FOR SALE: 36 unit Apartment Complex $1,700,000

Transcription

1 FOR SALE: 36 unit Apartment Complex $1,700, Chef Menteur Highway New Orleans, Louisiana Presented By: Robert Hand, MBA, SIOR, CCIM Louisiana Commercial Realty New Orleans, Louisiana September 22, 2012

2 Table of Contents Page Property Location 3 Property Description 4-5 Comparable Properties 6-7 Supply Analysis 8 Demand Analysis 9 Financial Data 10 Traffic Count 11 Demographics Flood Map 17 Summary 18 Page 2 of 18

3 Property Location 36 unit apartment complex on Chef Menteur Highway, in New Orleans East The property is located in the eastern area of New Orleans, on Chef Menteur Highway near Interstate 10 which runs from Jacksonville, Florida to San Antonio, Texas. The eastern area of New Orleans enjoys traffic from both New Orleans Central Business District and French Quarter population as well as residents of Slidell, Louisiana, about 26 miles to the Northeast. Page 3 of 18

4 Property Description The 36 unit apartment complex is 5 two-story buildings, wood framed on a concrete slab with built-up roof, brick veneer and aluminum windows, composed of 27 two bedroom units, 748sf to 870sf, and 9 one bedroom units, 600sf. Zoned C-1. Page 4 of 18

5 Property Description The property received a major renovation in 2007, and is 85% leased, with 50% of the tenants in place the last two years. There are 39 parking spaces, 14 in front and 25 on the side. Each apartment includes a stove and refrigerator, 85% of the air conditioning units are new with a 10 year warranty on the compressor, and 100% percent of the hot water heaters are new. The roof is 1 ½ years old with a 10 year warranty. Page 5 of 18

6 Comparable Properties For Sale In Louisiana, there are 23 apartment properties for sale that have over 25 units. Of those, only 4 are in New Orleans and producing rental income. Cap Rates range from 8.90% to 15%. The lower cap rates apply to properties with only one bedrooms and smaller square footage units. The closest competitor is 6000 Chef Menteur which was renovated in 2007 but only 50% of the HVAC was replaced and only 30% of appliances replaced, and the one bedrooms are 600sf, two bedrooms are 750sf and 3 bedrooms are 1,200sf. Based on competing properties and taking into account the target property has a new roof, newer appliances, HVAC and fixtures and larger two bedroom square footage, we expect the market to be willing to pay a 12 cap rate for the target property. Address 2300 North Broad, New Orleans 6867 Tara Lane, New Orleans 4000 Florida, Mandeville Bristoe Avenue, Baton Rouge 6711 Tara Lane, New Orleans 400 Darby Lane, New Iberia 6000 Chef Menteur, New Orleans Source: Loopnet.com & LACDB.com # Units Building Size Price Price/Unit NOI NOI/Price (Cap Rate) 32 14,008 $1,950,000 $60, , % 20 12,760 $1,200,000 $60, , % 48 51,589 $3,300,000 $68, , % 32 36,608 $2,100,000 $65, , % 79 78,908 $4,875,000 $61, , % ,475 $3,450,000 $33, , % ,000 $3,150,000 $31, , % 6711 Tara Lane Apartments 6867 Tara Lane Apartments Page 6 of 18

7 Comparable Properties For Sale 4000 Florida Hayne Boulevard Bristoe Avenue 6000 Chef Menteur 2300 North Broad 400 Darby Lane Page 7 of 18

8 Supply Analysis-Nearby Apartments Many apartments in the area use Section 8 so the rent charged depends on the income of the tenant, but stated market rents for one bedrooms average $625 and for two bedrooms $850, with one apartment complex, Magnolia Gardens, below market rents with one bedrooms at $525 and two bedrooms at $575. Page 8 of 18

9 Demand Analysis-Nearby Universities Near four Universities and Lakefront Airport The property is centrally located among four universities in New Orleans: 1. William Carey College, 300 student population 2. Southern University, 3,140 student population 3. University of New Orleans, 12,000 student population 4. Dillard University, 950 student population Page 9 of 18

10 2012 Financial Data Income Calculation, Monthly Count SF Vacant Rent, Section 8 Rent, Market One bedroom 9 600sf 1 2@$815/mo $600/mo Two Bedroom sf to 870sf 1 12@$900/mo 11@$700/mo GRAND TOTAL $ 24,574 Net Operating Income, Annual Calculation Operating Expenses, Last 12 months ending March 2012 Actual Income, Last 12 months ending March 2012 Above Monthly Income, Annualized $ 294,888 Real Estate Taxes, estimated $7,632 Hazard Insurance $23,407 Flood Insurance $613 Property Management, Steve $9,000 $750/month Repairs-Labor, Home Depot, Paint, $5,145 Plumbing Phone $1,584 Trash Removal $3,096 Water $10,256 Electricity $3,049 Pest $819 $64,601 Net Operating Income $230,287 Source: All information is provided by the seller or staff and believed reliable but cannot be guaranteed. Purchaser to verify all information during inspection period. Page 10 of 18

11 Traffic Count At Interstate 10, the traffic count is 111,019 cars per day. In front of the apartment complex, at the corner of Majestic Oaks Drive and Chef Menteur, the traffic count is 37,024 cars per day. TARGET SITE Page 11 of 18

12 Demographics In the 5 minute drive time, population from 2000 to 2009 declined from 67,717 to 32,391, while the renter occupied housing percent declined from 46% to 22%. In the apartment renters prime age bracket of 20-35, there are 6,717 people in the 5 minute drive time area. The household growth rate from 2009 to 2014 is among the highest in the US at 7.28%. 5 minute drive time 10 minute drive time 15 minute drive time Population Density, , , ,759 Population Density, , , ,534 Per Capita Income, ,405 16,875 20,391 Average Household Income, ,743 42,560 50,039 Renter Occupied Housing Units, % 47% 45% Renter Occupied Housing Units, % 47% 45% Renter Occupied Housing Units, % 29% 33% Renter Occupied Housing Units, % 39% 39% 2009 Population, age ,426 15,489 38, Population, age ,291 27,241 67,181 Households By Income, minute drive time 10 minute drive time 15 minute drive time under $10,000 14% 16% 13% $10,000-$19,999 17% 18% 16% $20,000-$29,999 14% 15% 13% $30,000-$39,999 14% 12% 12% $40,000-$49,999 9% 9% 9% $50,000-$59,999 9% 8% 8% over $60,000 19% 19% 19% Households By Income, ,440 77, , to 2014 Household Growth Rate 7.28% 5.92% 3.34% Source: Site To Do Business, CCIM.com Page 12 of 18

13 Demographics The annual growth rate in the area of 5 minute drive time is 7 times the state and national average. Page 13 of 18

14 Demographics 5 Minute Drive Time Percent Employed By Industry Group 10 Minute Drive Time Percent Employed By Industry Group Source: CCIM.com, Site To Do Business Page 14 of 18

15 Demographics Population within a 5 minute drive time exceeds the US average for apartment rental age group, % of the population with a 5 minute drive time earns less than $40,000, creating demand for rental units since home buying is out of reach. Page 15 of 18

16 Demographics Within the 5 minute drive time, renter occupied housing units have declined more rapidly than the decline in population, suggesting there is more demand than supply for rental units. Population declined from 2000 to 2009 by 52% but renter occupied units declined by 57%. From 2009 to 2014, renter occupied household units is expected to grow 30%, but currently there is no new construction in the area, making demand more inelastic for existing units. 5 Minute Drive Time Renter Occupied Household Units Population, 5 minute drive time 12,600 5,401 7,781 67,717 32,391 45,693 Page 16 of 18

17 Flood Map Target Property is in flood zone B. Page 17 of 18

18 Summary The value of the property is usually calculated using three methods: income, cost and market approach. The cost approach is not applicable in this situation since it fails to take into account demand for the property. Using a combination of market and income approaches, the value of the property is best calculated using the income derived after expenses and applying a reasonable cap rate which depends on competing properties. There are competing properties with cap rates of 9% but the square footage of the two bedroom units is smaller, thereby limiting future rental income. There is one property priced at a 15% cap rate, but it has older HVAC and appliances and does not have a recently repaired roof. Therefore, a reasonable cap rate for this property should be approximately 11% to 12%. Using the formula: Value = Income Cap Rate assuming the income is the same, a higher cap rate results in a lower value. The average marketing period for commercial property in the New Orleans MSA ranges from 261 to 408 days, so for a more immediate sale, discount the property 10% to 15%. Incorporating the most recent net operating income of $230,236 from page 10, the market value should range from $1,900,000 to $2,100,000. Page 18 of 18