Clay & Tiffany Apartments — Q3 2026
Dear Clay & Tiffany Apartments Investors,
Q3 was a cleanup quarter at Clay & Tiffany, and the financials show it. Net operating income was negative $18,190 for July through September: income of $168,404 against operating expenses of $186,594. After $90,535 of interest, $3,170 of accrued (unpaid) asset-management fees, $8,876 of capital items and a $25,360 bad-debt write-off in September, the quarter’s net loss was $146,132. For context, Q2 NOI was roughly $62,400 and Q1 was $57,739.
The expense side is where the quarter was lost, and most of it was deliberate. We ran a maintenance blitz in July to finish unit turns and clear the work-order backlog, which put $69,570 of Meritus in-house maintenance and leasing labor through the books in Q3 against a budget of $17,881. August carried a $52,605 water charge — a mandatory down payment to establish a payment plan with the Portland Water Bureau, partly offset by a $25,783 sewer credit. Apart from the maintenance blitz, that payment was the largest single driver of August’s negative NOI. Eight eviction filings cost $3,402 in July, and eight units were painted for turnover. September was the first clean month: expenses of $37,205 came in under the $40,802 budget and NOI was $20,284. On the income side, vacancy loss ran $51,297 for the quarter against an $11,130 budget, which is the number that has to change.
One reason that number is so high: we recently learned that the newly built apartment building adjacent to Clay & Tiffany was foreclosed on in February 2026. The lender dropped pricing dramatically and layered on concessions to lease the building ahead of a marketing push that began in early Q3, putting its rents below ours on a per-square-foot basis for a materially nicer product. It leased more than 20 units during the quarter, which made an already hard market harder.
Occupancy and delinquency moved the right way. Physical occupancy went from 75.8% at July 31 to 82.3% at September 30 (51 of 62 units, with four approved applicants and 10 vacant). Current-resident delinquency fell from $85,425 on June 8 to about $12,000 in September as evictions, two sheriff lockouts and rental-assistance referrals worked through. Net rental income rose with it — from $42,272 in July to $53,724 in September — as we pulled vacancy and concessions down. Three residents remain in active eviction. The balance-sheet receivable, which still includes former residents, was $98,498 at September 30 after the write-off; former-resident balances actually grew about $21,000 during the quarter even as current-resident balances fell.
Cash is tight. Accounts payable stood at $299,007 at September 30, up from $204,042 at July 31, and the sponsors have now advanced roughly $187,000 in loans in total to keep the property operating. We are also evaluating a change in third-party property management and the structure and timing of a capital call tied to that transition; nothing is final, and we will communicate terms directly once they are. Distributions remain paused. The plan has not changed: finish clearing the rent roll, lease the vacant units (concessions are now up to eight weeks on the hardest units), reset renewals, and get expenses back to the run-rate September showed.
A loss-making quarter that bought a cleaner building
Clay & Tiffany is a 62-unit downtown Portland community held by Clay Street Apartment Holdings, LLC and managed by Meritus Property Group. Q3 2026 absorbed a maintenance blitz, prior-period utility bills, eviction costs and a write-off, and produced negative NOI. Occupancy and collections improved through the quarter and September operated close to budget. The capital structure is unchanged: 7-year fixed-rate agency debt, amortizing since early 2026, with no refinance risk.
What is working
Occupancy dipped before it recovered — from 80.6% at June 30 to 75.8% at July 31 as evictions cleared non-payers, back to 82.3% at September 30, about 1.6 points above where the quarter began — and the rent roll is cleaner: current-resident delinquency is down to roughly $12K from $85.4K on June 8, two sheriff lockouts are complete, and the remaining cases are in court. The turn backlog is cleared, and net rental income rose from $42,272 in July to $53,724 in September as vacancy and concessions came down. September expenses came in under budget, which is the first month in a while that has been true. Traffic is healthy (11 tours in the two weeks to October 13).What we are managing
Vacancy loss of $51.3K for the quarter against an $11.1K budget, and tour-to-application conversion that remains weak (11 tours, one application). Unit T202 sat vacant 166 days before its rent was cut to $1,095. Payables of $299K are aging and the sponsors are funding operations. Average rent on the roll is $1,102 against a $1,210 budget. A newly repositioned, lender-owned building next door is leasing below us on a per-square-foot basis. A property-management transition and a capital call are under evaluation.Negative NOI in July and August; September turned the corner
The July–September accrual statements show total income of $168,404 and operating expenses of $186,594, for net operating income of negative $18,190. July (−$10,653) and August (−$27,821) carried the maintenance blitz and the water catch-up; September posted NOI of $20,284 on expenses of $37,205. Interest of $90,535 ran slightly over budget; principal of $18,481 was paid on top of that.
What drove the numbers
Gross potential rent of $207,017 lost $57,857 to vacancy ($51,297), concessions ($6,354) and loss-to-lease. Other income (laundry, late fees, application fees, utility billbacks) was $19,244. Meritus One in-house labor was $26,313 in July (the maintenance blitz), $29,232 in August (current and prior-period service fees plus $3,250 of leasing fees) and $14,025 in September — $69,570 for the quarter. That dwarfs the $17,881 maintenance budget, but the comparison is apples-to-oranges: the budget assumes ordinary maintenance, not a quarter spent clearing a turn backlog and the work-order queue. Meritus is also crediting back roughly 30% of these labor fees; that credit has not yet posted, so the Q3 figure overstates the eventual net cost. We are reviewing the charges line by line, and the labor run-rate is a central question in the property-management review now under way. Utilities were $45,568 against a $30,948 budget, driven by the $52,605 August water charge — a mandatory down payment on a payment plan with the water bureau, net of a $25,783 sewer credit. Eviction legal fees were $4,480, turnover painting and cleaning $4,515, and marketing $7,553 including $2,600 of move-in commissions.Below the NOI line
Capital items of $8,876: three refrigerators ($1,257), flooring replacement in C046 ($3,730) and remediation and plumbing after a water intrusion ($3,430). The $25,360 bad-debt write-off in September cleared former-resident balances that had been carried in receivables. Interest of $90,535 and $18,481 of principal were paid on the agency loan, which funded at $6,316,000 (5.62% fixed, two-year interest-only) and had amortized to $6,291,747 at September 30. Asset-management fees of $3,170 were accrued but not paid; no asset-management fees have been paid to the sponsors.Occupancy up, delinquency down, payables up
The rent roll went from 47 occupied units at July 31 to 51 at September 30, with four approved applicants in the pipeline. Current-resident delinquency dropped to about $12,000 as the eviction cases from the first half of the year resolved. The cost of the quarter shows up in payables, which rose to $299,007, and in the roughly $187,000 of sponsor loans advanced in total to keep the property operating. No distributions were made in Q3; $118,250 has been distributed to date, all before May 2025.
| Item | Balance | Note |
|---|---|---|
| Accounts payable | $299,007 | $204,042 at 7/31 · $318,021 at 8/31 |
| Sponsor loans | ~$187,000 | Total funded by sponsors to date |
| Operating cash | $8,978 | Chase operating + CTA |
| Lender escrows | $109,581 | Tax $62,769 · insurance $30,644 · working capital $16,169 |
| Resident receivable | $98,498 | Incl. former residents |
| Agency loan principal | $6,291,747 | $6,316,000 original · 5.62% fixed · 2-yr IO, now amortizing · $18,481 paid in Q3 |
Leasing and renewals
Concessions are now up to eight weeks free on the hardest-to-lease units; unit T202 was cut from $1,150 to $1,095 after 166 days vacant and C041 leased with four weeks free. Traffic is fine (11 tours in two weeks in October) but conversion is one application per 11 tours, with some prospects citing neighborhood safety. Leasing agents will join the biweekly calls to report tour feedback, an open house is planned, and a resident-referral campaign is being set up. An audit of resident files found utility addenda that did not meet the required disclosure standard; billbacks were paused for affected residents and are reinstated only on a corrected addendum at renewal, with new move-ins already on it. The Two Dots application system went live October 13 to speed screening.Hold the September run-rate and fill ten units
If September is the new baseline (expenses near $37K, NOI near $20K) and the ten vacant units lease, the property gets back toward covering its roughly $36K monthly debt service. That is the whole plan for Q4, alongside two decisions at the ownership level: who manages the building, and how the partnership funds the gap in the meantime.
Lease the ten vacant units
Up to eight weeks free on the hardest units, unit-level price cuts (T202 to $1,095), an open house, a resident-referral campaign, and leasing agents reporting tour feedback directly on the biweekly call. Conversion, not traffic, is the problem being solved.
Finish the rent-roll cleanup
Three residents remain in active eviction; one case is awaiting first appearance and one unit is being monitored for abandonment. Rental-assistance referrals (211 Info, Multnomah County) go to residents who can be kept. Former-resident balances are being written off and sent to collections.
Turn backlog cleared
The July maintenance blitz finished the unit turns and outstanding work orders that had been holding units off the market; C046 flooring and a water-intrusion repair were completed in August. Expense in September fell to $37K as a result.
Management and capital decisions
Ownership is soliciting bids from third-party property managers — including one from an affiliate of a co-sponsor, which, if engaged, would be disclosed as a related-party arrangement with its terms — and working through the structure and timing of a capital call aligned to any transition. Terms will be communicated directly to investors, before anything is asked of you.
Watch List
Payables and sponsor funding
Accounts payable of $299K at September 30 is up $95K since July 31, and the property has been funded with roughly $187K of sponsor loans in total. Until occupancy and expenses hold at the September run-rate, the partnership depends on that sponsor funding.
Vacancy, conversion & new competition
Vacancy loss ran $51.3K for the quarter against an $11.1K budget, and average in-place rent is $1,102 against a $1,210 budget. A newly built, lender-owned building adjacent to us — foreclosed in February 2026 — repositioned with deep price cuts and concessions and leased more than 20 units in Q3, pricing below us per square foot for a nicer product. Neighborhood perception is also coming up in tour feedback.
Fire-life-safety compliance
Vendors completed the required fire-life-safety repairs ahead of the September 16 re-inspection; the fine deadline had been extended in the interim.
Amortizing debt service
The loan now costs about $36K a month in principal and interest (roughly $430K a year). Fixed rate and a 7-year term mean no refinance risk, but the property has to produce about $36K of NOI a month to cover the loan from operations; September’s $20K covered a little over half of it, before any reserves or payables.