VILLA HEIGHTS UNION ST PORTFOLIO. Offering Memorandum

Transcription

1 VILLA HEIGHTS UNION ST PORTFOLIO Offering Memorandum

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3 SUMMARY 2001/2003, 2000/2002, 2006/2008, 2012/2014, 2018/2020, 2027/2029 Union Street Charlotte, North Carolina R , , , , , $1, (744 sq ft; built in 1948/2016 (full rehab))

4 TABLE OF CONTENTS Investment Rationale 05 Unit Features 06 Value-Add Opportunities 07 Rankings 09 Charlotte, North Carolina 10 Market Overview 11 Market Fundamentals 12 Villa Heights Sub Market 13 Location 14 Parcels 15 Amenities Map 18 Cordelia Park & Cross Charlotte Trail Greenway 19 Rent Roll & Nearby Comps 21 Cash Flow Analysis 22 Underwriting & Assumptions 23 Offering Details 24

5 INVESTMENT RATIONALE Low maintenance, 100% occupied buy-andhold asset in attractive urban setting within one of the country s hottest local real estate markets. Ideally located in the heart of Villa Heights/ NoDa/Optimist Park Redevelopment area near uptown Charlotte. Walking distance to Blue Line light rail station connecting central business district to UNC-Charlotte; $1.2B, 9.2-mile project set to open Q High barrier to entry in sub-market, with limited value-add and infill opportunities remaining. Long-term Villa Heights appreciation upside. SFR homes at $210/ft in 17 vs $150/ft in 16 with new-build lot values tripling over last 4 years. Majority of units leased through 2017; Tremendous rent rate and ancillary rental income upside. 5

6 UNIT FEATURES Each of 12 units is 2 bed, 1.0 bath, 744 sq. ft. All units renovated (electrical, plumbing, fixtures, etc.) Off and on street parking Fenced in back yards on quiet street with no thru-traffic 5 of 6 duplexes are full brick Central AC, full size washer+dryer; security system included in each unit (all convey to buyer) Meters controlled individually per unit; utilities paid by tenant Front and side entrances, vaulted living room ceiling Preset Irrigation System 6

7 VALUE-ADD OPPORTUNITIES 11 of 12 units currently below market rent of $1,807/mo. (See Rent Comps. p.21). Pets currently a one-time $500 fee for life of lease versus monthly add to lease rate. ADT system currently included for free. Landscaping and lawn maintenance currently paid by landlord. $20/mo charge back to tenants equates to $2,880 annual revenue increase. Storage shed add-on in back yard as ancillary rental income. 7

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9 rankings CHARLOTTE 3 Fastest 5 U.S. 5 Largest 9 Best growing U.S. city in 2017 (Census Bureau) city with largest population growth (WalletHub.com) airport in the U.S. (Airport Council International) U.S. city to invest in rental property (Home Union) Best State for economic development (SiteSelection) Best State for business (CEO Magazine) Fastest growing State for Tech jobs (Dice.com) 3 Fastest State Growth in Women-Owned Businesses (American Express) NORTH CAROLINA 9

10 CHARLOTTE, NORTH CAROLINA Home to Fortune 500 companies in a variety of industries, Charlotte, North Carolina has been the fastest growing city in the entire United States over the last decade, with a 59.6% population growth rate (Census Bureau) and is the 17th largest in the country. It Is a key energy, transit and healthcare hub for many companies, and is the second largest banking city in America. Due to its hub of financial institutions, including Wells Fargo, Ally Bank, TIAA-Creff, BB&T among others, the city s technology sector is booming and has become a key driver of job growth over the last decade. Attractions The two mile radius of uptown Charlotte is home to more than 100,000 daily workers and 1,240 companies that enjoy a variety of dining and entertainment options. The NBA s Charlotte Hornets are based in the 20,000-seat Spectrum Center arena, with the Triple-A baseball affiliate of the Chicago White Sox, the Charlotte Knights, just a few blocks away in their new 10,000- seat stadium. The mixed use Epicentre is a hub of nightlife activity and is a key tailgate spot for Carolina Panthers home football games at nearby Bank of America Stadium. 10

11 MARKET OVERVIEW Charlotte s significant infrastructure investment over the last decade-plus has spurred significant development within the urban core, which in turn has driven tremendous economic growth and has broadened the urban living core. Charlotte is the tenth largest home to Fortune 500 headquarters in the country. The center city s 5-year population growth rate is 12.44%, and the salary growth for those jobs has risen nearly 11% over the last 10 years. Medium Household income tops $52,000. While job, population and infrastructure growth are high, cost of living remains lower than similar cities such as San Francisco, Miami, Orlando, Denver, Houston, New York, and Atlanta. As of March 2017, the Charlotte MSA s unemployment rate was 4.4%, which is on par with the national average and 0.4% below the state average. Despite a growing labor force, the unemployment rate has been below 6.0% for more than two years due to continued business expansion in the MSA given the city s low business costs and strong infrastructure. Several employers have already announced their intention to continue to expand in Charlotte this year. Those employers include the following: Corning Optical Communications (650 jobs), AvidXchange (600 jobs), Topgolf (500 jobs), Gordon Food Service (300 jobs), and TTI Floor Care (200 jobs). The city added 28,500 jobs in 2016 and is expected to top that figure in MAJOR EMPLOYERS Wells Fargo Bank of America Sonic Automotive Sealed Air Domtar Lowe s Duke Energy Daimier Trucks Compass Group TIAA Cref Spectrum BB&T Belk Family Dollar IBM Ingersoll Rand Siemens Microsoft Red Ventures Snyder s - Lance Vanguard Lending Tree Shutterfly 11

12 MARKET FUNDAMENTALS Low Unemployment Rate 4.5% Rent growth over last 12 months 4.9% Healthy vacancy rate in rental market 6.2% Population growth over last 7 years 9.4% Cost of living index is lower than national avg. 3.7% 12

13 VILLA HEIGHTS Sub Market Strong tenant demographic: High income business professionals with a desire to live/ work/play in and around the city center. Matches millennial trend toward urban-oriented, reduced footprint/upkeep residences with modern features and flexibility. Incredible growth in median home values across zip code -- from $84/sq. ft in Jan to $210/sq. ft as of May Charlotte public school system recently announced the re-opening of a Villa Heights Elementary school in 2018, within walking distance. 15-minute commute to UNC-Charlotte via light rail system beginning 2018 school year. 13

14 CONVENIENTLY LOCATED Convenience to center city CBD (2 miles), airport (15 minutes), and 85/77 interstate system (5 minutes). Less than one mile to 25th street light rail station, opening March Centrally located between NoDa Arts District (1 mile) and Plaza Midwood Historic District (1.5 miles). 15-minute commute to UNC-Charlotte via light rail system beginning 2018 school year. 14

15 locator map 25th st station 0.4 miles parkwood station 0.6 miles Site 15

16 parcel map

17 7 NEARBY REDEVELOPMENT DEVELOPMENTS SITE Apts, 17k sf Retail 2 Light Rail Station 3 100k sf Class A office, 60k sf Retail Apts Apts, 150k sf Class A office Apts, 13k sf Retail Apts, 20k sf Retail 8 High-density townhome 9 Gold Line Rail Extension (2019) 17

18 Amenities map FOOD / FUN LIFESTYLE SITE 1 Amelie s 2 Cabo Fish Taco 3 Harberdish 4 Sabor 5 Joe s Doughs 6 Dog Bar 7 Heist Brewery 8 Free Range Brewery 9 Birdsong Brewing 10 YMCA 11 NoDa Brewing Co. 12 Park/Greenway (p.18) 13 Plaza Midwood Nightlife 14 City Center (Uptown) 18

19 Cordelia Park Cross Charlotte Trail Greenway 19

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21 RENT ROLL & NEARBY COMPS Building Address Monthly Rent if paid after 1st Monthly Rent on or before the 1st Pet Fee Paid Apr '16 May '16 June '16 July '16 Aug '16 Sept '16 Oct '16 Nov '16 Dec '16 Jan '17 Feb '17 Mar '17 Lease Start Date Lease End Date Security Deposit Held 2000 Union $ 1,595 $ 1,495 NA $ 1,495 $ 1,495 $ 1,495 $ 1,495 $ 1,495 $ 1,495 $ 1,495 $ 1,595 $ 1,595 $ 1,495 $ 1,495 $ 1,495 4/1/2017 4/30/2020 $ 2, Union $ 1,295 $ 1, $ 1,100 $ 1,100 $ 1,200 $ 1,100 $ 1,100 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,100 $ 1,200 $ 1,200 8/1/2014 8/31/2017 $ 2, Union $ 1,395 $ 1,295 NA $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 10/1/2016 1/31/2019 $ 1, Union $ 1,295 $ 1,195 NA $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,295 $ 1,195 $ 1,295 $ 1,195 $ 1,195 $ 1,195 $ 1,195 3/1/2017 5/30/2020 $ 2, Union $ 1,395 $ 1, $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,395 $ 1,395 $ 1,295 $ 1,295 $ 1,295 3/1/2016 2/28/2018 $ 2, Union $ 1,395 $ 1, $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,295 $ 1,395 $ 1,295 3/1/2017 5/30/2020 $ 2, Union $ 1,300 $ 1,200 NA $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,200 $ 1,300 $ 1,300 8/1/2015 7/31/2017 $ 2, Union $ 1,295 $ 1, $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,295 7/11/2015 7/10/2017 $ 2, Union $ 1,295 $ 1, $ 1,295 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 $ 1,195 5/15/2015 5/31/2018 $ 2, Union $ 1,195 $ 1,095 NA $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 6/1/2015 5/31/2018 $ 2, Union $ 1,297 $ 1, $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,197 $ 1,297 $ 1,197 8/1/2016 8/1/2017 $ 2, Union $ 1,195 $ 1,095 NA $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 $ 1,095 4/6/2016 4/6/2018 $ 2, Totals $ 3,000 $ 14,752 $ 14,652 $ 14,752 $ 14,652 $ 14,652 $ 14,952 $ 14,852 $ 15,152 $ 15,052 $ 14,652 $ 15,052 $ 14,952 $ 28, T12 Total $ 178,124 Rent: Orange - Denotes payment after 1st T12 Collections After 1st of Month $ 2,300 21

22 T12 (Apr 16-Mar 17) Income and Expenses 1 Debt Type Interest EXPENSES 200 per unit 9 Repairs & Maintenance 80% LTV Principal 75 per unit 12 Marketing 4.50% Interest Rate TOTAL DEBT 100 SERVICE per unit 13 Contractor Services 25 Amort. Yrs. DCR 6.00% % of EGI 15 Management Fee 2,419,230 Loan Amount BEFORE TAX 366 CASH per unit 16 FLOW Insurance % Closing Costs CAP RATE Real Estate Taxes TOTAL EXPENSES 650,168 Cash Down Unleveraged IRR* Expense % of EGI Leveraged IRR* NOMINAL NOI ECONOMIC NOI CASH FLOW ANALYSIS Union St Duplexes, Charlotte, NC units Pro Forma Year 1 Year 2 Year 3 Year 4 Year 5 Income Growth Assumed 5.00% 5.00% 5.00% 5.00% Expense Increase Assumed 2.00% 2.00% 2.00% 2.00% Loss-To-Lease 0.00% 1.00% 1.00% 1.00% 1.00% 1.00% Vacancy 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% Concessions 0.00% 1.00% 1.00% 1.00% 1.00% 1.00% Bad Debt 0.00% 0.50% 0.50% 0.50% 0.50% 0.50% Economic Vacancy 0.00% 5.50% 5.50% 5.50% 5.50% 5.50% Debt Assumptions 1 Debt Type Interest 80% LTV Principal *IRR ASSUMPTIONS: NEW MORTGAGE 4.50% Interest Rate TOTAL DEBT SERVICE Purchase Price** 25 Amort. Yrs. $3,024,037 LTVDCR 80% Hold Period 2,419,230 Loan Amount 5 Years BEFORE LOAN AMOUNT TAX CASH FLOW2,419,230 Terminal Cap 1.5% Rate Closing Costs 6.00% CAP RATE RATE 4.50% Cost of 650,168 Sale Cash Down 5.0% Unleveraged AMORTIZATION IRR* 25 Leveraged TERM IRR* 10 DEBT SERVICE 161,362 INCOME Per Unit Per Unit 1 Market Rent 178,124 14, ,272 21, , , , ,362 2 Loss-to-Lease - - (2,603) (217) (2,733) (2,869) (3,013) (3,164) GROSS POTENTIAL RENT 178,124 14, ,669 21, , , , ,199 3 Vacancy Loss - - (7,730) (644) (8,117) (8,522) (8,949) (9,396) 4 Concessions - - (2,577) (215) (2,706) (2,841) (2,983) (3,132) 6 Bad Debt - - (1,288) (107) (1,353) (1,420) (1,491) (1,566) EFFECTIVE RENTAL INCOME 178,124 14, ,074 20, , , , ,105 7 Other Income 1, ,883 1,074 13,528 14,204 14,914 15,660 EFFECTIVE GROSS INCOME 179,624 14, ,958 21, , , , ,765 Annual EGI Increase 2.00% 44.17% 5.00% 5.00% 5.00% 5.00% EXPENSES Per Unit Per Unit 9 Repairs & Maintenance 12,760 1,063 2, ,448 2,497 2,547 2, Marketing Contractor Services - - 1, ,224 1,248 1,273 1, Management Fee ,537 1,295 15,848 16,165 16,488 16, Insurance 4, , ,480 4,569 4,661 4, Real Estate Taxes 7, , ,880 8,037 8,198 8,362 TOTAL EXPENSES 24,881 2,073 32,155 2,680 32,798 33,454 34,123 34,805 Expense % of EGI 13.9% 12.4% 12.1% 11.7% 11.4% 11.1% NOMINAL NOI 154,743 12, ,803 18, , , , ,959 ECONOMIC NOI 154,743 12, ,803 18, , , , ,959 (2,365,636) (2,309,581) (2,250,950) (2,189,626) (2,125,485) Interest - 107, , , ,038 97,221 Principal - 53,593 56,056 58,631 61,324 64,141 TOTAL DEBT SERVICE - 161, , , , ,362 DCR BEFORE TAX CASH FLOW 154,743 65,440 77,745 90, , ,597 CAP RATE 5.12% 7.50% 7.9% 8.3% 8.8% 9.3% Unleveraged IRR* 14.7% **Cash on Cash 10.1% 12.0% 13.9% 16.0% 18.2% Leveraged IRR* 38.7% **Includes 1.5% Closing Costs 226, , , ,653 4,712,646 65,440 77,745 90, ,290 2,564,291 *IRR ASSUMPTIONS: NEW M Purchase Price** $3,024,037 LTV Hold Period 5 Years LOAN A Terminal Cap Rate 6.00% RATE Cost of Sale 5.0% AMORT TERM Price $ 3,024,037 DEBT S Price per Door $ 252, # of Units 12 Yr. 1 Cap Rate 7.50% 22

23 UNDERWRITING & ASSUMPTIONS The portfolio is currently 100% physically occupied (as of June 1, 2017), and has recently demonstrated a sustainable trend that will continue in the coming months of operation. The pro forma conservatively assumes 6% vacancy in Years 1-5, even though true physical vacancy is likely to remain at lower levels. The pro forma assumes a bad debt rate of 0.50% GPI to be maintained in Years 1-5 as well as a concessions rate of 1% to be maintained in Years 1-5. General repairs and maintenance expenses is $210 per month, is assumed in Year 1, with 2% increases applied annually. This is consistent with industry norms for an asset of this age and quality. A 6% property management fee is added, even though these are currently not operated by a property manager. Real estate taxes are reflective of 2016, and a $487 per month expense is added for security system needs, though this could be shown as income upside as well. 23

24 OFFERING DETAILS Dane Warren Real Estate is the exclusive listing Broker representative of the Owner for the sale of this property. No contact shall be made by any prospective purchaser or agents to the Owner, its executives, staff, personnel, tenants, or related parties. This Investment Offering Memorandum is a confidential solicitation of interest, and the information provided herein is provided for the sole purpose of considering the purchase of the Property. The Owner expressly reserves the right, at its sole discretion, to reject any or all expressions of interest to purchase the Property or to terminate discussions with any entity at any time with or without notice. The Owner shall have no legal commitment or obligation to any entity reviewing the Investment Offering Memorandum or making an offer to purchase the Property unless and until the Owner executes and delivers a signed Purchase Agreement on terms acceptable to the Owner. By receipt of this Offering Memorandum, prospective purchaser will be deemed to have acknowledged the for going and agrees to release the Owner from any and all liability with respect hereto. The enclosed materials are being provided solely to facilitate the prospective purchaser s own due diligence for which the purchaser shall be fully and solely responsible. All information contained herein is confidential in nature, and recipient agrees not to photocopy, duplicate, forward, distribute, or solicit third party interest without written permission and consent. PROPERTY TOURS Available by request only PRICE & TERMS TBD by market 24

25 for more information Caleb is a broker at Dane Warren Real Estate and works with both residential and commercial clients in the Charlotte market. A Midwest native, Caleb has served in a variety of sales and digital marketing roles, including Wells Fargo and NBC. Caleb Troop calebtroop@gmail.com