Courtesy / Ned Payne
The multi-family building at 363 Cumberland Ave. in Portland was one of a package acquired in Portland’s Bayside neighborhood.
December 27, 2020
Multifamily buyer invests in Portland ‘one coat of paint at a time’
Courtesy / Ned Payne
Real estate investor Ned Payne sees long-term value in Portland multifamilies.
The buyer of five multifamily buildings in Portland’s Bayside neighborhood aims to improve housing stock without displacing existing tenants.
Ned Payne bought 361-367 Cumberland Ave. and 8-10 Alder St. from Ahab Investments LLC for $3.55 million.
Chris Sullivan of Vitalius Real Estate Group and Vince Ciampi of Porta & Co. brokered the deal, which closed earlier this fall.
The five adjacent buildings occupy the corner of Cumberland and Alder and comprise 28 residential units.
Sullivan has worked with Payne on other multi-family transactions over the past five or six years. The price per unit, $126,785, was on average for the market in Bayside, he noted.
“It made a lot of sense from all the economic metrics,” Sullivan added.
Passion for improvement
“I am investing in Portland for the long haul,” said Payne. “One coat of paint at a time. One landscaping project at a time.”
He credited Sullivan for his help to fulfill that vision.
“He has helped me to identify a number of opportunities in Portland that have worked out well,” Payne said.
Payne was born and raised in Bangor. Prior to focusing on real estate full time, he was a financial advisor at Morgan Stanley Wealth Management.
He turned to real estate in 2012, when he bought his first building, a four-unit on Portland’s East End.
“With real estate, my interest became a passion when I experienced how rewarding it was to witness the improvements you could make each day after rehabbing a unit,” he said.
Rehab approach
The condition of that first building was mediocre.
“Like a lot of houses in Portland, it had charm as it was built in 1894, but the units were tired and the common areas were dark,” he described. “It was not very welcoming.”
Payne used a U.S. Federal Housing Administration 203(k) loan to buy the building. The loan program allowed him to make a low down payment of 3.5% and to finance the needed rehabilitation.
“I didn't have a large budget or any experience and I didn't feel comfortable asking any of the tenants to leave, so I went after the common areas first,” he explained.
Along with new flooring throughout the entry and hallways, he replaced the light fixtures and repainted to brighten the space.
“Because they were my first shot at things, the rehabs took twice as long as they should have and weren't the best, but even with minimal skill, it's amazing how much new paint, lighting and flooring can change a place,” he said. “When the first tenant moved out, I repeated the process I had done on the common areas, while also replacing the appliances. Over the first couple years, as tenants moved on, I turned over the units one at a time.”
Make-or-break tenants
With the latest Bayside investment, he now own 65 units in Portland and has another 29 units under contract that he hopes to close early 2021.
The five buildings were fully occupied as of the purchase date. All but two of the 28 units had already been completely renovated over the past year, with new vinyl plank flooring, fresh drywall, new bathroom, vanities and showers, upgraded kitchen countertops, new stainless steel ovens, hoods and refrigerators and individual heat pumps installed in most of the units.
Courtesy / Ned Payne
All but two of 28 units across five buildings were renovated over the past year. Features include new vinyl plank flooring, fresh drywall, new vanities and showers upgraded kitchens.
“The rehab was done tastefully,” he noted.
Payne plans to complete renovations of the remaining two units, but will wait until the existing tenants choose to leave.
“While I look to improve a building after closing, I prefer to do it one unit at a time as tenants move out on their own schedule,” he explained. “I don't want to rehab an empty building and I don't want to displace people from their home.”
Renovations of the two units will consist of new flooring, fresh paint and overhauling the kitchens and bathrooms with mid-level finishes. The improvements are expected to run about $25,000.
“When I complete a full rehab, I wouldn't really say I even charge a significantly higher rent,” he continued. “It's probably 5 to 10% higher, max, but the unit looks and feels new. It may not make sense, but a higher rent is not really the goal. The goal is to get a better quality of tenant. Having good tenants will make or break you. It's a two-way street. To grow, landlords need good tenants and tenants deserve good landlords.”
The acquisition and renovations were financed by Katahdin Trust Co.
“I reached out to Vicki Bessett at Katahdin Trust to discuss the financing, as we have worked well together in the past,” he said. “They offered competitive terms and already understand my financial picture, so it was an easy decision. Katahdin Trust has been great to work with.”
Value potential
Overall, he said, his investment philosophy centers on value, or the potential for value, in the multi-family segment in Portland, and ideally on the peninsula, as attractive long-term holds.
“I'm location-driven more than anything,” he said. “I'm from Bangor and, while I love all of Maine, the breadth of job and lifestyle opportunities Portland offers is unmatched in the state. The attraction to Portland is strong and only growing.
“Because of Portland's geography and peninsula attribute, there is minimal opportunity for urban sprawl – making it an area that, when thriving, leads to continuously growing demand over a fixed mass of land.”
However, he said, he’s concerned about potential impacts from “Green New Deal” real estate referenda approved by voters in November. That includes an increase in affordable housing allotments in multi-family buildings, which some developers have said could result in conversions of apartment buildings to condos.
“The ‘Green New Deal’ will undoubtedly slow or halt the level of new housing developed,” he said. “Demand will continue to rise and supply will be fixed or reduced as a result of condo conversions and rent will increase. Prices will rise.”
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