Multifamily 2-8 Unit Market Update

This is Jonathan Aceves with an update on Multifamily Transactions in the 2-8 Unit Space for 2019. 

 

Overall, the market was steady in small multifamily for the year.   The average price per door was $58,256, with an average Gross Rent Multiplier of 7.56.  Anecdotally, we have seen overall interest in Downtown multifamily increase significantly.  

 

We reviewed 36 transactions from 2-8 Units, with an average of $58,256 per door, and an average GRM of 7.56.  Average price per foot was 64.07. We did find that GRM went down slightly over the year.  There was one outlier, and when removed the Average GRM was 7.77. 

 

We’ve shown Days on Market by this box and whisker graph, and it shows that 50% of all transactions closed betwen 50-150 days.  There were some transactions that closed over a much longer period, one over 300 days and one at over 700 days.  The overall average was 116 Days.  I think what this shows is that if priced correctly and adequately marketed a multifamily property should close within 4-5 months.  

What do you make of the numbers?  What’s your opinion of the market?  

 

Thanks for reading!  The link to our excel information is below, also you can download selected downtown comps in the report below.  

 

Link to Spreadsheet with details on Multifamily 2-8 Unit Comps: 4th Quarter Market Report

Link to Basic Multifamily Underwriting Spreadsheet: Basic Multifamily Underwriting Worksheet

 

155-Unit Downtown Opportunity Zone Apartment Project Moving Forward–Continued Growth Downtown

 

Artist Rendering of Millhouse Station
Artist Rendering of Millhouse Station

 

Downtown Augusta continues to announce new projects and developments! Developer Ivey Development announced Friday they had closed on the land for a new downtown apartment complex.  This new development is in the immediate vicinity of two other ongoing development projects on Telfair Street, and three blocks from the newly completed Georgia Cyber Center.  

 

Ivey Development, developer for the 155-Unit Apartment Complex at 11th and Fenwick in Downtown Augusta, announced on Friday December 6th that they had closed on he land and were moving forward with the project. McKnight Construction has been selected as the General Contractor.  The land was purchased by Ivey Development from Jeff and Joey Hadden, who also own Phoenix Printing across the street.    

 

1024 Telfair Street – Augusta Office Solutions

This project is 500 feet from Augusta Office Solutions’ new building at 1024 Telfair,and a block from the city’s new fire station at 928 Telfair Street.   RD Brown is the general contractor on 1024 Telfair Project, which appears to be moving along nicely. 

 

This is great news for the City of Augusta!  155 high-end apartments will help fill in the housing gap created by continuing downtown developments, and will continue to press demand for retail and office space in the Central Business District.  

 

Congrats to Beman Group and Ivey Homes on what looks to be an incredible project! McKnight Construction Company, Inc. will serve as the general contractor. Trotter-Jordan represented the seller.  

 

What is your opinion of the downtown momentum?  What do you think we will see in 2020?

 

Augusta Chronicle Article: https://www.augustachronicle.com/business/20191206/ivey-development-acquires-downtown-land-to-build-155-unit-apartment-community

 

MKnight Construction Website: https://www.mcknightconstructionco.com/#1

 

Ivey Development Website: https://www.iveyhomes.com/

 

Article about the new fire station: https://www.augustachronicle.com/news/20190109/new-fire-station-slated-for-telfair-street

 

Update from RD Brown on construction of Augusta Office Supplies’ Telfair Street Building: https://www.browntrusted.com/overview/awards-accolades/

132-Unit Student Multifamily Housing Development given Preliminary Approval

2715 N Davidson
Photo is of the 2715 N Davidson Apartment Development, another project that College Acres was involved with.  –Charlotte Business Journal

 

 

132-Unit Student Multifamily Housing Development on Druid Park Ave given preliminary approval. Myrtle Beach Developer College Acres has proposed to build a four-story #apartment development aimed at Paine & AU students. David Despain, the developer, has developed a number of similar properties, and was also involved in working with Coastal Carolina University for the development of the HTC Center in Conway, SC.

 

It is great to see developers take notice of what’s happening in Augusta. This looks like a great project and should have a big positive impact in that neighborhood!

 

Augusta Chronicle Article: https://www.augustachronicle.com/news/20191202/developer-proposes-student-housing-complex-on-druid-park-ave

 

Info on Charlotte Project: https://www.bizjournals.com/charlotte/blog/real_estate/2015/07/developers-planning-147-unit-apartment-complex-in.html

 

Info on Wilmington Project: https://www.starnewsonline.com/news/20190103/more-student-housing-proposed-near-uncw

Wilmington Project Approved in October: https://www.wect.com/2018/10/18/wilmington-planning-commission-approves-college-acres-townhome-development/

 

Horry City Council Minutes RE: Tiff Bonds for HTC Center:

https://www.horrycounty.org/Portals/0/Docs/council/archives/min04-0518.pdf

Huge Economic Impact of Topgolf and Dave & Busters for Augusta

 

What are the economic implications of Topgolf and Dave & Buster’s coming to Village at Riverwatch?  According to projections from Augusta Economic Development Authority reported by Damon Cline, these two projects are expected to add $15 million to the local tax base, and add 200 jobs and generate $1M in sales tax revenue.  Hats off to the Economic Development Authority, who was able to help attract these developments without tax incentives, and the only expense is a $250K commitment  to construct the public road that will give these sites access.  

 

What do you think will be the impact of these new developments?  Comment below:

 

Additional Resources:

More Details in Great Article by Damon Cline on this Subject

Village @ Riverwatch website & contact for Jordan Trotter Real Estate who handles leasing

Topgolf Website

Dave & Buster’s Website

 

 

September Industrial Market Report

 

Hi!  Today we’re going to be discussing the Industrial Market Update.  There’s been a few notable sales, the Keebler building sold on 7/28 for 7.4M, $16 per foot, and 1431 Marvin Griffin sold on 6/27 for 2.7M (Jay Willingham handled that one).   On the leasing side a few large leases have been done, the largest is at 4301 Evans To Locks, leased over 400K SF to start in Feb, Acoustic Insulation Techniques leased 75,000 SF in Augusta Forward Drive in June of 2019,and 48KSF leased in April at 1595 Columbia Hwy N in Aiken.  Overall demand for flex is strong, and with the Hock family putting some of their portfolio on the market there is availability of good multi-tenant industrial buildings.  See below for more resources, including details on notable sales and leases, and a link to an overall industrial market report.  

 

Recent Notable Industrial Transactions:

Sales:

  • 2.7M, $32.58/SF, 75,200 SF, sold on 6/27/19 — Electrical Equipment Bldg–1431 Marvin Griffing Rd Marvin Griffin Comp
  • 3M, $47/SF, 64,256 SF, Sold on 5/14/19, Advanced building Advanced Autoparts
  • 7.4M, $16/SF, 453,708SF, Sold on 7/28/19, Keebler Facility – Marvin Griffin rd: 1550 Marvin Griffin Comp
  • 650K, 11,800SF, $55/SF, Sold on 8/1/2019, 3715 Benchmark Warehouse  Benchmark

Leases:

 

Additional Resources: 

Industrial Market Report 9.20.19

September 2019 Multifamily Update

There’s a lot of activity in Augusta’s Multifamily Market!  We’ve already reported that there are over 1500 apartments in development around Augusta, and Damon Cline published an article with even more projects and details two weeks ago.  Click here to download the Costar Multifamily Report, which has some great information about vacancy rates, rental rates, and the overall economy.  Below we’ve included listings from the MLS, Costar and Crexi if you’re looking to buy or want to keep up with the market.  Many of these properties trade off-market, so give us a call if you’re looking for off-market opportunities.  

 

Subscribe to our Multifamily Newsletter–click here! 

 

MLS Multifamily Search (Mostly Duplexes & Quads)

Augusta Market Multifamily Costar Listings

Georgia Costar Listings

South Carolina Costar Listings

North Carolina Costar Listings

Georgia CREXi Multifamily Inventory Export

SC CREXi Multifamily Inventory Export

NC CREXi Multifamily Inventory Export

 

Recent Notable Sales:

926 West Apartments, McKinley Inc. to McDowell Properties for 26.5M, $94.6K/Unit

Crane Creek Apartments, Southeastern Development to PASSCO Companies, $58.0M, $193K/Unit, 5.73% CAP

Ironwood Apartments, LIV Apartment Partners to Graycliff Capital Partners, $51.9M $185K/unit, 5.4% CAP

Metropolitan Augusta to Lexerd Capital – Sold Aug 26th, Terms not disclosed (and not yet public record)

 

What are your thoughts about the Multifamily Market?  Overheated?  Just getting started?  What activity are you seeing?  What do you think about rental rates?  We’d love to hear your comments! 

Car Wash Underwriting – Commercial Real Estate

 

 

Have you ever wondered how to evaluate a coin-operated car wash?  Today we’re going to underwrite a car wash.  Someone called me and asked me to give them an opinion of value on their car wash. 

I always start by evaluating the financial statements.  In this case I requested their last two year’s tax returns, in this case Schedule C’s.  My goal is to arrive at the NOI.  Remember, generally tax returns are drafted to minimize tax liability, so often they are inflated, or include things such as travel and deductible meals that you likely wouldn’t include on an operating statement. Here you see my revision of the Schedule C’s–depreciation and mortgage interest are both non-operating expenses that we’re going to remove from the operating Statements. 

Then I’m going to create a pro-forma, which is my guess as to the actual operation of the car wash.  You can see here that I’ve added some expenses–lawn care and utilities, and taken the average of the actuals on some of the other items, and then I look across the three different lines to get a guess of what a potential buyer might expect. 

Then I’m going to call a few lenders and get their guess on what financing assumptions will look like.  I want to know what the term, interest rate, and LTV might be for a loan on this asset.  In this case, two lenders I called, both guessed that at 75% LTV is likely, 5.65% interest, and 15 year term, and target DSCR of 1.5.   

I enter these loan assumptions and then I review the value indicators.  How does the property cash flow?

Now I review industry specific resources–you can use the Business Reference Guide or similar resource.  It tells tells me a general rule of thumb is that car washes trade at 4 times gross sales–that would put this car wash at between $160,000 and $215,000.  Another guideline is “cost of real estate, equipment, improvements, plus 2 to 3 times EBIT“.    I’m also told that a market average is that operating expenses should be between 25 and 40 percent of Gross Sales (our numbers put it between 18% and 37%).

Another consideration on this property would be the value as a development site.  What are land comps selling for?  Is it suitable for commercial development?  If so, there is a chance the land is worth more than the car wash–keep that in mind.   

So now I have a pretty good ballpark guess on this car wash.  If I set the price down under $200K, the cash on cash-on-cash is between 26%-60% (obviously too high), and the Cap Rate is between 22% and 14%.  At $300K, the cash-on-cash is too low–7.55%, and DSCR is tight at 1.25.  My guess on this is that 250K is about right.  Remember, this is higher than the rule of thumb from the Business Reference Guide–but still leaves a decent margin for a potential buyer.  

What are your thoughts?  Have you ever owned or sold a coin-operated car wash?  Do you have any questions?  Feel free to comment below!  

 

Additional info:

Car Wash Underwriting Spreadsheet

Dultmeier Sales – Good information

Auto Care Forum 

Parsons Corporation to lease space in Georgia Cyber Center

Parsons Corporation–A Defense, Security, Infrastructure and Intelligence Company with 16,000 employees and $3.6 Billion in Revenue–is the latest company to lease space in  the Georgia Cyber Center.  It is estimated that they will create twenty-six jobs with the potential for more in the future.  

 

According to Wikipedia, Parsons Corporation provided jet propulsion facilities during the cold war, and worked with nuclear, chemical weapons, as well as working in systems design for aircraft, missiles, and rockets.  Today Parsons focuses on defense, infrastructure, and security, and handles many federal and municipal agencies along with private customers. 

 

According to their website, Parsons has worked with the US Government for over 30 years providing technical and cyber intelligence solutions.  The Cyber Center will be a great match for them and they will be a welcome addition to Augusta!  

 

What are your thoughts about Parsons coming to Augusta?  It seems the nation’s intelligence and cyber contractors are coming to Augusta!  Do you think they will bring their whole operations here or just small teams? 

 

Additional Links:

Cyber Center Website
Press Release

 

 

Timber Thinning and Subdivision Case Study: Magruder Tract

In this video we talk about timber thinning and land subdivision at Magruder Place, a 90-acre tract of land adjacent to Lights of The South on Louisville road in Grovetown, GA.  

The Magruder Tract was a 90 acre tract, and the owner enlisted the Brokers at Presley Realty to sell the property.   he property had merchantable timber, but had limited access as an adjacent property controlled the frontage.  We marketed heavily to developers and builders with little success.  We began to discuss the possibility of subdividing, and after meeting with the owner, we proceeded with a plan to subdivide. 

 

First, we met with the neighbors and negotiated a land swap, where the adjacent owners increased squared off their property and our client now had road frontage and access to Louisville Road.  This resolved the issue of the north side of the property not having road access.  Travis then worked with Columbia County and the surveyor to create a subdivision concept everyone was happy with. 

Travis also oversaw the thinning operation.  Having been in forestry for many years, Travis has lots of experience with timber thinning, and was careful to choose a timber company that he knew would be careful with the property, and could chip and mulch the debris.  Price McWhorter handled this project, and did a great job.  This company also oversaw repairs to the pond dam, which was in disrepair. 

The result was a beautifully manicured property, which was visible from the street, with a gorgeous pond.  The lots sold quickly, and as of now we have one remaining.  The owner will at the current price sell the lots for over 1 million dollars.   

 

Do you have any experience subdividing large tracts of land?  Have you ever performed a real estate cut on your land?  Do you have any good or bad stories of working with logging crews?  We’d love to hear from you!  

 

Helpful Links: 

North Georgia Timber

McWhorter Logging (Great GA Logging Contractor)

Story about Josh Key (Beech Island Timber)

Josh Key was honored as FRA’s 2019 Outstanding Logger of the Year

Beach Island Timber’s Website

3rd Quarter 2019 Olde Town Market Update

There are a lot of good things happening in Olde Town!  I had the privilege of turning over the role of President of the Olde Town Neighborhood Association to Bob Trescott, who’s been serving as Vice President.  As the father of five and brand new twins, I needed to trim my commitments, but I was encouraged to see lots of new and excited people with fire and energy to move the neighborhood forward!   

As far as real estate goes, many homes are under renovation and we’ve seen some notable sales driving up the prices.  The Renaissance Apartments at Third and Broad were foreclosed on by HUD last week, and likely will be sold as market-rate apartments in the next few months–that will be great for the neighborhood. We’ve definitely seen the prices rising–in 2016 and 2017 the average price per foot was (38) per square foot, and in 2019 so far it is (72) per square foot!  We are definitely seeing Gentrification is coming to the neighborhood. Also Olde Town Apartments is continuing to renovate and lease units.  

 

Recent Notable Sales in Olde Town:

102 Third Duplex, Sold to Jeremy Rueggeberg for $165,000 on 5/16/19

222 Ellis, Sold to Kelsey Kalyta for $122,870. (Not yet Recorded, should be soon)

220 Broad Sold to James Demons for $61,465.  They are already renovating and this will be a great home.  

224 Greene, Sold to Emily Beatty for $139,000 (Not yet Recorded, should be soon)

235 Broad. Sold to Shivaun Delisser for $115,000 (Not yet Recorded, should be soon)

Under Contract: 307 Broad.  This was listed by Atul Sinha, appears to be under contract at almost full price.

Under Contract: 224 Broad.  This duplex is under contract at almost full price, and should be closing in the next two weeks. 

 

Rents are also rising.  We’re estimating a $0.20 PSF increase on average across rental units in Olde Town over the last 2 years.  

 

Here’s links to two properties we have listed in Olde Town:

407 Third Street

260 Reynolds Street 

 

What are you seeing in Olde Town?  Are you a resident or tenant?  How has the neighborhood changed?  What changes have you seen?