A strong month across the board. Hermiston 17 hit 100% occupancy, Pasadena 172 is deep into its physical and resident centric transformation, and we submitted an LOI on a new Houston deal. Here is the full update.
The biggest story in this month's economy: the FOMC voted 12-0 on September 16 to raise the federal funds rate by 25 basis points to 3.75%-4.00%, its first hike since July 2023 and signals of at least one more hike before year-end. The Fed cited persistent inflation, projecting 2026 PCE at 3.7%, well above its 2% target. Simultaneously, the 10-year Treasury briefly touched 5.04%, its highest level since 2007, before retreating to roughly 4.97%. For real estate borrowers, the message is unchanged: NOI growth is the primary lever. Floating-rate debt is more expensive. Higher rates can be advantageous for well positioned buyers like Eaglecap when current owners low-rate debt comes due and they cannot afford to refinance at the higher rates and must sell quickly at a discount.
On the supply side, the structural picture continues to improve for existing owners. Census Bureau data shows multifamily starts for buildings with five or more units fell 22.5% from July and 15.5% year-over-year, with Nov 2026, and 2027 expected to decline further. The national construction pipeline has contracted more than 50% from its Q1 2023 peak, per MMG Real Estate Advisors. Fewer starts today is good for us, because it means less competitive supply 18-30 months from now, which leads to higher rents that support our business plans.
Nationally, the median rent ticked down slightly to $1,394 in September per Apartment List, still soft on a year-over-year basis as the market continues absorbing the 2023-2025 delivery wave. That softness is concentrated in oversupplied Sun Belt Class A product. Class B and C workforce housing in supply-constrained markets, which describes the majority of our portfolio, continues to outperform. The gap between new-lease asking rents and renewal rents remains wide, meaning blended rent growth at the asset level is holding up better than national headlines suggest.
EagleCap has submitted a Letter of Intent on a Houston, TX acquisition and has additional deals on its active radar. Our target is to bring the next offering to investors around the end of 2026 or early 2027, consistent with the cadence we signaled last month.
We continue sourcing 1980-2005 vintage, Class B and C workforce housing in Texas markets, where the supply correction is most pronounced and the value-add thesis is sharpest. If you have interest in being considered for the next opportunity, reach out directly.
One of the most important concepts in multifamily investing is that property value is driven by Net Operating Income (NOI), not simply by how much rent a property collects. NOI is the income a property produces after normal operating expenses, but before mortgage payments, depreciation, and income taxes. That means an owner can create value in two ways: increase revenue or reduce operating expenses. A $50,000 improvement in annual NOI can be surprisingly powerful. At a 6% capitalization rate, that additional NOI represents roughly $833,000 of increased property value ($50,000 ÷ 6%).
This is one reason multifamily investing can be so different from owning a single-family rental. With an apartment community, seemingly small operational improvements (reducing vacancy, improving collections, controlling utilities, renegotiating insurance, or generating additional resident income) can compound across dozens or hundreds of units. The goal isn’t simply to “raise rents.” Strong asset management is about improving the entire operating business behind the real estate, because every sustainable dollar added to NOI can potentially create many dollars of long-term property value.
Hermiston 17 (The Avenues) is fully occupied and performing above expectations. The 10% Oregon maximum rent increase applies to multiple units starting October 1, which will drive a direct, measurable lift to NOI heading into any year-end refinance or sale evaluation.
Pasadena 172 (La Serena) is in the thick of its physical transformation. Interior unit renovations are underway on 21 units simultaneously, with several already pre-leased ahead of completion. The expectation is to have the current batch finished and the next 10 units started before the end of September. On the exterior, all siding, trim, brick repairs, wood rot remediation, stairs, railings, welding, critical roof repairs, and painting are complete. A complete renovation of the laundry facility is underway. The property's appearance and resident satisfaction have changed dramatically since acquisition. New and current residents are clamoring for the upgraded units; we are receiving a lot of positive feedback as well for addressing deferred maintenance in their units, for the attitude and responsiveness of the new management team, and in regard to the periodic community wide events.
Capital improvement projects already completed at Pasadena 172 include: new entry and exit gates with modern sliding tracks, motors, and a UniFi entry access system with license plate reader; full property-wide LED exterior lighting; complete landscaping refresh; water conservation retrofit (all toilets, showerheads, and faucet aerators replaced); property-wide WiFi; Vivint security and camera systems; new Xfinity bulk internet with new lines and modems; pool cleaning, chemical balance, new pump, and pool plumbing and electrical work with the pool now reopened; amazon lockers onsite; vending machine upgrades; new signage; and new modern door number plaques. Non-paying residents are being addressed through eviction proceedings, and the team is preparing for a targeted marketing push to lease newly renovated units and attract a stronger tenant base come October.
October brings Hermiston 17's rent increases, continued lease-up of renovated units at Pasadena 172, and active deal pursuit in Texas as we work toward our next offering. The macro environment is tighter, but our operating strategy, buying existing assets and forcing value through execution, is exactly built for it. If you have questions about portfolio progress or want to be on the early list for the next opportunity, reply to this email or reach out directly.
Questions or want early access to the next deal? Reach out directly.
