SANTANA COURT APARTMENTS 70 Units - Corvallis, Oregon OFFERING MEMORANDUM

Transcription

1 SANTANA COURT APARTMENTS 70 Units - Corvallis, Oregon OFFERING MEMORANDUM

2 INVESTMENT SUMMARY ASSET SUMMARY Property Location County Benton Total Units 70 Year Built 1975 Stories 2 stories Approximate Sq Ft 47,400 Average Unit Sq Ft 677 Acres 2.2 Acres HFO INVESTMENT REAL ESTATE Santana Court Apartments Western Boulevard Corvallis, Oregon PRICING Price $8,500,000 Per Unit $121,429 Per Bedroom $90,426 Per Sq Ft $179 Cap Rate 5.67% FOR MORE INFORMATION Greg Frick greg@hfore.com Rob Marton rob@hfore.com Jack Stephens jack@hfore.com Lee Fehrenbacher lee@hfore.com Todd Tully todd@hfore.com Tyson Cross tyson@hfore.com 2424 SE 11th Avenue, Portland, Oregon (503) Fax: (503) Brokers licensed in Oregon.

3 INVESTMENT SUMMARY Santana Court is a 70-unit apartment community adjacent to Oregon State University s campus in Corvallis, Oregon. The asset is directly south of the university s Reser Stadium and offers immediate access to U.S. Route 20, the Corvallis-Newport Highway. Santana Court has completed extensive exterior improvements including an entire envelope replacement, along with numerous interior updates such as carpet and cabinet replacement. Residents are offered diverse floor plans to choose from including studio, one- and two-bedroom flats, and two-bedroom townhomes. Residents can take advantage of secured bike storage, on-site laundry and off-street parking. Santana Court has demonstrated consistent rent growth and maintained a high historical occupancy. Current rents average $960 per unit, or $1.51 per square foot. Current rents have experienced an increase of 6.5% over 2016 average rents. Santana Court is expected to benefit from continued rent growth due to the guaranteed renter pool found at OSU. Investors will benefit from the extensive improvements as most of the major mechanical systems have been updated. Santana Court is an attractive asset with a strong, in-demand Corvallis location and is an exceptional investment opportunity. PROPERTY HIGHLIGHTS Diverse unit mix Significant interior and exterior improvements On-site laundry facilities On-site parking and secured bicycle storage Adjacent to Oregon State University campus DETAILED UNIT MIX Unit Type Unit Count Average Sq Ft Approx. NR Sq Ft % of Total Units 0 Bedroom / 1 Bathroom Studio , % 1 Bedroom / 1 Bathroom Flat , % 2 Bedroom / 1.5 Bathroom Townhome , % 2 Bedroom / 1 Bathroom Flat 12 1,040 12, % Totals / Averages , % 28.6% 37.1% 17.1% 17.1% Studio 1 Bedroom / 1 Bathroom Flat 2 Bedroom / 1.5 Bathroom TH 2 Bedroom / 1 Bathroom Flat SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 3

4 RECENTLY COMPLETED UPDATES Santana Court has completed extensive exterior updates. Complete exterior paint in 2010 New blacktop in 2009 and a new sealcoat in 2016 Updated landscaping in 2013 and the addition of a pet relief area New exterior signage and lighting Updated laundry room including new machines 4 HFO INVESTMENT REAL ESTATE

5 INTERIOR UPDATES Since 2008, Santana Court has been implementing interior improvements including: Laminate plank flooring New lighting and paint New kitchen cabinets and counter tops New kitchen appliances SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 5

6 CORVALLIS BACKGROUND Corvallis is recognized as one of the best small college towns in the country. The city s economic opportunities and community atmosphere are directly tied to the presence of Oregon State University. Located 85 miles south of Portland, Corvallis is bordered by the Willamette River and the Oregon Coast Range. Its name is derived from words meaning Heart of the Valley, its motto is Enhancing Community Livability, a testament to its position as a friendly, inclusive community in an outdoor paradise. OREGON STATE UNIVERSITY BENTON COUNTY Corvallis is located in Benton County, which is located between Salem and Eugene, west of I-5. The population of the Corvallis Metropolitan Area (which includes Albany and Lebanon, located in Linn County) increased by 4.8% between 2010 and The City of Corvallis had an estimated population of 57,110 people in With only 43.7% of housing units in Corvallis owner-occupied, and a median age of 26.6, Corvallis is a vibrant city of youthful renters, many associated with OSU. EDUCATION & EMPLOYMENT Corvallis is a very educated city, with 59.7% of residents having achieved a bachelor s degree or higher. The top employment sectors in Corvallis are manufacturing, professional/business services, education, and health services. Its largest employer is OSU, which employs 10,430 residents. Samaritan Health Services and the Hewlett-Packard Company are the area s two other top employers, with 2,632 and 1,550 employees, respectively. Other significant employers include the Corvallis Clinic, the Corvallis School District, and the City of Corvallis. BUSINESS DEVELOPMENT Corvallis has made a strong effort to attract top businesses to the area, offering tax incentives through its Enterprise Zone program. Three of the current Enterprise Zones include South Corvallis, Sunset Research Park, and the Hewlett-Packard Campus. The tax incentives are effective for three years, and are reserved for companies that develop previously unused land. 6 HFO INVESTMENT REAL ESTATE

7 CORVALLIS OREGON STATE UNIVERSITY Oregon State University, founded in 1868, is home to 11 colleges, 15 agricultural experiment stations, and 35 county extension offices. As of 2017, it has $441 million in external research funding. The university boasts 31,476 students, making it Oregon s largest university. 83% of students are undergraduates, while 15% are graduate students. Forbes ranks Corvallis as the #4 college town in the nation. As of 2016, the school s endowment was $482.5 million. Oregon s State strong engineering and science programs have made Corvallis the #4 most innovative tech hub in the nation, according to the website NerdWallet. OSU is the only university in Oregon with Carnegie Classifications for Highest Research Activity and Community Engagement, and is one of two land, sea, space, and sun grant institutions in the US. Oregon State is an NCAA Division 1 school, and part of the Pac-12 conference. The Beaver Nation of OSU athletics fans are enthusiastic supporters of the school s teams, and the rivalry between the OSU Beavers and Oregon Ducks dates back to 1894, making it one of the oldest college rivalries in the nation. The average age of an OSU student is 23, and 17% of undergraduates live in college housing. RESER STADIUM PARKS & RECREATION The city s Parks and Recreation Department oversees 2,000 acres of public green spaces, including parks, hiking trails, fields, and playgrounds. Corvallis and its surrounding area boast over 60 miles of hiking and biking trails, with beautiful vistas of mountains, waterfalls, and covered bridges. The City of Corvallis has been recognized by the League of American Bicyclists as a Gold Level Bicycle Friendly Community, and by SmartAsset as the 3rd most fitness-friendly American city for According to the 2016 American Community Survey, Benton County has the largest percentage of bike commuters in the nation, at 9.1%. SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 7

8 OREGON STATE UNIVERSITY Oregon State University is located ninety miles south of Portland in Corvallis, voted America s safest city in 2008 and OSU is the state s leading public research university (based on external research funding) and has Oregon s largest total enrollment. OREGON STATE UNIVERSITY Founded in 1856, OSU was the state s first school devoted to primary and preparatory education. The school offered its first college-level courses in OSU s modern-day name was adopted in 1961, by an order from then-governor Mark O. Hatfield. Its 15 colleges and multiple extension offices serve a student body of over 30,000 a diverse group that comes from all 50 states and 80 different countries. OSU offers over 200 undergraduate degree programs and 80 graduate degree programs 30 of which are offered online through the university s E-Campus, founded in OSU has received national recognition for the quality of its programs in such fields as conservation biology, agricultural sciences, nuclear engineering, forestry, fisheries and wildlife management, community health, pharmacy, and zoology. Over 300 clubs and activities are available to OSU s student body, including student government, sports, community service, social and environmental awareness, Greek life, theater, and music. 8 HFO INVESTMENT REAL ESTATE

9 LIFESTYLE CONVENIENCES Timberhill Park NW 29th St Brandis City Park NW Walnut Blvd Good Samaritan Regional Medical Center 99W 20 NW Circle Blvd NW King Blvd NW Grant Ave Corvallis Market Center NE 2nd st NW Harrison Blvd Corvallis High School NW Monroe Ave Trysting Tree Golf Club 34 Pioneer Park Santana Court Apartments Corvallis Country Club Crystal Lake Sports Fields and Kendall Natural Area SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 9

10 RENT COMPARABLES NW Witham Hill Dr NW Garfield Ave 20 NW Walnut Blvd NW Grant Ave NW Lincoln Ave NW Harrison Blvd Riviera Apartments La Gaviota Apartments The Arcade Apartments NW 2nd St SW 53rd St SW 35th St NW Van Buren Ave Santana Court Apartments Shadow Hills Apartments Oak Park Apartments 20 The Centurion 99W SE Peoria Rd SE Stahlbush Rd SW Country Club Dr SE Crystal Lake Dr 10 HFO INVESTMENT REAL ESTATE

11 RENT COMPARABLES S 1 SANTANA COURT APARTMENTS SW Western Boulevard, Corvallis, OR Total Units: 70 Avg Sq ft: 702 Year Built: 1975 Avg Rent: $954 Avg Rent/Sq ft: $1.36 Unit type Units Sq Ft Rent Rent/Sq Ft 0 BED / 1 BATH $755 $ BED / 1 BATH $914 $ BED / 1 BATH 12 1,050 $1,170 $ BED / 1.5 BATH $1,156 $1.29 Average $954 $1.36 THE ARCADE APARTMENTS 440 NW 23rd Street, Corvallis, OR Total Units: 22 Avg Sq ft: 900 Year Built: 1969 Avg Rent: $1,198 Avg Rent/Sq ft: $1.33 Unit type Units Sq Ft Rent Rent/Sq Ft 2 BED / 1 BATH $1,198 $1.33 Average $1,198 $1.33 SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 11

12 RENT COMPARABLES 2 3 SHADOW HILLS APARTMENTS 2740 SW Western Boulevard, Corvallis, OR Total Units: 72 Avg Sq ft: 813 Year Built: 2004 Avg Rent: $963 Avg Rent/Sq ft: $1.18 Unit type Units Sq Ft Rent Rent/Sq Ft 1 BED / 1 BATH $875 $ BED / 2 BATH 18 1,000 $1,225 $1.23 Average $963 $1.18 OAK PARK APARTMENTS SW 26th Street, Corvallis, OR Total Units: 101 Avg Sq ft: 780 Year Built: 1984 Avg Rent: $1,108 Avg Rent/Sq ft: $1.42 Unit type Units Sq Ft Rent Rent/Sq Ft 0 BED / 1 BATH $735 $ BED / 1 BATH $975 $ BED / 1 BATH $1,250 $ BED / 2 BATH $1,320 $1.37 Average $1,108 $ HFO INVESTMENT REAL ESTATE

13 RENT COMPARABLES 4 5 THE CENTURION 2740 SW Western Boulevard, Corvallis, OR Total Units: 26 Avg Sq ft: 465 Year Built: 1978 Avg Rent: $675 Avg Rent/Sq ft: $1.45 Unit type Units Sq Ft Rent Rent/Sq Ft 1 BED / 1 BATH $675 $1.45 Average $675 $1.45 LA GAVIOTA APARTMENTS NW 25th Street, Corvallis, OR Total Units: 32 Avg Sq ft: 810 Year Built: 1965 Avg Rent: $925 Avg Rent/Sq ft: $1.14 Unit type Units Sq Ft Rent Rent/Sq Ft 2 BED / 1 BATH $925 $1.14 Average $925 $1.14 SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 13

14 RENT COMPARABLES 6 RIVIERA APARTMENTS NW 23rd Street, Corvallis, OR Total Units: 53 Avg Sq ft: 656 Year Built: 1960 Avg Rent: $850 Avg Rent/Sq ft: $1.30 Unit type Units Sq Ft Rent Rent/Sq Ft 1 BED / 1 BATH $813 $ BED / 1 BATH $900 $1.24 Average $850 $ HFO INVESTMENT REAL ESTATE

15 OPERATIONS ANALYSIS PROJECTED OPERATIONS Income 2016 YE September 2017 YTD Annualized Projected Operations Note Scheduled Gross Rent $743,229 $770,282 $842,563 $12,037 1 Less: Concessions ($1,180) -0.2% ($800) -0.1% $0 $0 0.0% Less: Vacancy/Credit Loss $0 0.0% $0 0.0% -$42,128 -$ % 2 Net Rental Income $742,049 $769,482 $800,434 $11,435 Other Income $34,786 $47,653 $47,653 $681 Includes: Utility Billing (RUBs) $16, % $17, % $17,039 $ % 3 Plus: Laundry $3,766 $6,639 $6,639 $95 Gross Operating Income $776,836 $817,135 $848,087 $12,116 Expenses 2016 YE % GOI September 2017 YTD Annualized % GOI Projected Operations Per Unit % GOI Real Estate Taxes $53,668 $53,676 $55,029 $ % 4 Insurance $13,107 $11,136 $11,136 $ % Garbage $9,341 $10,009 $10,009 $ % Sewer/Water $17,878 $17,731 $17,731 $ % Electric $4,911 $5,094 $5,094 $73 0.6% Cable Internet $23,020 $22,710 $22,710 $ % Total Utilities $55,150 $55,544 $55,544 $ % 5 Administrative $54,627 $25,525 $18,927 $ % 6 Fee Management $31, % $32, % $33,923 $ % 7 Consulting Fee $15, % $30, % $0 $0 0.0% 8 On-site Payroll $57, % $53, % $53,781 $ % Landscaping $17,274 $11,153 $11,153 $ % Maintenance/Repairs $4,126 $16,434 $16,434 $ % Turnover $33,075 $46,564 $46,564 $ % Reserves $17,500 $17,500 $17,500 $ % 9 Total Expenses ($352,993) ($354,413) ($319,992) ($4,571) -37.7% Expenses per Unit ($5,043) ($5,063) ($4,571) % of Gross Operating Income 45% 43% 38% Net Operating Income (NOI) $423,842 $462,722 $528,095 SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 15

16 OPERATIONS ANALYSIS 1. RENTS Current scheduled rents at the Santana Court Apartments average $960 per unit, or $1.51 per square foot. Rents have trended positively over both 2016 and 2017 YTD average rents. Current scheduled rents are 7.8% per unit higher than 2016 YE average rents, and average 4.5% higher than September 2017 YTD annualized average rents. It is assumed rents will continue to trend upward. Rents are projected at a market average of $1,003 per unit, or $1.57 per square foot. The market rents are based on the increase achieved over the 2017 YTD average rents. $980 HISTORICAL RENT TRENDS $960 $960 $940 Average Rents $920 $900 $920 $880 $885 $860 $ YE September 2017 YTD Annualized Current Scheduled Rents 16 HFO INVESTMENT REAL ESTATE

17 OPERATIONS ANALYSIS Unit Type Unit Count Square Feet RENT ROLL ANALYSIS: SCHEDULED RENTS Lowest Achieved Rent Highest Achieved Rent % Diff Avg Scheduled Rent Avg Scheduled Rent per Sq Ft 0 Bedroom / 1 Bathroom Studio $555 $ % $787 $ Bedroom / 1 Bathroom Flat $585 $ % $879 $ Bedroom / 1.5 Bathroom TH $1,170 $1, % $1,185 $ Bedroom / 1 Bathroom Flat 12 1,040 $1,180 $1, % $1,198 $1.15 Totals / Averages $873 $1, % $960 $1.51 Unit Type Unit Count Square Feet RENT ROLL ANALYSIS: MARKET RENTS Avg Scheduled Rent Avg Scheduled Rent per Sq Ft Average Market Rent Average Market Rent per Sq Ft % Change 0 Bedroom / 1 Bathroom Studio $787 $1.87 $822 $ % 1 Bedroom / 1 Bathroom Flat $879 $1.75 $919 $ % 2 Bedroom / 1.5 Bathroom TH $1,185 $1.33 $1,238 $ % 2 Bedroom / 1 Bathroom Flat 12 1,040 $1,198 $1.15 $1,252 $ % Totals / Averages $960 $1.51 $1,003 $ % 2. VACANCY AND CREDIT LOSS OCCUPANCY AND TURNOVER The operating statements do not include a vacancy factor. Based on the location of the asset and the student demographic, it is assumed vacancy is low for the majority of the school year while the university is in session. Based on turnover, the property experiences higher vacancy in June and July when students are moving. The Santana Court Apartments is analyzed using a market rate vacancy of 5.0%, which represents an average for the entire year. Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Average Occupancy 100% 100% 100% 95% 100% 64% 91% 91% 100% 100% 100% 100% 100% 100% 100% 100% 100% 64% 73% 94% 94% Turnover UTILITY CHARGES (RUBS) The Santana Court Apartments charges residents for utilities. The total utility expense has been adjusted to include the internet cost. The RUBs collections totaled $17,039 for the September 2017 YTD annualized operations, an average $21 per month per unit and a capture rate of 33.8% of the total utility expense. SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 17

18 OPERATIONS ANALYSIS 4. PROPERTY TAXES The table below summarizes Santana Court s property tax values. Property tax values for the 2017/2018 tax year were published October 15 and taxes increased 2.47% over the previous year. In Oregon, property taxes are not reassessed on sale and are limited to a 3.0% annual increase at the state level. Property taxes paid prior to November 1 each year receive a 3.0% discount. The net property taxes for Santana Court for the 2017/2018 tax year total $56,731. With the 3.0% discount, net property taxes total $55,029 which are reflected in the operations analysis. PROPERTY TAX HISTORY Tax Year Account # 2014/ / / / $132 $115 $101 $ $327 $320 $330 $ $12,644 $12,978 $13,259 $13, $20,496 $21,037 $20,749 $21, $20,344 $20,882 $20,889 $21,425 Total $53,942 $55,332 $55,327 $56,731 % Change 5.22% 2.51% -0.01% 2.47% 5. UTILITIES The utilities for the Santana Court Apartments have been adjusted to include the wireless internet cost as a utility. 6. ADMINISTRATIVE The administrative costs were adjusted for costs associated with the current ownership including $4, in LLC accounting costs incurred in the 2017 YTD operations. 7. MANAGEMENT FEE The management fee reflects the average 4.0% charge found in 2016 and September 2017 YTD annualized operations. 8. CONSULTING FEE The consulting fee in 2016 is applicable to the current ownership and the improvements completed at the property. The consulting fee is not found in the 2017 YTD annualized operations and is not reflected in projected operations. 9. REPLACEMENT RESERVES Replacement reserves are required by most lenders and are estimated at $250 per unit, or $5,500 annually. 18 HFO INVESTMENT REAL ESTATE

19 SANTANA COURT APARTMENTS PRICING Price $8,500,000 Per Unit $121,429 Per Bedroom $90,426 Per Sq Ft $191 Cap Rate 5.8% Avg Unit Size ASSET SUMMARY Property 677 sq ft Santana Court Apartments Location Western Boulevard Corvallis, Oregon County Benton Total Units 70 Year Built 1975 Stories 2 stories Approximate Sq Ft 47,400 Average Unit Sq Ft 677 Acres 2.2 Acres 2.20 TOURS AND INQUIRIES Please do not disturb tenants. All tours and inquiries regarding Santana Court are to be directed to HFO Investment Real Estate at (503) Greg Frick greg@hfore.com Rob Marton rob@hfore.com Jack Stephens jack@hfore.com Lee Fehrenbacher lee@hfore.com Todd Tully todd@hfore.com Tyson Cross tyson@hfore.com 2424 SE 11th Ave Portland, OR Phone: (503) Fax: (503) This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Parties who receive this information from unauthorized parties shall not be recognized HFO Investment Real Estate LLC. Build your legacy is a service mark of HFO Investment Real Estate. Licensed in the states of Oregon and Washington. SANTANA COURT APARTMENTS 70 UNITS CORVALLIS, OR 19

20 Investment Real Estate Passion Collaboration Specialization 2424 SE 11th Ave Portland, OR (503)