Dear Partners,
Grandview earned $70,638 of net operating income in the third quarter on $163,828 of income, against a budget of $104,342. That is down from $96,862 in Q2, but June carried roughly $17,000 of one-time catch-up utility billbacks, and rent income itself was flat quarter to quarter at about $143,000. Year to date, NOI is $258,446 against a $309,329 budget, 16% behind.
The building did not generate distributable cash this quarter. After interest at the contractual $15,414 a month, the asset-management fee and $10,524 of capital repairs, Q3 earned roughly $10,000 — and receivables grew by $15,704 over the same three months. At September 30 the property held $19,643 of unrestricted cash against $50,060 of payables, $34,083 of which were more than 90 days old, with a property-tax installment of about $22,000 due in November. On paper the building covers its interest about 1.9 times on the year-to-date run-rate; the cash problem is collections and the payables it has built up.
A $2,650 distribution was paid on August 17 and recorded by the manager as the Q3 2026 distribution. No further distribution will be made for Q3, and distributions will resume once the aged payables are cleared, the November tax installment is funded and occupancy recovers. Grandview has returned $226,650 to investors since acquisition, about 11.9% of invested equity.
Three things drive the gap to plan. Occupancy ended the quarter at 87% (40 of 46, 41 leased) against a 93.5% budget; the leasing team signed six move-ins in the quarter, but six residents also moved out, so the building stood still. Gross potential rent averages $1,165 a unit against $1,347 budgeted, and new leases signed at $999–$1,250. And expenses ran 11.6% over budget for the quarter — property operating costs, including turnover, were on budget; the overage is office expense — in-house maintenance labor, eviction legal and leasing fees.
There are early signs of progress. Unit 406 — where the eviction was completed in August — re-leased for an October 8 move-in. On October 13 the manager reported occupancy of 91.3%, with two more applications pending. The three-bedroom has been repriced to $1,595 to move it. The two residents with the largest balances have left: unit 305 vacated October 1, and unit 210 was removed by sheriff lockout on October 13. That costs occupancy in the short run but stops the balances growing.
Our priorities for Q4 are concrete: lease the vacant units, collect or reserve the aged receivables, catch up the vendors, set aside cash for taxes and insurance, and finish the utility-billing clean-up. Portland's new-supply pipeline remains the thinnest in over a decade, and the fixed-rate, interest-only loan runs to 2029, so the long-term thesis is intact — but the near term is about operations and cash. Thank you for your continued partnership; please reach out anytime.
Arie van Gemeren, CFA
Founder & Managing Member · Lombard Equities Group
Net rent income held at $143,639 for the quarter, roughly flat on Q2, but NOI of $70,638 landed 32% under the $104,342 budget: rents and occupancy remain below plan, and in-house maintenance labor, eviction legal and leasing fees pushed expenses 11.6% over. With receivables up to $65,395 and payables at $50,060, the building is short of operating cash, and distributions are paused.
What is working
Rent income has held at about $143,000 a quarter for two quarters. Property operating costs — utilities, repairs, turnover, taxes, insurance — ran $70,713 for the quarter, essentially on its $70,657 budget, and repairs, utilities, management fees and marketing are all under budget year to date. Leasing improved in September after a weak August, with two more applications pending at October 13. The unit 406 eviction is complete and the unit is re-leased.What we are managing
Gross potential rent is $53,630 a month against $62,000 budgeted, and vacancy loss ran 12.5% in September against 6.5%. Office expense — in-house maintenance labor, eviction legal and leasing fees — ran $9,657 over budget in Q3. Receivables are $65,395, most of it owed by former residents, and no bad debt has been written off this year. Payables over 90 days rose to $34,083 from $22,227 in June, and the operating cash account carried a negative $7,058 book balance at quarter end.Subsequent events (through October 13, 2026)
Unit 406 moved in October 8 at $1,225. The manager's October 13 update reported 91.3% occupancy, with two more applications pending, and improved collections. Units 210 and 305, which together owed $12,994 at September 30, have left: 305 vacated October 1 and 210 was removed by sheriff lockout October 13. Utility billing has been corrected for renewals and new move-ins.Total income was $163,828 against $93,189 of operating expenses. Rent income was steady at roughly $48,000 a month; the swing versus Q2 is in other income, where June booked $24,647 of billbacks and fees against $6,000–7,000 in a normal month. Expenses ran $4,351 higher than Q2, almost entirely August's $12,564 of office expense. August was the weak month — $15,746 of NOI — on $9,587 of in-house maintenance labor (current and prior periods), eviction filings and a leasing-fee charge.
| Line | Q3 actual | Q3 budget | Variance | YTD actual | YTD budget |
|---|---|---|---|---|---|
| Net rent income | $143,639 | $169,121 | −$25,482 | $442,041 | $502,138 |
| Other income (billbacks, fees) | $20,188 | $18,698 | +$1,490 | $76,477 | $52,884 |
| Total income | $163,828 | $187,819 | −$23,991 | $517,988 | $555,022 |
| Property operating expenses | $70,713 | $70,657 | −$56 | — | |
| Office expense (in-house labor, legal, leasing fees) | $22,477 | $12,820 | −$9,657 | — | |
| Total operating expenses | $93,189 | $83,477 | −$9,712 | $259,542 | $245,693 |
| Net operating income | $70,638 | $104,342 | −$33,704 | $258,446 | $309,329 |
| Capital repairs (water heaters, plumbing, flooring) | $10,524 | $3,500 | −$7,024 | $18,636 | $9,000 |
| Loan interest ($15,414 a month) | $46,241 | $46,242 | — | $138,724 | $138,726 |
| Asset-management fee & other | $3,622 | $3,378 | −$244 | $10,256 | $10,134 |
| Earnings after debt service & capital | $10,252 | $51,222 | −$40,970 | $90,830 | $151,469 |
Year to date, NOI is $50,883 behind budget. Rent is the largest piece — $60,100 short on lower gross potential rent, 12–17% monthly vacancy and new-lease concessions — partly offset by $23,600 of extra utility billbacks, most of it June's catch-up. On the expense side, turnover, in-house maintenance labor and administrative costs (eviction filings and utility-billing fees) are $35,600 over budget combined, while utilities, repairs, management fees and marketing are $31,000 under.
Revenue against plan
September gross potential rent was $53,630 against $62,000 budgeted — an average gross potential rent of $1,165 per unit versus $1,347. New leases signed at $999–$1,250. Vacancy loss was 12.5% versus 6.5% budgeted. New leases still need concessions: $2,349 of concessions were booked in Q3 (units 102 and 401). Other income is $76,477 year to date, 44.6% over budget, but $24,000 of that is unbudgeted water billback, most of it June's catch-up — September's water billback was zero while resident utility addenda are brought current.Expenses against plan
Year-to-date expenses are $259,542 against $245,693 budgeted, 5.6% over — and 11.6% over in Q3. The overages are turnover ($22,140 vs $4,332), in-house maintenance labor ($35,687 vs $27,000, partly offset by repairs $9,859 under budget), administrative ($9,601 vs $540) and insurance ($36,867 vs $33,030). Capital repairs — mostly water-heater failures and water intrusion — are $18,636 against $9,000. Under budget: utilities ($49,157 vs $57,942), repairs ($14,091 vs $23,950), management fees ($26,184 vs $36,077) and marketing ($5,381 vs $7,808).Occupancy ended September at 87% — 40 of 46 units — where it started the quarter. The team signed six move-ins (units 102, 103, 401, 308, 204 and 310), but six residents moved out or were evicted. Six units were vacant at September 30 (101, 406, 407, 503, 510, 512), one of them pre-leased: 406 moved in October 8 at $1,225. Conversion was weak in August — eight tours produced one lease — and improved in September; the October 13 update reported 91.3%, with two more applications pending.
| Unit | Type | Asking | Status |
|---|---|---|---|
| 101 | 3 bed | $1,595 | Repriced from $1,695 |
| 406 | 1 bed | $1,225 | Moved in Oct 8 |
| 407 | Studio | $950 | Vacant |
| 503 | 1 bed | $995 | Vacant |
| 510 | 1 bed | $995 | Vacant |
| 512 | 1 bed | $1,025 | Vacant |
Pricing, concessions and renewals
New leases in Q3 signed between $999 and $1,250. The offer ran at four weeks free through most of the quarter and was raised in late September to six weeks free plus two bonus weeks, and the three-bedroom was repriced to $1,595. Renewals are being offered at 3–5% with incentives. Nineteen legacy leases are now month-to-month; that is both renewal risk and an opportunity to bring in-place rents and utility addenda up to date as each renews.Collections — the balance sheet overstates what will be collected
Receivables were $65,395 at September 30, up $15,704 since June. $16,384 of that was owed by residents in place, $12,994 of it by units 210 and 305, which have since left (305 vacated October 1; 210 was removed by sheriff lockout October 13). The remaining ~$49,000 is owed by former residents and is likely bad debt; the manager engaged a new collections firm this quarter to pursue it. No bad debt has been written off in 2026 against $11,056 budgeted; we expect a meaningful year-end write-off and are reconciling the aging to size it. Collections from current residents improved after the unit 406 eviction in August.At September 30 the property held $37,919 of cash, but $18,276 of it is resident security deposits. Unrestricted cash was $19,643 — after a negative $7,058 book balance in the operating cash account, carried since August. Against that sit $50,060 of payables (up from $40,110 in June), $34,083 of it more than 90 days past due, and a November property-tax installment of about $22,000.
| Account | Balance |
|---|---|
| Chase operating trust account | $25,546 |
| Operating cash account (book balance) | −$7,058 |
| Ownership account | $1,155 |
| Unrestricted cash | $19,643 |
| Security deposits (held for residents) | $18,276 |
| Total cash | $37,919 |
Payables and the plan to clear them
The oldest payables are utilities (PGE, including past-due notices), plumbing and water-heater contractors, the elevator service contract and turnover vendors. The manager is paying priority vendors first — utilities, plumbing (where a lien is possible) and the elevator. We have asked for a dedicated tax-and-insurance reserve so that the November tax installment and insurance premiums are not funded from vendor payments, and for a 13-week cash forecast with each monthly report.The Q4 list is short and operational. Our working view is that the building needs occupancy in the low 90s, at today's rents, before it produces cash after interest, capital repairs and the payables it has built up. Distributions will resume once aged payables are cleared, the November tax installment is funded and occupancy recovers.
Lease the six vacant units and renew the month-to-month leases
Six units were vacant at quarter end, one of them pre-leased (406), and units 305 and 210 turned in October. The offer has been strengthened, the three-bedroom repriced to $1,595, and open houses and an AI leasing assistant added to speed follow-up. We will report leased occupancy, tours-to-application conversion and days vacant each month.
Collections and a realistic receivable
Former-resident balances (~$49,000, plus units 210 and 305 now that they have left) are likely bad debt and are with the new collections firm. No bad debt has been written off in 2026 against $11,056 budgeted; we are reconciling the aging and expect a meaningful year-end write-off. From Q4 we will also report economic occupancy — rent actually collected against potential rent — alongside physical occupancy.
Payables, the November tax installment and a reserve
Clear the $34,083 of payables over 90 days, fund the ~$22,000 November tax installment, and set up a dedicated tax-and-insurance reserve. The negative operating-account balance must be cleared. Beyond the $2,650 paid in August, distributions are on hold until this is done.
Utility billing (RUBS)
June's catch-up billing recovered back water and trash charges, but a lease-file review found residents without current utility addenda, and billing for those residents is paused until addenda are signed. September water billback was $0, and sewer billback is $20,747 year to date against $27,801 budgeted. Billing has been corrected for renewals and new move-ins; the remaining files are being brought current at renewal. We will report the monthly recovery rate until this is complete.