Happy New Year!

We are sharing a quick bonus update with something we think is pretty cool that is happening at the property.

Below is a short video from one of the units where we are adding washer/dryer hookups. On the surface, this may look like a small improvement. From an ownership and underwriting perspective, it’s actually a great example of how thoughtful, high-quality value-add work can meaningfully increase the value of a commercial multifamily property.

We also want to use this as a chance to briefly explain how multifamily properties are valued, since this is where the impact really shows up.

How multifamily properties are valued

Unlike single-family homes, commercial multifamily properties are not valued based on comparable sales. They are valued primarily on the income they produce.

At a high level, the formula looks like this:

• NOI = rental income minus operating expenses
• Cap rate = the market’s required rate of return for similar assets (essentially the “price” investors are willing to pay for a dollar of income)

The key takeaway is simple but powerful: When NOI increases, property value increases — often by a multiple of that income.

What this specific upgrade does

We’re implementing two targeted improvements:

• 10 newly added patio units
  • 9 one-bedroom units
  • 1 studio unit
  • Average rent premium: ~$150/month per unit
• 13 units receiving in-unit washer/dryer hookups
  • Average rent premium: ~$100/month per unit
  • (We expect this premium to increase further in 2026)

This translates to:

Total new gross annual rent: ~$33,600
After applying a conservative 5% vacancy assumption, this results in approximately $31,900 in additional annual NOI.

Capitalized at an estimated ~5.5% cap rate, that incremental NOI alone supports roughly $575,000–$600,000 in added property value.

Importantly, this value is created without materially increasing operating expenses, which is exactly what we look for in strong value-add execution.

Additional value creation underway

In addition to these upgrades, we are also converting the existing laundry room and office into two additional residential units, further increasing density and long-term income potential at the property.

Why this is such a strong value-add strategy

Projects like this are strategic because they check multiple boxes:

• High return on capital – relatively modest investment compared to value created
• Durable rent premiums – patios and in-unit laundry are features renters consistently pay for
• Minimal expense drag – no meaningful increase in staffing or utilities
• Better resident experience – improved retention and leasing velocity
• Permanent value creation – the income (and resulting value) compounds over time

This is a great example of how small, intentional upgrades — executed well — can meaningfully move the needle on long-term asset value.

Want to go deeper?

The Neighborhood Ventures Head of Investor Relations, Bart Diehl, and Co-Founder Jamison Manwaring recently sat down to discuss the 52nd Street property, walking through the strategy behind these upgrades and how we think about value creation more broadly.

What’s coming next

We’re also excited to share that we’ll be partnering again with Neighborhood Ventures on another upcoming offering, currently expected to close in February. The turnaround timeline will be relatively quick, so if you’re interested in learning more, please reach out to your sponsor.

As always, thank you for being part of the ownership group and for trusting us with this asset. We’ll continue to share progress as these improvements roll out and look forward to diving deeper into overall performance in our next quarterly update.

Best,
The HSK Capital Team

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