracted to the opportunity to acquire a well-located community that we could improve while preserving its long-term affordability,”  continued van der Veen. “The property has been an important source of housing for Portland families for decades, and we believe there is an opportunity to make meaningful investments that will improve the resident experience and reduce the property’s long-term operating costs.”

Many of the buildings have significant long-term capital needs. The improvement plan includes replacing a portion of the roofs, making exterior and building-envelope repairs to improve heat retention and upgrading the property’s HVAC infrastructure.

“One of the most significant projects involves bringing new natural-gas service to a number of the buildings and transitioning away from portions of the property’s older centralized HVAC infrastructure,” said van der Veen. “We are also replacing water fixtures, which will significantly reduce water usage, improving exterior lighting, completing pest-exclusion work and addressing other deferred maintenance throughout the community.”

Projects are underway

Some of the projects are underway.

“We are fortunate to have Rylee Knox on our team, who is among the best in the business at managing complex rehabilitation projects like this one and is playing a central role in overseeing the work,” van der Veen added.

The partners expect to invest over $2 million  into the property over the first several years of ownership.

“We are continuing to refine that number as the major projects are designed and bid, but the mechanical, roofing and exterior work will represent the largest components of the investment,” he said.

Financing for the acquisition and improvements include a combination of debt and equity. Maine Community Bank originated the senior loan.

“MCB, and Justin Laverriere specifically, was excellent to work with throughout the origination and closing process,” van der Veen said. “We are also grateful for the support of our equity investor partners, many of whom are repeat partners of ours. In particular, we are grateful to be partnering with Pete Whitehead again on this acquisition. Pete is a long-time partner of ours and a highly experienced real estate operator himself.”

Work began shortly after the transaction closed. Initial projects included replacing all water fixtures, improving exterior lighting, beginning natural-gas utility work and addressing immediate roof, pest-control and building-maintenance needs.

“We expect the most significant improvements to occur over the next 18 to 24 months,” he said. “Certain projects, particularly the mechanical-system upgrades, require extensive planning and coordination and will be completed in phases to minimize disruption to residents.”

Strong demand

The property is 96% occupied and there is a long wait list of prospective tenants.

“Demand for affordable housing in Portland remains extremely strong, and we expect the community to continue operating at or near full occupancy,” he said.

Munjoy South will remain affordable housing and the existing MaineHousing affordability restrictions remain in place.

Of the property’s 140 apartments, 28 are restricted to households earning no more than 50% of area median income, 78 are restricted at 60% of area median income and 34 are restricted at 80% of area median income. The limits are adjusted based on household size and are published annually.

“The MaineHousing occupancy restrictions extend through 2042,” said van der Veen. “We view the property as an important piece of Portland’s affordable-housing inventory, and our intention is to invest in it responsibly so it can continue serving residents for many years.”