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DRAFT - 2025 Results
Executive Summary - AI written
Executive Summary - AI written
In 2025, Clarameda made a pivotal strategic shift to facilitate Partner exits after 17 years of operation, focusing on property renovations and preparations for asset sales. Revenue declined 9.5% to reflect vacancies during major upgrades, particularly at 2534 74th Avenue in Oakland, where extensive deferred maintenance was addressed through a comprehensive renovation. High repair costs (86% allocated to 74th Avenue) and insurance increases contributed to a negative net income, providing tax loss benefits via depreciation offsets for Partners. The Oakland market experienced tenant turnovers amid regional migration trends, while Las Vegas rents remained flat with modest increases for below-market tenants. Zillow estimated a decline of $100,000 in portfolio value with most of the decline in the Oakland market.
Looking ahead, the Fund will prioritize selling 1457 Homestead and 922 Single Tree in summer 2026 to enable cash distributions, following Partner approvals and Operating Agreement amendments to ensure IRS compliance. Operational plans include broker engagements for CMAs and BPOs in March, tenant notices, and property enhancements to maximize returns. With anticipated lower interest rates and seasonal market strength, management remains cautiously optimistic about realizing value in a challenging environment, while maintaining prudent cash reserves for professional fees and contingencies. This positions Clarameda for a successful wind-down, honoring the trust of Partners throughout its history.
As stated in the Mid-Year 2025 Update, we made the strategic decision to allow Partners to exit the Fund after 17 years. The initial step in that plan was to allow Partners the first opportunity to take drop downs of Company Properties. As part of that strategic intent we needed to address the deferred maintenance in the first property we had purchased, which had a Section 8 tenant residing in it for the past 12 years. The financial results of 2025 reflect the change in strategy as communicated. After offering all Partners the first opportunity to purchase, we need to sell two properties - which we anticipate to be 1457 Homestead and 922 Single Tree to enable us to send out cash to exiting Partners. We are finalizing with legal and accounting the procedural steps that we will be taking to keep us compliant with IRS regulations on doing this optimally. Its proving to be more complicated and we are going thru steps to make sure we are doing our best to avoid any costly surprises later. The basic issue is that the Operating Agreement that was written 17 years ago only contemplated a full liquidation. That Operating Agreement allocated profits at the Company level. What we need to do is to have new language that will allow us to have the IRS assign the gains on the sales of the properties only to exiting Partners. Without this certainty the Company would have to withhold gains allocated to non-exiting Partners which would delay a significant portion of payouts to exiting Partners. Once I receive the Amendment to the Operating Agreement, I will be sending out Approval letters for Partner signature to enable us to move forward. The lawyer has been identified and will work with our Accountant to ensure we do this to minimize the chance of being charged this phantom gain.
Profit & Loss
Revenue fell 9.5% due primarily to keeping 2534 74th vacant as we were doing the renovations. We also had a tenant turnover in our other Oakland property which caused a two month vacancy there. We were able to pass along modest price increases in our Las Vegas properties - mostly to good long term tenants who are below market. As we will discuss the Vegas market has turned flat with market rents dropping a bit. You will notice the really high Repairs and Maintenance line item. 86% of those costs was spent for 2534 74th Avenue. We also incurred costs on the turnover for 75th Avenue and we had an HVAC issue at Homestead. We also felt the increase in insurance costs in the Oakland properties - Safeco our primary insurer is backing off of CA market and we will be forced to find a new solution next year we are fairly certain. Interest expenses went down as we paid off Partner debt.
Overall net income was negative for the year - so good news for those of you as the loss here, will enable you to offset other gains. For 2026 when we are successful in selling the two properties you will see those gains reflected in your final K1 so plan ahead for that.
OAKLAND MARKET
Last year we said we didn't agreee with the WARM sentiment of the Bay Area and that we foresaw one of our tenants leaving. We were correct about that tenant. It took us two months to fill that vacancy, which for us is a long time. We didn't have to do that much on the turnover - fresh paint and some upgrades to light fixtures and landscape items. We had done a major renovation in 2018/2019 on this property. We ended up fillling the vacancy with a market (not Section 8) tenant. So far that tenant has been working out. In our other Oakland house, our tenant of almost 15 years vacated. This tenant's family size increased and she obtained a voucher for a 3 bedroom house so she left our 2 bedroom house. We do believe that rents have gone up in the neighborhood - mostly due to the Section 8 floor increase. However, the market still takes some time to fill vacancies as there are plenty of options. Demand we believe has been negatively impacted by migration out of CA and the Bay Area including due to immigration policy.
OAKLAND MARKET DATA - Zillow Rentals
OAKLAND MARKET DATA - Zillow Rentals
With the change in strategy we decided to get the properties in tip top shape and sales ready. As part of that as previously communicated, we did a major renovation at the first property that we had purchased for the Fund. Here is what we planned from that Update:
Structural - fix foundation issues to level the house. Fix cracked ceiling beams by sistering new ones. Remove mold and water damage.
Modernizing floor plan - remove wall between living area and kitchen - open up the space. Remove hallway and expand the other rooms. Change access to backyard to new living area. Place new water heater outside the house to gain space. Remove dead space for old vents.
Update electrical from old knob and tube to modern electrical with breakers throughout the house. New electrical fixtures and lighting.
Update plumbing replace old galvanized pipes with copper as we install new fixtures and move water heater.
Add full bathroom - convert washer/dryer room into bathroom with access from of one of the two bedrooms. Put stacked washer dryer in expanded old bathroom.
Update kitchen new cabinets, solid surface counter, tile backsplash, new stainless steel appliances.
Roof maintenance including patching old vent holes and waterproofing around new ones.
New tile flooring in kitchen and baths, try and restore old hardwood flooring in living area and bedrooms (remove carpet placed over old hardwood).
Smooth texture throughout, new drywall where needed and paint.
Some landscape improvements - fix fence, posts, new concrete pavers and replace broken concrete path.
It ended up taking longer and costing more. We had estimated a range of $70 to $85K in the Mid-Summer update and ended up at about $87K. The renovation took a little over 5 months. However we are happy with the results, here are some photos:
LAS VEGAS MARKET
While there are some parts of the country that are massively down in rents - such as Texas - we believe Las Vegas is slightly down as reflected in the Zillow data. If I drill down to specific properties the Z Estimate for rents is for our "market" rates less than what we are charging. It will be difficult to raise those rents. Where we did raise rents was on our good long term tenants who were below market rates - they are being caught up.
For the coming year, to offer investors a cash exit - we will not be renewing the leases at 1457 Homestead and 922 Single Tree so we will have costs associated with that. We anticipate doing a fair amount of work at 922 Single Tree as that tenant has been a difficult one on rent payment and I anticipate the house will need to be freshened up quite a bit to make it ready for sale. The 1457 Homestead property as had a lot of deferred maintenance addressed and improvements undertaken so I don't anticipate as much there - of course that is subject to change once we see the places. The plan will be to hire an agent for those properties and work with them to get the most for each property. As stated those sales will take place in the summer to take advantage of the selling season and when leases terminate.
We anticipate interest rates will be lower and we are cautiously optimistic that we have more buyers in the summer. As is consistent with the approach of the last 17 years, we will do the right thing in running the properties and we trust the market will reward us for that on the way out as well as while we were managing them for rental.
LAS VEGAS MARKET DATA - Zillow Rentals
LAS VEGAS MARKET DATA - Zillow Rentals
Interest Expense
Interest expense continued to go down as the Company paid down debt from Partners.
Other Items
No other items had any unusual activity as there were some pre-paid expenses that evened out despite the year to year flucuations.
Overall Profitability
The financial results reflect the strategic decision we made to get the properties ready for sale. Timing worked out as the oldest property in our portfolio 74th Avenue became vacant and we were able to do the major renovation this property needed. We covered the cost of the renovations from cash and for the year we broke even on operating cash flow. After Depreciation Partners will see a tax loss headed their way as we will report a Tax loss for the year.
Balance Sheet (Dec 31, 2025)
Assets
Cash $ 34,822
Other Current Assets $ 2911
Book Value of Buildings $389,014
Book Value of Land $156,700
Other LT Assets $ 21,039
Total Assets $604,486
Liabilities
Current Liabilities $325
Accounts Payable
Security Deposits $16,491
Partner Debt Tranche 1 $0
Partner Debt Tranche 2 $0
Partner Debt Tranche 3 $0
Partner Debt Tranche 4 $50,000
FOA - 74th $313,813
FOA - 75th $297,802
Total Liabilities $678,431
Equity
Partner Equity $0
Less Change in Cost Basis -73,945
Total Liabilities and Equity: $604,486
Market Balance Sheet (Dec 31, 2025)
Assets
Cash $ 34,822
Other Current Assets $ 2911
Market Value of Properties $3,138,500
Zillow 2/11/2025
Total Assets $3,176,233
Liabilities
Current Liabilities $325
Accounts Payable
Security Deposits $16,491
Partner Debt Tranche 1 $0
Partner Debt Tranche 2 $0
Partner Debt Tranche 3 $0
Partner Debt Tranche 4 $50,000
FOA - 74th $313,813
FOA - 75th $297,802
Total Liabilities $678,431
Equity
Partner Equity $0
Unrealized Gain $2,497,802
Total Liabilities and Equity: $3,176,233
Zillow estimates the portfolio to be down about $100,000. Most of the market decrease was in the Oakland properties which have declined as that market has felt the impact of high rates and the general discontent with the high taxes and low quality of life measures. Las Vegas market hasn't had much of a decline as low inventory and lower rates have mitigated the decline in tourism for a few months. There is speculation that Vegas has priced itself out of a significant segment of demand. We are confident that is temporary and anticipate that Vegas will figure this out quickly. We are cautiously optimistic that the summer selling season will be seasonally strong as is typical and with lower rates to attract more buyers.
From a capitalization standpoint we took down Partner debt by $30K early this year.. Last year also paid out a year end Special Distribution. Our goal this year will be to make the two identified properties in Vegas as attractive as possible to maximize return on sale. We will keep the cash on hand to make that happen. In addition we will need cash on hand to cover any expenses on vacancy and tenant issues as well as all professional fees.
Going Forward
There are several things to look out for and I hope to have as soon as possible. First look out for the Approval Letter that will need your signature and the Amendment to the Operating Agreement. Second, look for the K1s around March where these DRAFT results will be finalized.
Operationally, I've contacted one of the Real Estate Agents I have worked in the past to secure the properties. She is starting to prepare CMAs (comparative market analysis) of the Las Vegas properties. I will be going down in March and will walk the properties with her to get a BPO (Broker Price Opionion) on all the properties to confirm the expected value of the sales. I will also get a preliminary idea of the work that we will be doing on the for sale properties. After this meeting we will formally give notice to the tenants to move out. Ideally for us May 31, however we have to honor lease duration so Homestead might be June 30. It will be a busy summer and hopefully a lucrative one.
If all is successful, this should be the last year for most of the Partners, thanks as always to all Partners for your support and continued trust in management. I hope that in addition to the Financial results we have gotten something more lasting through the many years.
With gratitude,
Biren Talati
Managing Member
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