offering memorandum - loopnet...this marketing brochure has been prepared to provide summary,...

PHEASANT COURT APARTMENTS7015 SE Lake Rd • Milwaukie, OR 97267

Offering Memorandum

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

Confidentiality and DisclaimerThe 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 NoticeMarcus & 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.

PHEASANT COURT APARTMENTSMilwaukie, ORACT ID Y0210294

TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01 Offering Summary Property Photos Regional Map Local Map

Aerial Photo

FINANCIAL ANALYSIS 02 Rent Roll Summary

Rent Roll Detail

Operating Statement

Notes

Pricing Detail

Acquisition Financing

Growth Rate Projections

Cash Flow

MARKET OVERVIEW 03 Market Analysis

Demographic Analysis

PHEASANT COURT APARTMENTS


5

INVESTMENT

OVERVIEW


#

EXECUTIVE SUMMARY

OFFERING SUMMARY

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

PCC Schlosser 2,000

Precision Castparts Corp 1,828

Safeway 857

County of Clackamas 814

Clackamas Dental Office 800

Willamett FLS Hlth Educatn Ctr 760

Providnce Wllmette FLS Med Ctr 730

Mattei Insurance Services Inc 715

Walmart 711

Small Structurals Bus Oper Div 700

Cash & Carry Smart Foodservice 650

Lewis & Clark College 645

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2016 Estimate Pop 9,113 111,414 266,913

2010 Census Pop 8,797 106,638 250,783

2016 Estimate HH 3,654 44,834 104,799

2010 Census HH 3,533 42,958 98,720

Median HH Income $63,709 $57,129 $61,732

Per Capita Income $29,571 $29,571 $33,149

Average HH Income $73,331 $73,068 $83,793

UNIT MIX

NUMBEROF UNITS UNIT TYPE APPROX.

SQUARE FEET

20 2 Bedroom/ 1 Bath 805

2 3 Bedroom/ 1 Bath 900

22 Total 17,900

VITAL DATA

Price $3,050,000 CURRENT YEAR 1

Down Payment 25% / $762,500 CAP Rate 6.73% 7.09%

Loan Amount $2,287,500 GRM 10.83 10.34

Loan Type Proposed New Net Operating Income $205,408 $216,378

Interest Rate / Amortization 4.30% / 30 Years

Net Cash Flow After Debt Service

9.12% / $69,566 5.05% / $38,536

Price/Unit $138,636 Total Return 14.14% / $107,793 10.29% / $78,440

Price/SF $170.39

Number of Units 22

Rentable Square Feet 17,900

Year Built / Remodeled 1970 / 2016

Lot Size 1.26 acre(s)

6


#

OFFERING SUMMARY

PROPERTY OVERVIEW

7

Pheasant Court Apartments is a 22-unit apartment asset located on the edge of Milwaukie, Oregon bordering Clackamas, Oregon. Constructed in 1970, the property consists of 20 two-bedroom/one-bathroom apartments that are 805 square feet and two three-bedroom/one-bathroom apartments that are 900 square feet each. 70% of the units are remodeled with some features such as new appliances, ceiling fans, laminate and carpet.

The city of Milwaukie is a suburb of Portland offering both a small town feel and close proximity to downtown Portland which is only 15 minutes away. Milwaukie is home to several of Oregon's largest and most iconic employers including, Blount International, Bob’s Red Mill, Dark Horse Comics and Precision Castparts Corporation. Shopping, grocery stores, bars and restaurants are all under a mile from the property. It is also approximately one and a half miles away from the Clackamas Mall. Mass transit including the MAX Light Rail Green and Orange Lines, as well as bus lines 152, 29 and 30 are all nearby. PROPERTY HIGHLIGHTS

• 22 Apartment Units

• Close to Shopping, Restaurants,

and Retail

• 15 Minutes From Downtown Portland

• Close to Mass Transit Via the MAX Light Rail Green and Orange Lines


#

OFFERING SUMMARY

§ Lower Expense Rates Compared to the City of Portland

§ Higher Rent Proven for Recently Remodeled Units

§ Outside Portland's Restrictive Laws for Landlords

INVESTMENT HIGHLIGHTS

An investor for Pheasant Court Apartments has the opportunity to capitalize on a rapidly expanding submarket with steadily increasing rental rates. Tenants looking for larger units with more amenities are attracted to this location as it supports an urban lifestyle on a moderate income. The location is near light rail and multiple freeways which offer many options for efficient transit to work and recreational activities. It is for these reasons that vacancy will remain extremely low and that an investor will see predictable revenue increases year over year.

The City of Portland has declared a state of housing emergency and temporary measures are in place as they finalize new laws which include requiring landlords to pay moving costs for tenants they would like to evict in addition to some forms of rent control. In the near future, this temporary measure is predicted to become law, alongside a handful of additional restrictions. This has created an environment where it is very difficult to keep costs low for rehab projects and thus has handicapped investors looking for value-add projects within the city limits. An investor in Pheasant Court Apartments would be able to capitalize on the central location of this asset and also avoid this impending legislation since it is located just outside of the city of Portland. The city of Milwaukie is less expensive in terms of operating expenses when compared to Portland as well.

The current owner has successfully remodeled 15 of the units and has proven a higher rent for these upgrades. The buyer is therefore set up for a successful value-add scenario by following this model and by strategic rehab as the units turnover. There are currently 3 vacant units that should be filled at time of closing.

INVESTMENT OVERVIEW

8

KITCHEN AND LIVING ROOM INTERIORS


9

INTERIORS


10

INTERIORS


11

Washer and dryer hook-ups


PROPERTY SUMMARY

OFFERING SUMMARY

PROPOSED FINANCING

First Trust Deed

Loan Amount $2,287,500

Loan Type Proposed New

Interest Rate 4.30%

Amortization 30 Years

Loan Term 10 Years

Loan to Value 75%

Debt Coverage Ratio 1.51

THE OFFERING

Property Pheasant Court Apartments

Price $3,050,000

Property Address 7015 SE Lake Rd, Milwaukie, OR

Assessors Parcel Number 432981

Zoning OC, Milwaukie

SITE DESCRIPTION

Number of Units 22

Year Built/Renovated 1970 / 2016

Rentable Square Feet 17,900

Lot Size 1.26 acre(s)

Type of Ownership Fee Simple

12

AERIAL PHOTO


13

AMENITIES MAP


14

NEIGHBORHOOD MAP


15


17

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


RENT ROLL SUMMARY

18

FINANCIAL ANALYSIS


19

RENT ROLL DETAIL

FINANCIAL ANALYSIS


OPERATING STATEMENT

20

FINANCIAL ANALYSIS


NOTES

21

Notes to Operating Statement

[1] All financials used are from a trailing twelve profit & loss statement unless otherwise noted[2] Real Estate Taxes: Clackamas County records for Current; a 3% percent increase is estimated from Current to Year 1[3] Repairs & Maintenance: the owner had lower repairs & maintenance in trailing twelve because he did major remodel prior. Market rates is used.[4] Turnover: the owner has been fixing up and turning over units. Market rate is used.[5] Operating Reserves: not included in the P&L so market rate is used.[6] Actual management fee was lower but market rate is used.

FINANCIAL ANALYSIS


PRICING DETAIL

22

ACQUISITION FINANCING


23

MARCUS & MILLICHAP CAPITAL CORPORATION CAPABILITIESMMCC—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 financingand work tirelessly to resolve all potential issues to the benefit of our clients.

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

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

WHY MMCC?

Closed 1,651 debt and equity

financings in 2016

FINANCIAL ANALYSIS


GROWTH RATE PROJECTIONS

24

FINANCIAL ANALYSIS


CASH FLOW

25


26

MARKET

OVERVIEW

MARKET OVERVIEW

PORTLAND-VANCOUVEROVERVIEW

1

The Portland-Vancouver metro is located near the confluence of the Columbia and Willamette rivers and stretches across the Oregon border into Washington State. The region is composed of Multnomah, Clackamas, Columbia, Washington and Yamhill counties in Oregon, and Clark and Skamania counties in Washington. Mount Hood and the Cascade Range stand to the east, and the Oregon Coast Mountain Range lies to the west. The metro contains approximately 2.4 million residents, with more than 600,000 people residing in Portland, the area’s most populous city.

MARKET OVERVIEW

METRO HIGHLIGHTS

HIGH POPULATION GROWTHThe Portland-Vancouver metro has recorded more than 20 years of positive net migration thanks to expanding industries.

ALTERNATIVE-ENERGY INDUSTRYAlternative-energy companies are attracted to the local educated workforce and research institutions and are locating within the region.

LOW BUSINESS COSTSThe cost of doing business is among the lowest on the West Coast, supported by no state income tax in Washington and no sales tax in Oregon.


MARKET OVERVIEW

ECONOMY§ Lower land costs than other West Coast metros, a skilled labor pool and affordable,

abundant power attract companies to the region. The favorable tax structure, with no state income taxes in Washington and no sales tax in Oregon, also lures businesses.

§ The metro’s economy has shifted from timber to industries that include athletic and outdoor activities, clean tech, advanced manufacturing and software.

§ A diverse group of companies based in the metro include Nike, Daimler, Oregon Iron Works, Intel and IBM.

SHARE OF 2016 TOTAL EMPLOYMENT

MAJOR AREA EMPLOYERS

Providence Health & Services

Oregon Health and Sciences University

Portland State University

Kaiser Foundation Health Plan of the NW

Legacy Health System

Nike, Inc.

Wells Fargo

Fred Meyer Stores

U.S. Bank

Intel Corp.* Forecast

2

MANUFACTURING11%

GOVERNMENT

HEALTH SERVICESEDUCATION AND

+OTHER SERVICES

4%

LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES

18%AND UTILITIES

TRADE, TRANSPORTATION CONSTRUCTION

PROFESSIONAL ANDBUSINESS SERVICES

2%INFORMATION

16%

5%

14% 10% 6%

15%


MARKET OVERVIEW

DEMOGRAPHICS

SPORTS

EDUCATION

ARTS & ENTERTAINMENT

§ The metro is expected to add nearly 130,000 people through 2021, resulting in the formation of nearly 50,000 households.

§ A median home price well-above the U.S. level has afforded 60 percent of households to own their home, which is below the national rate of 64 percent,.

§ Of residents age 25 and older, 34 percent hold bachelor’s degrees, and 12 percent have also obtained a graduate or professional degree.

The metro contains more than 37,000 acres of parks and provides numerous opportunities

for outdoor enthusiasts, including activities at Mount Hood and on the Hood River. The

metro lies 60 miles east of the Pacific Ocean, with 330 miles of beaches along the Oregon

coast. Professional sports teams represent basketball, soccer and hockey. Cultural

activities can be found at various local venues, including the Portland Art Museum, World

Forestry Center Discovery Museum and the Portland Children’s Museum, and plays are

staged at the Portland Center for the Performing Arts. Major colleges and universities

including Lewis and Clark, Pacific University, the University of Portland and Portland State

University. The University of Oregon and Oregon State University are nearby.

37.72016

MEDIAN AGE:

U.S. Median:

37.7

$60,9002016 MEDIAN

HOUSEHOLD INCOME:

U.S. Median:

$54,500

2.4M2016

POPULATION:

Growth2016-2021*:

5.2%

933K2016

HOUSEHOLDS:

5.7%

Growth2016-2021*:

QUALITY OF LIFE

3

2016 Population by Age

0-4 YEARS

6%5-19 YEARS

19%20-24 YEARS

6%25-44 YEARS

30%45-64 YEARS

26%65+ YEARS

13%

* Forecast Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s Analytics; U.S. Census Bureau


MARKET OVERVIEW


30

PORTLAND METRO AREA

Substantial Rent Growth Drives Demand In Portland’s Secondary Submarkets

High cost of homeownership fuels rental demand. Portland’s lower cost of doing business compared

with other West Coast metros and its highly skilled workforce will underpin hiring in 2017. Companies

including Nike, DiscoverOrg and Simple Financial are expanding local operations, bringing higher-paying

jobs to the metro and driving household formation. Despite rising incomes, the metro’s skyrocketing home

prices and the cost of a down payment will push many individuals to apartments. Developers have

responded, delivering thousands of new rentals. Several Class A complexes designed to target higher-

income households are slated for completion this year. While completions will moderate from the cycle high

registered last year, vacancy will inch up as new complexes begin to lease. As vacancy remains below 4

percent and demographics strengthen, apartment rents will register another year of strong growth.

Tenant demand for lower rents draws buyers to suburban properties. Tight apartment vacancy and a

healthy economy will maintain investor interest in Portland. As rents rise for an eighth consecutive year,

some tenants will seek units in secondary submarkets for affordability, fueling buyer demand in these areas.

In particular, value-add opportunities within Gresham, Salem and Vancouver, where higher rents can be

captured, will be targeted. On average, a well-located Class B/C asset in these locales will trade with yields

in the low-5 to high-6 percent range while a Class A property in central Portland can start as low as 3

percent. Metrowide, multifamily assets typically trade with cap rates in the mid-5 percent span. Additionally,

Portland’s average yield is nearly 150 basis points higher than the average in California markets, motivating

out-of-state investors to make acquisitions in the area. The competitive bidding environment may place

further downward pressure on cap rates and elevate property values this year.

*Estimate ** ForecastSources: Marcus & Millichap Research Services; BLS; CoStar Group, Inc.

MARKET OVERVIEW


31

PORTLAND METRO AREA

2017 Market Forecast

Portland climbs two rungs on its sub-4 percent vacancy and one of the

highest rates of rent growth nationwide.

This year, Portland employers will add 26,000 jobs. In 2016, roughly 28,000

positions were created, primarily in the trade, transportation and utilities

sector.

Developers are on track to complete more than 4,600 apartments in 2017.

Last year, 6,500 units were added to inventory.

The vacancy rate will tick up 20 basis points this year to 3.6 percent as

completions enter a period of lease-up. In 2016, the rate rose 30 basis

points.

The average effective rent will surge 7.1 percent in 2017 to $1,371 per

month, a decline from last year’s 10.1 percent increase.

Corporate expansions will generate new housing needs and elevate the

performance of assets near major employment hubs. Additionally, high

returns will lure California buyers to Portland.

* Estimate ** ForecastSources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics

NMI Rank

6, up 2 places

Employment

up 2.2%

Construction

4,600 units

Vacancy

up 20 bps

Rent

up 7.1%

Investment

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2016 Experian

Created on June 2017

POPULATION 1 Miles 3 Miles 5 Miles§ 2021 Projection

Total Population 9,540 114,899 277,342

§ 2016 Estimate


§ 2010 Census


§ 2000 Census


§ Daytime Population

2016 Estimate 8,983 110,399 239,570

HOUSEHOLDS 1 Miles 3 Miles 5 Miles§ 2021 Projection

Total Households 3,889 46,498 109,182

§ 2016 Estimate


Average (Mean) Household Size 2.46 2.44 2.49

§ 2010 Census


§ 2000 Census


Growth 2015-2020 6.43% 3.71% 4.18%

HOUSING UNITS 1 Miles 3 Miles 5 Miles§ Occupied Units

2021 Projection 3,889 46,498 109,182

2016 Estimate 3,746 46,319 107,630

Owner Occupied 2,329 26,523 66,194

Renter Occupied 1,326 18,311 38,605

Vacant 91 1,485 2,831

§ Persons In Units

2016 Estimate Total Occupied Units 3,654 44,834 104,799

1 Person Units 27.23% 28.70% 27.20%

2 Person Units 35.60% 34.31% 34.41%

3 Person Units 16.39% 16.22% 16.39%

4 Person Units 11.63% 11.85% 12.87%

5 Person Units 5.64% 5.39% 5.48%

6+ Person Units 3.50% 3.54% 3.66%

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles§ 2016 Estimate

$200,000 or More 2.24% 2.79% 5.08%

$150,000 - $199,000 4.06% 4.26% 5.04%

$100,000 - $149,000 16.86% 14.42% 15.47%

$75,000 - $99,999 17.49% 14.73% 14.46%

$50,000 - $74,999 19.06% 19.94% 19.64%

$35,000 - $49,999 13.67% 14.12% 13.21%

$25,000 - $34,999 7.79% 9.78% 8.94%

$15,000 - $24,999 9.64% 9.61% 8.44%

Under $15,000 9.19% 10.33% 9.73%

Average Household Income $73,331 $73,068 $83,793

Median Household Income $63,709 $57,129 $61,732

Per Capita Income $29,571 $29,571 $33,149

POPULATION PROFILE 1 Miles 3 Miles 5 Miles§ Population By Age

2016 Estimate Total Population 9,113 111,414 266,913

Under 20 23.01% 23.17% 23.92%

20 to 34 Years 18.41% 20.84% 20.28%

35 to 39 Years 5.72% 6.72% 7.29%

40 to 49 Years 12.17% 12.94% 13.89%

50 to 64 Years 21.38% 20.44% 20.36%

Age 65+ 19.31% 15.88% 14.25%

Median Age 42.33 39.45 38.97

§ Population 25+ by Education Level

2016 Estimate Population Age 25+ 6,443 78,370 186,729

Elementary (0-8) 0.64% 1.33% 1.73%

Some High School (9-11) 6.81% 6.93% 6.24%

High School Graduate (12) 29.05% 27.65% 23.16%

Some College (13-15) 30.51% 30.10% 26.32%

Associate Degree Only 9.23% 9.47% 9.02%

Bachelors Degree Only 15.42% 16.37% 21.17%

Graduate Degree 7.53% 7.49% 11.62%

§ Population by Gender

2016 Estimate Total Population 9,113 111,414 266,913

Male Population 47.89% 48.98% 48.96%

Female Population 52.11% 51.02% 51.04%

32

IncomeIn 2016, the median household income for your selected geography is $63,709, compare this to the US average which is currently $54,505. The median household income for your area has changed by 25.23% since 2000. It is estimated that the median household income in your area will be $74,378 five years from now, which represents a change of 16.75% from the current year. The current year per capita income in your area is $29,571, compare this to the US average, which is $29,962. The current year average household income in your area is $73,331, compare this to the US average which is $78,425.

PopulationIn 2016, the population in your selected geography is 9,113. The population has changed by 27.99% since 2000. It is estimated that the population in your area will be 9,540.00 five years from now, which represents a change of 4.69% from the current year. The current population is 47.89% male and 52.11% female. The median age of the population in your area is 42.33, compare this to the US average which is 37.68. The population density in your area is 2,892.82 people per square mile.

HouseholdsThere are currently 3,654 households in your selected geography. The number of households has changed by 32.78% since 2000. It is estimated that the number of households in your area will be 3,889 five years from now, which represents a change of 6.43% from the current year. The average household size in your area is 2.46 persons.

EmploymentIn 2016, there are 10,584 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 62.98% of employees are employed in white-collar occupations in this geography, and 37.13% are employed in blue-collar occupations. In 2016, unemployment in this area is 5.08%. In 2000, the average time traveled to work was 24.00 minutes.

Race and EthnicityThe current year racial makeup of your selected area is as follows: 84.09% White, 1.57% Black, 0.25% Native American and 3.77% Asian/Pacific Islander. Compare these to US averages which are: 70.77% White, 12.80% Black, 0.19% Native American and 5.36% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 10.87% of the current year population in your selected area. Compare this to the US average of 17.65%.

PROPERTY NAME

MARKETING TEAM


HousingThe median housing value in your area was $279,771 in 2016, compare this to the US average of $187,181. In 2000, there were 1,940 owner occupied housing units in your area and there were 812 renter occupied housing units in your area. The median rent at the time was $593.

Source: © 2016 Experian

DEMOGRAPHICS

33

www.MarcusMillichap.com

Michael Shall

Senior AssociateAssociate Member, National Multi Housing GroupPortland OfficeTel: (503) 200-2067

Fax: (503) 200-2010

[email protected]

License: OR 201102054

Bouba Traore

AssociateAssociate Member, National Multi Housing GroupPortland OfficeTel: (503) 200-2061

Fax: (503) 200-2010

[email protected]

License: OR 201215654

P R E S E N T E D B Y

offering memorandum - loopnet...this marketing brochure has been prepared to provide summary,...

Documents