Glen Ellen Apartments — Q3 2026
Dear Partners,
Glen Ellen had a steady third quarter. The property produced $55.7K of operating NOI, bringing year-to-date NOI through September to $172.1K — already about 1.7 times its full-year 2025 result — and the partnership paid a $15,000 distribution, its third this year, for $40,000 in 2026. Two items we flagged last quarter arrived on schedule: the building's electrical modernization is complete, funded with new partnership notes rather than operating cash, and the insurance reduction we anticipated has begun to show, with September's charge falling to $1,141 from $3,645 a month.
I want to be equally direct about what we are managing. July carried about $14K of one-time costs — landscaping, a lock replacement, fire-system service and annual permits — which is why the quarter trailed the strong pace of August and September. Two studios leased below their prior or underwritten rents this quarter, and we head into winter with four units vacant or on notice, which we are pricing to fill rather than carry. As planned under the loan terms, our senior-loan interest stepped up in September, from $12,500 to $15,625 a month; the lower insurance cost absorbs most of that increase. Finally, a housekeeping note: our Q2 report was built before June closed, and Q2 NOI finally closed at $64.0K rather than the $37.1K we reported — a correction in your favor.
The tabs above walk through each of these in detail — the quarter's leasing, the completed capital work, the operating numbers, the expense picture, and the Valuation & Equity view, updated for this quarter, which lets you see where your position stands and how it moves with the assumptions that matter.
From here, the work is simpler than it has been: lease up the winter vacancies, let the lower cost base flow through to NOI, and keep distributions steady as we position the asset for its refinance out of the bridge loan in 2027. Thank you, as always, for your partnership.
A Steady Quarter, a Third Distribution, and the Insurance Reset Arrives
Glen Ellen produced $55.7K of operating NOI in the third quarter on $136.3K of operating income, bringing year-to-date NOI through September to $172.1K — already 1.7× the property's full-year 2025 result. The partnership paid a $15,000 distribution for the quarter, its third this year, bringing 2026 distributions to $40,000. July was weighed down by about $14K of one-time items; August and September together ran at an NOI pace of roughly $280K a year.
Two developments matter most for the quarters ahead. First, the insurance reduction we flagged in Q2 has begun to show: the September insurance charge fell to $1,141 from $3,645 a month. Second, the building finished its electrical modernization in July — an $80.7K project funded with $90K of new partnership notes rather than from operating cash. Against those positives, we enter Q4 with more turnover than we would like: three units vacant or vacating and a fourth on notice.
What went right this quarter
Eight in-place residents renewed at an average +6.4%, adding about $770 a month of rent without turnover cost. Renovated one-beds re-leased at $1,745–$1,895. RUBS utility recovery reached 90% of gross utility cost — right on target. The electrical upgrade is complete, the insurance charge has dropped by roughly two-thirds, and the partnership paid its third distribution of the year.What we're managing
Not every lease went up: two studios leased below their prior or underwritten rent (Unit 108 at $1,150; Unit 207 at $1,345, down 8.8%). Physical occupancy ended the quarter at 90%, and four units — 101, 208, 309 and 302 — are vacant or on notice heading into the slower winter season. Senior-loan interest also stepped up in September, as scheduled under the loan terms (see Outlook).Renewals Carried the Rent Roll; a Few Turns Gave Ground
Average in-place rent per occupied unit reached $1,533 on October 1, up from $1,506 at the start of the second quarter and about 20% above the October 2024 low. Total in-place rent was $41,380 a month against $45,565 of asking rent across all 30 units; the gap is mostly vacancy and the legacy tenancies we hold for natural turnover. The quarter's gains came chiefly from renewals rather than new leases.
| Unit | Type | Event | Effective | Prior rent | New rent | Change |
|---|---|---|---|---|---|---|
| 209 | Studio | Renewal | Jul | $1,350 | $1,480 | +9.6% |
| 307 | 1BR | Renewal | Jul | $1,395 | $1,520 | +9.0% |
| 205 | 1BR | Renewal | Aug | $1,795 | $1,895 | +5.6% |
| 206 | 1BR | Renewal | Aug | $1,795 | $1,895 | +5.6% |
| 109 | Studio | Renewal | Sep | $1,395 | $1,495 | +7.2% |
| 303 | Studio | Renewal | Sep | $1,345 | $1,425 | +5.9% |
| 110 | 1BR | Renewal | Oct | $1,695 | $1,775 | +4.7% |
| 202 | Studio | Renewal | Oct | $1,395 | $1,450 | +3.9% |
| Renewals — 8 leases | $12,165 | $12,935 | +6.4% avg | |||
| 201 | 1BR | New lease | Sep 29 | $1,810 | $1,895 | +4.7% |
| 106 | 1BR | New lease | Oct 22 | $1,695 | $1,745 | +2.9% |
| 102 | Studio | New lease | Aug 21 | vacant | $1,395 | at asking |
| 207 | Studio | New lease | Oct 22 | $1,475 | $1,345 | −8.8% |
| 108 | Studio | New lease | Aug 1 | vacant | $1,150 | −17.6% vs UW |
The misses, beside the wins
Not every turn was up. The two studios at the bottom of the table were priced to fill: Unit 108, vacant since before Q2, leased after its asking rent was stepped down to $1,150, and Unit 207 re-let $130 below its departing resident. Both run to mid-2027 and will be repriced at renewal.The Electrical Rebuild Is Done — Funded Without Touching Operating Cash
In July the partnership completed the building's $80,710 electrical system upgrade, the last major item of the systems rebuild described in our Q2 update. It was funded with $90,000 of new partnership notes (two $45,000 notes) rather than from operating cash, which is why the quarter could still support a distribution. With the electrical, plumbing and boiler work complete, Glen Ellen now carries the profile of a modernized building — the basis for the insurance reduction now showing in the numbers.
| Item | Timing | Amount |
|---|---|---|
| Electrical system upgrade | Jul 2026 | $80,710 |
| Decks & walkways | Q2 2026 | $9,922 |
| Unit renovation | Jun 2026 | $4,733 |
| Intercom replacement | Sep 2026 | $2,475 |
| Total capital, YTD | $97,840 |
How it was funded
Two new $45,000 partnership notes covered the electrical project. Partnership notes now total about $140,000, carrying roughly $583 a month of interest — reflected in the Valuation tab as debt ahead of common equity.| Unit | Type | In-place rent | Most recent action |
|---|---|---|---|
| 310 | 1BR | $1,625 | Renewal +9.6% (May '26) |
| 307 | 1BR | $1,520 | Renewal +9.0% (Jul '26) |
| 304 | Studio | $1,525 | Renewal +9.3% (Jun '26) |
| 109 | Studio | $1,495 | Renewal +7.2% (Sep '26) |
| 105 | 1BR | $1,425 | Renewal +9.5% (May '26) |
| 204 | Studio | $1,315 | Renewal +9.6% (Mar '26) |
| 203 | Studio | $1,260 | Legacy tenancy, below market |
| 7 units · occupied | $10,165 | ~$1,452 average |
The capital-discipline case from Q2 still holds: a full interior renovation runs about $23,800 per unit against a realistic $100–200 a month of additional rent on these tenancies, so we renovate only when a unit turns naturally. Two of the seven (307 and 109) renewed again this quarter, keeping the group's average close to market without capital or vacancy.
Q3 2026 — $55.7K of NOI, With a Heavy July and a Strong Exit
Third-quarter operating NOI was $55,695 on $136,276 of operating income and $80,581 of operating expense. July was the soft month ($9.1K NOI). It absorbed a $5,835 landscaping project, a $5,162 lock and key replacement, $1,889 of fire-system service and about $1,079 of annual permits — roughly $14.0K in all — plus $5,492 of rent adjustments. Excluding those expense items, Q3 NOI would have been about $69.7K. August ($21.5K) and September ($25.1K, helped by a one-time $2,615 lease-break fee) show the building's earning power more clearly.
| Period | Operating income | Operating expense | NOI | Note |
|---|---|---|---|---|
| July 2026 | $42,579 | $33,496 | $9,083 | Landscaping, locks, permits |
| August 2026 | $43,717 | $22,204 | $21,513 | Clean month |
| September 2026 | $49,980 | $24,882 | $25,098 | Lower insurance; lease-break fee |
| Q3 2026 | $136,276 | $80,581 | $55,695 | ~$69.7K ex one-time items |
| Q2 2026 (final close) | $140,025 | $76,074 | $63,951 | $37,139 as first reported |
| Q1 2026 | $125,845 | $73,422 | $52,423 | |
| YTD through September | $402,146 | $230,077 | $172,069 | Per manager YTD statement |
Distributions and coverage
The partnership paid a $15,000 distribution for Q3, bringing 2026 distributions to $40,000. Q3 NOI covered senior-loan and note interest ($41,625) 1.34 times, leaving about $14.1K of cash flow before capital spending; the electrical project was funded separately through new notes. With the scheduled interest step-up in effect for a full quarter, the same NOI would cover interest about 1.15 times.A note on Q2
Our Q2 update reported Q2 NOI of $37,139, built from a June 27 export before June closed. Q2 finally closed at $63,951: about $19K of June rent was booked after the export, and ~$9.9K of deck and walkway work was reclassified from repairs to capital. We show the final figure so the quarters reconcile to the manager's year-to-date total.Insurance Turns the Corner; Opex Still Above Plan
Operating expense was $80.6K for the quarter, or $66.6K (about $266K a year) excluding July's one-time items — still well above the ~$160K underwriting, but moving the right way. The most important line moved in September: insurance fell from $3,645 to $1,141 a month. If that level holds, it removes about $30K a year of cost.
Insurance — the reset we anticipated
In Q2 we said much of Glen Ellen's premium reflected the building's old condition, and that we expected a substantial reduction once the systems upgrades were complete and coverage was re-marketed. September's $1,141 charge, against $3,645 in each prior month, is the first evidence. At that level, insurance runs about $13.7K a year — versus the ~$43.7K run-rate in our Q2 report and below the $15.0K underwrite. One month is not yet a trend; we will confirm the figure against the full policy term.| Category | Q3 2026 | Annualized | Comment |
|---|---|---|---|
| Repairs, maintenance & turnover | $26,454 | $105.8K | Includes $5.8K landscaping, $5.2K locks, $1.9K fire-system service |
| Property tax | $13,893 | $55.6K | Flat at $4,631/mo; appeal remains an option |
| Administrative | $12,044 | $48.2K | Includes ~$1.1K annual permits (July) |
| Utilities (gross) | $10,648 | $42.6K | 90% recovered via RUBS ($9,617) |
| Professional & management fees | $9,112 | $36.4K | Management fee 5.0% of income |
| Insurance | $8,431 | $33.7K | Run-rate now ~$13.7K at September's level |
| Total operating expense | $80,581 | $322.3K | ~$266K ex one-time items |
Your Position — A Moment-in-Time Mark
This view flows a building valuation down the capital stack to show what the equity is worth today. Glen Ellen is still on its bridge loan, so the mark is highly sensitive to the NOI you value on and the cap rate you choose. At the trailing run-rate the value roughly covers the debt; at the near-term stabilizing NOI it produces meaningful equity; at the underwritten plan it clears invested capital. This quarter the debt deducted includes the new partnership notes. Set the assumptions below to see your stake.
| Source | Amount | Note |
|---|---|---|
| Senior bridge loan (75% LTC · SOFR+375 / 4.00% floor at close) | $3,750,000 | Interest-only; scheduled step-up Sep 2026; matures ~Aug 2027 |
| Partnership notes | ~$140,000 | Includes $90K funding the 2026 electrical upgrade |
| Common equity invested | $2,183,174 | No preferred equity |
| Total capitalization | ~$6.07M |
| NOI basis | 5.75% cap | 6.25% cap | 6.75% cap |
|---|---|---|---|
| $230K — trailing run-rate | $0.11M | ≈ $0 | ≈ $0 |
| $300K — near-term stabilizing | $1.33M | $0.91M | $0.55M |
| $410K — plan stabilized | $3.24M | $2.67M | $2.18M |
How the split works
Above a return of invested capital, the gain is shared through the partnership waterfall — 10/90 up to a 5% LP IRR, 20/80 between 5% and 15%, and 30/70 above 15% LP IRR. At today's mark the value is below invested basis, so no promote applies and the mark simply reflects your capital position. This calculator is a static, sale-today approximation for a directional "what's my stake worth" read; the binding split depends on the realized IRR at exit or refinance.Q4 Priorities — Fill the Winter Vacancies, Bank the Cost Savings
With the systems rebuild finished and insurance coming down, the work from here is simpler: keep the building leased through the slower winter season, let the lower cost base flow through to NOI, and keep distributions steady. Below are the forward priorities and the items we are watching, surfaced proactively per the partnership's standard.
Electrical modernization finished
The $80.7K electrical upgrade closed out in July, funded by partnership notes. The rebuild-phase systems work — electrical, plumbing and boiler — is now behind us.
Insurance reduction flowing through
September's insurance charge fell to $1,141 from $3,645. If it holds, this adds roughly $30K a year to NOI. We will confirm the annual premium against the policy and show the full-quarter effect in Q4.
Lease up four winter vacancies
Unit 208 has been vacant since September 30; Units 101 and 309 vacated October 31; Unit 302 is on notice for November 30. Asking rents are $1,395 for the studios and $1,795 for 101. We are pricing to fill quickly rather than carry vacancy through the holidays. Unit 305 renewed November 1 at +8.7%.
Bridge maturity & refinance (~Aug 2027)
The senior loan matures roughly three years from the August 2024 close. A refinance into permanent debt remains the base plan, sized on the stabilized NOI that the lower insurance cost and full occupancy support.
Watch List
Scheduled interest step-up now in effect
As planned under the senior loan's terms, interest stepped up in September to $15,625 a month from $12,500 — equivalent to 5.00% on the $3.75M balance, from 4.00%. This was built into our plan for this stage of the deal and adds about $37.5K a year of debt service, most of which the lower insurance cost (~$30K a year) offsets.
Studio pricing pressure
Two studios leased below prior or underwritten rent this quarter ($1,150 and $1,345), and asking rents were trimmed on several winter vacancies. We will watch whether this is seasonal or a softer Capitol Hill studio market, and reprice at renewal.
Operating cost still above plan
Even excluding one-time items, opex is running near $266K a year against the ~$160K underwrite. Insurance is the largest fix and is now arriving; repairs and turnover should ease as vacancies fill. A property tax appeal remains an option.
Exit-cap & stabilization sensitivity
The underwriting carries a 5.75% exit cap; a normalized 6.25–6.75% would compress the reversion. The value case rests on carrying the August–September earning power and the lower insurance cost into a full year of stabilized NOI.