Offering Memorandum HEMLOCK COURT 1700 Hemlock Street Longview, WA 98632 1
NON-ENDORSEMENT AND DISCLAIMER NOTICE Confidentiality and Disclaimer The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. Â 2017 Marcus & Millichap. All rights reserved. Non-Endorsement Notice Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers. ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS. HEMLOCK COURT Longview, WA ACT ID Y0210506 2
TABLE OF CONTENTS SECTION INVESTMENT OVERVIEW 01 Offering Summary Regional Map Local Map Aerial Photo FINANCIAL ANALYSIS 02 Rent Roll Summary Rent Roll Detail Operating Statement Notes Pricing Detail Acquisition Financing MARKET COMPARABLES 03 Sales Comparables 3
INVESTMENT OVERVIEW 4
EXECUTIVE SUMMARY NUMBER OF UNITS UNIT TYPE VITAL DATA Price $3,100,000 2017 PROFORMA Down Payment 25% / $775,000 CAP Rate 6.00% 7.38% Loan Amount $2,325,000 GRM 8.68 7.86 Loan Type Proposed New Net Operating Income $185,887 $228,865 Interest Rate/Amort. 4.44% / 30 Years Net Cash Flow After Debt Service 5.87% / $45,515 11.42% / $88,493 Price/Unit $65,957 Total Return 10.76% / $83,422 16.53% / $128,118 Price/SF $126.84 Number of Units 47 Rentable Square Feet 24,440 Number of Buildings 1 Number of Stories 4 Year Built 1994 Lot Size 0.28 acre(s) UNIT MIX 47 One Bedroom 520 47 Total 24,440 APPROX. SQUARE FEET OFFERING SUMMARY MAJOR EMPLOYERS EMPLOYER # OF EMPLOYEES St John Medical Center 2,000 St Johns Medical Center 1,640 Peterson Machinery Co 1,121 Kapstone 1,012 Foster Poultry Farms 800 Deere & Company 712 Walmart 669 Dick Hannah Toyota 625 Lcc 580 Nippon Dynawave Packaging Co 540 County of Cowlitz 537 Schwei Mark G MD Dabpm 437 DEMOGRAPHICS 1-Miles 3-Miles 5-Miles 2017 Estimate Pop 12,512 50,380 68,401 2017 Census Pop 12,378 49,489 67,266 2017 Estimate HH 5,795 20,322 27,172 2017 Census HH 5,805 20,287 27,107 Median HH Income $32,093 $35,531 $39,199 Per Capita Income $22,667 $21,178 $22,021 Average HH Income $46,649 $51,676 $54,787 # 5
INVESTMENT OVERVIEW OFFERING SUMMARY Hemlock Court Senior Apartments is a 47 unit age-restricted apartment community located in Longview, Washington. The property is currently subject to a regulatory agreement (extended use agreement) with the Washington State Housing Finance Commission Low Income Housing Tax Credit Program. Units are available to rent to seniors ages 55 and older. The property consists of 47 one-bedroom/one-bath units. All units are approximately 520 square feet and have dishwashers in the units. The regulatory agreement expires on 12/31/2023. At that time, the income and rent restrictions will no longer be applicable, and rents can be adjusted to market. The current market rate in Longview for an age restricted unit is $850 obtained from the one-bedroom rate at Fir at 17th, which is located one block south of the subject property. The building is elevator served and is fully sprinkled. Each unit is separately metered for electricity and the landlord is responsible for paying sewer, water, garbage and electricity, inclusive of common areas, units and water heaters. The common areas include a laundry room on each floor, sitting area on each floor and a community room on the second floor that is equipped with a kitchen for tenant gatherings. The property also has 19 garages that can be rented separately. The property is located on a quiet residential street near downtown Longview and is within walking distance to St. Johns (Peace Health) Hospital and a Safeway anchored shopping center. Given the close proximity to health services and shopping, and the strong historical occupancy, Hemlock Court Senior Apartments represents a unique opportunity for an investor to acquire a very well maintained building in the desirable submarket of Longview. Longview is the largest city in Cowlitz County with a population of approximately 37,000. It benefits from the greater Portland, Oregon area's low vacancy rates, while benefiting from lower utility rates and no state income tax. As Portland, Oregon and Vancouver, Washington continue to see increases in rents, Longview experiences growth in local rents as tenants search for more affordable housing options, inadvertently driving up the overall market. INVESTMENT HIGHLIGHTS 55-Plus Senior Apartment Well-Maintained Building Strong Location Near Shopping and Healthcare Amenities Units Separately Metered for Electricity 1994 Construction 6
PROPERTY SUMMARY OFFERING SUMMARY Property THE OFFERING Hemlock Court Price $3,100,000 Property Address Assessors Parcel Number 1700 Hemlock Street, Longview, WA SITE DESCRIPTION R020696 Number of Units 47 Number of Buildings 1 Number of Stories 4 Year Built/Renovated 1994 Rentable Square Feet 24,440 Lot Size Type of Ownership PROPOSED FINANCING 0.28 acre(s) Fee Simple First Trust Deed Loan Amount $2,325,000 Loan Type Proposed New Interest Rate 4.44% Amortization 30 Years Loan Term 10 Years Loan to Value 75% Debt Coverage Ratio 1.32 7
REGIONAL MAP 8
LOCAL MAP 9
AERIAL PHOTO *Safeway Located One Block East *PeaceHealth St. John Medical Center Located 0.5 Miles South 10
AERIAL PHOTO Longview Public Library Lake Sacajawea Hemlock Court R.A. Long Park PeaceHealth Hospital *Safeway Located One Block East *PeaceHealth St. John Medical Center Located 0.5 Miles South *Lake Sacajawea Located 0.5 Miles West 11
PROPERTY PHOTO 12
PROPERTY PHOTO 13
IN THE NEWS (Friday, June 8, 2017) OFFERING SUMMARY As rents continue to rise in Clark County, so does the wage needed to afford one. A full-time worker needs to earn $18.19 hourly to afford a studio apartment, $20.25 for a one-bedroom or $23.88 for a two-bedroom, according to the National Low Income Housing Coalition s annual Out of Reach Report. Affordable means rent is no more than 30 percent of a renter s income, but more than half of Clark County renters devote a larger chunk of their paychecks toward rent. The report released Thursday analyzed 2017 fair market rents and wages, showing what people can and cannot afford. There is nowhere in the United States where a full-time minimum wage worker can afford a two-bedroom apartment, the report said. With an $11 hourly minimum wage in Washington, rent would have to be $572 to be affordable. Or, that worker would need to work 66 hours weekly to afford even a studio apartment. The wage needed to afford a one-bedroom apartment in Clark County known as the housing wage has increased 58 percent since 2012. This has created a gap between what renters actually earn and what they can afford. By Patty Hastings Andy Silver, executive director of the Vancouver-based Council for the Homeless, said the problem is that wages aren t keeping pace with rents. The average hourly renter wage is $15.07. We are expecting rents to continue to rise in the near future, Silver said. There is an enormous amount of development in the pipeline, but because the rental market is so tight right now and because there s still a considerable net migration to the region, specifically to Vancouver/Clark County, we re hoping that the rate of increase slows down. Newly constructed apartments tend to be priced above fair market rents and impact the rest of the stock, pulling up prices for older apartment complexes, Silver said. He believes that rents are unlikely to stop increasing, much less decline anytime soon, which is affirmed by the report s findings. While the largest rent increases happened between 2015 and 2016, rents are still going up. CONTINUED 14 #
IN THE NEWS (Cont d) A growing number of his agency s clients are looking for roommates. Two full-time workers earning about $12 an hour could theoretically afford a two-bedroom apartment. But, Silver said, at the same time it s gotten harder to find those room-for-rent opportunities. A room may not be affordable to a renter whose only income is a monthly Social Security check of $781. Retired couple Don, 77, and Dawn Mongeau, 73, live off Social Security. They said they recently got a 60-day notice that the monthly rent on their three-bedroom house off Padden Parkway would increase from $860 to $1,250. After 12 years in the same house, they re looking to downsize to a smaller, more affordable place. Washington remains the 10th most expensive rental market in the United States. Seattle-Bellevue, Portland-Vancouver-Hillsboro, Ore., Tacoma, San Juan County and Olympia-Tumwater are the state s most expensive areas in that order. There are more than 1 million renter households statewide, including 58,058 in Clark County. Thirty-six percent of households here are renters, which is higher than the state average. Portland-Vancouver-Hillsboro, Ore., tops Oregon s list of its most expensive areas, followed by Corvallis, Hood River County, Eugene- Springfield and Albany. Oregon has the 18th most expensive rental market in the country. Most of the country s costliest rental markets are concentrated in California, particularly in and around San Francisco. Clark County s 2017 Rental Market Hourly housing wage (Rent = 30% of full-time income) Studio: $18.19 One-bedroom: $20.25 Two-bedroom: $23.88 Three-bedroom: $34.77 Four-bedroom: $42.08 OFFERING SUMMARY Monthly fair market rent Studio: $946 One-bedroom: $1,053 Two-bedroom: $1,242 Three-bedroom: $1,808 Four-bedroom: $2,188 15 #
FINANCIAL ANALYSIS 16
RENT ROLL SUMMARY FINANCIAL ANALYSIS 17
RENT ROLL DETAIL FINANCIAL ANALYSIS 18
RENT ROLL DETAIL FINANCIAL ANALYSIS 19
OPERATING STATEMENT FINANCIAL ANALYSIS Notes: Payroll and Administrative costs were normalized from the Actual 2017 amounts to reflect market expenses for a building of this size, location and vintage. 20
PRICING DETAIL FINANCIAL ANALYSIS 21
ACQUISITION FINANCING MARCUS & MILLICHAP CAPITAL CORPORATION CAPABILITIES MMCC our fully integrated, dedicated financing arm is committed to providing superior capital market expertise, precisely managed execution, and unparalleled access to capital sources providing the most competitive rates and terms. We leverage our prominent capital market relationships with commercial banks, life insurance companies, CMBS, private and public debt/equity funds, Fannie Mae, Freddie Mac and HUD to provide our clients with the greatest range of financing options. Our dedicated, knowledgeable experts understand the challenges of financing and work tirelessly to resolve all potential issues to the benefit of our clients. Closed 1,651 debt and equity financings in 2016 National platform operating within the firm s brokerage offices $5.1 billion total national volume in 2016 Access to more capital sources than any other firm in the industry WHY MMCC? Optimum financing solutions to enhance value Our ability to enhance buyer pool by expanding finance options Our ability to enhance seller control Through buyer qualification support Our ability to manage buyers finance expectations Ability to monitor and manage buyer/lender progress, insuring timely, predictable closings By relying on a world class set of debt/equity sources and presenting a tightly underwritten credit file 22
MARKET COMPARABLES 23
SALES COMPARABLES MAP HEMLOCK COURT (SUBJECT) 1 2 3 4 Mountain View Apartments Kellogg Park Fairways Aparments Washington Square Village Apartments SALES COMPARABLES IN ESCROW COMPARABLES 24
PROPERTY HEMLOCK COURT NAME SALES COMPARABLES IN ESCROW COMPARABLES SALES COMPS AVG IN ESCROW COMPS AVG SALES COMPARABLES Average Cap Rate Average GRM 9.0 13.00 8.1 7.2 6.3 Avg. 6.53% 6.51% 11.70 10.40 9.10 Avg. 9.32 Avg. 8.58 5.4 7.80 4.5 6.50 3.6 5.20 2.7 3.90 1.8 2.60 0.9 1.30 0.0 Hemlock Court Mountain View Apartments Average Price Per Square Foot Kellogg Park Fairways Aparments Washington Square Village Apartments 0.00 Hemlock Court Average Price Per Unit Mountain View Apartments Kellogg Park Fairways Aparments Washington Square Village Apartments $200.00 $180.00 $160.00 $90,000 $81,000 $72,000 Avg. $81,250 Avg. $71,512 $140.00 $63,000 $120.00 $100.00 Avg. $102.01 Avg. $88.43 $54,000 $45,000 $80.00 $36,000 $60.00 $27,000 $40.00 $18,000 $20.00 $9,000 $0.00 Hemlock Court Mountain View Apartments Kellogg Park Fairways Aparments Washington Square Village Apartments $0 Hemlock Court Mountain View Apartments Kellogg Park Fairways Aparments Washington Square Village Apartments 25
PROPERTY HEMLOCK COURT NAME SALES MARKETING COMPARABLES TEAM SALES COMPARABLES IN ESCROW COMPARABLES HEMLOCK COURT 1700 Hemlock Street, Longview, WA, 98632 MOUNTAIN VIEW APARTMENTS 2185 38th Ave, Longview, WA, 98632 1 KELLOGG PARK 1940-1960 33rd Avenue, Longview, WA, 98632 2 rentpropertyname1 rentpropertyname1 rentpropertyname1 Units Unit Type Offering Price: $3,100,000 47 One Bdr Price/Unit: $65,957 Price/SF: $126.84 CAP Rate: 6.00% GRM: 8.68 Total No. of Units: 47 Year Built: 1994 Units Unit Type Close Of Escrow: 8/21/2017 28 1 Bdr 1 Bath Sales Price: $10,580,000 87 2 Bdr 1 Bath Price/Unit: $81,385 2 2 Bdr 1.5 Bath Price/SF: $101.73 13 3 Bdr 1 Bath CAP Rate: 4.92% GRM: 11.38 Total No. of Units: 130 Year Built: 1979 Units Unit Type Close Of Escrow: 7/31/2017 1 Studio 1 Bath Sales Price: $2,250,000 15 1 Bdr 1 Bath Price/Unit: $57,692 21 2 Bdr 1 Bath Price/SF: $63.64 2 3 Bdr 1 Bath CAP Rate: 8.16% GRM: 6.80 Total No. of Units: 39 Year Built: 1970 rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1 NOTES Mountain View is a larger apartment community in the northwest corner of Longview. Subject property is in a better location given it's proximity to downtown, medical and retail services. This property is 18 years older than the subject property. NOTES This property is 27 years older than the subject property. Subject property location is superior given its access to downtown and medical services however the comparable is in close proximity to retail amenities. 26
PROPERTY HEMLOCK COURT NAME SALES MARKETING COMPARABLES TEAM SALES COMPARABLES IN ESCROW COMPARABLES FAIRWAYS APARMENTS 3858 Pennsylvania St, Longview, WA, 98632 3 WASHINGTON SQUARE VILLAGE APARTMENTS 825 32nd Avenue, Longview, WA, 98632 4 rentpropertyname1 rentpropertyname1 rentpropertyname1 Units Unit Type Close Of Escrow: 10/1/2016 1 Studio 1 Bath Sales Price: $14,790,000 67 1 Bdr 1 Bath Price/Unit: $75,459 79 2 Bdr 1 Bath Price/SF: $99.93 49 3 Bdr 1 Bath CAP Rate: 6.50% GRM: 7.55 Total No. of Units: 196 Year Built: 1978 Units Unit Type In Escrow 126 2 Bdr 1 Bath List Price: $10,400,000 1 Studio 1 Bath Price/Unit: $81,250 1 1 Bdr 1 Bath Price/SF: $102.01 CAP Rate: 6.51% GRM: 9.32 Total No. of Units: 128 Year Built: 1975 rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1 NOTES Comparable property is a larger apartment complex on the outskirts of town and is 19 years older than the subject property, nor as well located. NOTES This building is 22 years older than the subject property. Location of the subject property is superior given its access to downtown, medical and retail services. Comparable property is in a less desirable area. 27
PRESENTED BY Tony Cassie First Vice President Investments Portland Office Tel: (503) 200-2068 Fax: (503) 200-2010 anthony.cassie@marcusmillichap.com Licenses: OR 200506094, WA 105227 www.marcusmillichap.com