A C T I V I T Y I D : Y 0 0 6 0 0 7 3RIVER OAKS APARTMENTS
1464 GABRIEL DRIVE, NORFOLK, VA 23502
Offering Memorandum
CONFIDENTIALITY & 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 Real Estate Investment Services of Florida, Inc.
(“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.
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 & MILL ICHAP AGENT FOR MORE DETAILS.
NON-ENDORSEMENT& DISCLAIMER NOTICE
O F F I C E S N A T I O N W I D E A N D T H R O U G H O U T C A N A D A
WWW.MARCUSMILLICHAP.COM
RIVER OAKSAPARTMENTS
PRESENTED BY
ALTAY UZUNTeam Lead
Hampton Roads OfficeTel (757) 777-3737 Fax (757) 493-3953
[email protected] VA 0225214405
NICHOLAS BALOGAssociate
Hampton Roads OfficeTel (804) 205-5008 Fax (757) 493-3953
[email protected] VA 0225226429
JUSTIN FERGUSONAssociate
Hampton Roads OfficeTel (804) 205-5022 Fax (757) 493-3953
[email protected] VA 0225225369
CHANDLER MORTAgent Candidate
Hampton Roads OfficeTel (757) 777-3737 Fax (757) 493-3953
[email protected] Coming Soon
TABLE OF CONTENTS
PRESENTED BY
EXECUTIVE SUMMARYSECTION 1
Investment Highlights...1Executive Summary...3Investment Overview...4
PROPERTY DESCRIPTIONSECTION 2Local Map...9
Regional Map...10Property Photographs...11
PRICING & FINANCIALSSECTION 3
Rent Roll Summary...29Operating Statement...30
Pricing Detail...31Growth Rate Projections....32
Cash Flow...33
SALES COMPARABLESSECTION 4
Area Sales Comparables...37
RENT COMPARABLESSECTION 5
Area Rent Comparables...43
MARKET OVERVIEWSECTION 6
Market Overview...49
DEMOGRAPHIC ANALYSISSECTION 7
Demographic Analysis...63
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
23.70%10 YR. LEVERED IRR
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS E X E C U T I V E S U M M A R Y
RIVER OAKS APARTMENTS | E X E C U T I V E S U M M A R Y1
OFFERING HIGHLIGHTS
V I TA L D ATA
Price $8,400,000
Price/Unit $84,000
Price/SF $96.00
Gross Square Feet 87,500 SF
Occupancy 93.40%
$8,400,000 PRICE
RIVER OAKS APARTMENTS1464 GABRIEL DRIVE, NORFOLK, VA 23502
7.27%YR. 2 CAP RATE
E X E C U T I V E S U M M A R Y | 2
INVESTMENT HIGHLIGHTS
MARKET DRIVERS
UNIT AMENITIES
• Turn-Key Asset
• 3,500 New Jobs Within Five Miles Entering Market
• 5 Miles from Downtown Norfolk
• 6 Miles from Virginia Beach Town Center
• 13.70% Cash-on-Cash Return
• 10 Yr. Levered IRR of 23.70%
• Easy Access to Downtown Norfolk & Virginia Beach Town Center
• 1.5 Miles from Hampton Road’s First Ikea Furniture Store
• 2 Miles from Norfolk Premium Outlets
• 5 Miles from Fortune 500 Company - Norfolk Southern
• 5 Miles from Joint Base Little Creek - Fort Story
• Centrally Located Between Norfolk State University and Virginia
Wesleyan University
• 100 Well Maintained Units
• Central Air Conditioning in All Units
• Ample Off-Street Parking
• On-Site Leasing Office
• Laundry Facilities
• Walk-In Closets
• Private Balcony/Private Patios
• Fireplaces In All Units
• Full Functioning Kitchen with Updated Appliances
• Pet Friendly
• Washer/Dryer Hook-Ups in All Units
RIVER OAKS APARTMENTS | E X E C U T I V E S U M M A R Y3
INVESTMENT OVERVIEW
Marcus & Millichap is pleased to present the exclusive offering memorandum for River Oaks Apartments, located on 1464 Gabriel Drive in Norfolk, VA. The Subject Property consists of 100 market-rate units constructed in 1975. Located along North Hampton Boulevard, this property’s prime location enjoys the benefits of Hampton Roads’ liveliest metros, Norfolk and Virginia Beach. River Oaks Apartments proximity to the area’s regional CBD’s and pristine Chesapeake Bay Beaches offers residents an array of recreational activities, outdoor attractions, and a prosperous, growing community. The Subject Property borders Interstate 64; a prominent traffic artery through the South Hampton Roads region, and a dominant route through The City of Norfolk.
River Oaks Apartments offer potential buyers the opportunity to purchase a well-maintained asset with tremendous upside potential. As is, the property offers potential investors a cash on cash return of nearly 13.70% and an equally lucrative IRR. By maintaining current operating efficiencies, controlling vacancy rates, and building on the rents a purchaser can acquire a stable coupon with long term upside in appreciation.
River Oaks Apartments consists of (100) well-maintained two-bedroom, one-bathroom units. Due to the concentrated unit-mix and location in a quaint neighborhood, this property offers a unique living experience in the heart of the Hampton Roads. River Oaks spacious layout comes equipped with a full funtioning kitchen, walk-in closets, private balconies, luxurious community amenities, and charming, residential neighbors. The apartment’s convenient location offers residents easy access to the area’s top employers and prominent commercial drivers such as US Department of Defense, Sentara Healthcare Centers, Old Dominion University, BAE systems, Norfolk State University and more.
Chuck Rigney, Director of the Economic Development Department states, “Recently, the City of Norfolk has played host to many development and redevelopment projects, with over $1 billion in new private/public investments and the addition of close to 6,000 new jobs in 2017.” Downtown Norfolk recently renovated; the Waterside District ($50 Million), Hilton Main Hotel ($150 Million), The ICON Luxury Apartments ($100 Million), and ADP ($32.5 Million). Automatic Data Processing (ADP) is expected to bring an estimated 2,000 jobs to the area and is anticipated to produce annual regional earnings of about $158 million as the overall economic impact climbs to almost $465 million, alone. Internationally owned brand, Ikea Furniture Store, broke ground for construction late last year with completion expected to conclude in mid-2019. This $75 million investment will provide the area with 500 additional mid-to-low level jobs and authenticate Virginia as a successful commercial corridor for further international companies to come. The Norfolk Premium Outlets, a 332,000 sq ft outlet mall located 2 miles away, opened June 2017 and will have 50 retail and restaurant locations for residents and tourists to experience high-end shopping. The completion of the outlets will add an additional 500 new full-time jobs to the local sub-market.
E X E C U T I V E S U M M A R Y | 4
The River Oaks neighborhood enjoys the recreational and economic benefits of the two largest metros in the Hampton Roads. The Subject Property’s convenient location is centrally located between the major corridors of Norfolk and Virginia Beach, allowing for easy access to Norfolk State University and Virginia Wesleyan University, Naval Station Norfolk and Joint Base Little Creek - Fort Story, and regional CBD’s Downtown Norfolk and Virginia Beach Town Center. The River Oaks Apartments consists of 100 well-maintained two-bedroom, one-bathroom garden-style apartments. This unit mix is highly favorable for the area due to the growing demand for larger housing.
INVESTMENT SUMMARY
T H E O F F E R I N G
Property Name River Oaks Apartments
Property Address 1464 Gabriel DriveNorfolk, VA 23502
Zoning MF-NS
S I T E D E S C R I P T I O N
Number of Units 100
Number of Buildings 4
Number of Stories 2
Year Built 1975
Lot Size 3.8 Acres / 164,247 Square Feet
Type of Ownership Fee Simple
Parking Ratio 1.1 Ratio
U T I L I T I E S
Water Paid by Owner
Electric Paid by Tenant
Gas Paid by Owner
RIVER OAKS APARTMENTS | E X E C U T I V E S U M M A R Y5
• Norfolk Premier Outets
• Downtown Norfolk
• Virginia Beach Town Center
• Ted Constant Convention Center
• MacArthur Mall
EVENTS & LEISURE
• Norfolk Southern
• Dominion Enterprises
• ADP
• Naval Station Norfolk
• Joint Base Little Creek - Fort Story
• Bon Secours DePaul Medical Center
• Sentara Leigh Hospital
JOB MARKET
• Virginia Wesleyan University
• Norfolk State University
• Old Dominion University
• Norfolk Academy
COMMUNITY
• Norfolk Botanical Garden
• Virginia Zoological Park
• Elizabeth River
PARKS & RECREATION
LOCAL ATTRACTIONS
V I R G I N I ANORFOLK
E X E C U T I V E S U M M A R Y | 6
R I V E R O A K SAPARTMENTS
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
100MARKET RATE UNITS
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS P R O P E R T Y D E S C R I P T I O N
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N9
LOCAL MAP
R I V E R O A K SAPARTMENTS
P R O P E R T Y D E S C R I P T I O N | 10
REGIONAL MAP
R I V E R O A K SAPARTMENTS
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N11
P R O P E R T Y D E S C R I P T I O N | 12
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N13
P R O P E R T Y D E S C R I P T I O N | 14
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N15
P R O P E R T Y D E S C R I P T I O N | 16
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N17
P R O P E R T Y D E S C R I P T I O N | 18
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N19
BEDROOMKITCHEN
REF.
WH
BATH
MASTERBEDROOM
LIVINGROOM
PATIO/DECK
P R O P E R T Y D E S C R I P T I O N | 20
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N21
P R O P E R T Y D E S C R I P T I O N | 22
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N23
P R O P E R T Y D E S C R I P T I O N | 24
RIVER OAKS APARTMENTS | P R O P E R T Y D E S C R I P T I O N25
P R O P E R T Y D E S C R I P T I O N | 26
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
6.54%YEAR 1 CAP RATE
7.27%YEAR 2 CAP RATE
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS F I N A N C I A L A N A L Y S I S
RIVER OAKS APARTMENTS | F I N A N C I A L A N A L Y S I S29
RENT ROLL SUMMARY
U N I T R E N TU N I T D I S T R I B U T I O N
N O T E S : Current scheduled rent reflects actual rent roll. Pro Forma rent reflects improvement to submarket average
2 Bedroom: 100%
$600
$500
$700
$800
$900
$400
$300
$100
$200
$0
$0.90
$1.00
$0.50
$0.60
$0.70
$0.80
$0.30
$0.10
$0.40
$0.20
$0.002 Bedroom
UNIT TYPE # OF UNITS APPROX. SF AVERAGE RENT AVERAGE RENT/SF MONTHLY INCOME AVERAGE RENT AVERAGE RENT/SF MONTHLY INCOME
Two Bedroom/One Bathroom 100 875 $790 $0.90 $79,000 $830 $0.95 $83,000
TOTALS / WEIGHTED AVERAGES 100 875 $790 $0.90 $79,000 $830 $0.95 $83,000
GROSS ANNUALIZED RENTS $948,000 $996,000
CURRENT POTENTIAL
F I N A N C I A L A N A L Y S I S | 30
OPERATING STATEMENT
N O T E S : Notes and assumptions to the above analysis are on page 38
Income Year 1 Year 2 Per Unit Per SFGross Potential Rent 996,000 1,005,960 10,060 11.50
Loss / Gain to Lease -48,000 4.8% -10,060 1.0% -101 -0.11Gross Current Rent 948,000 995,900 9,959 11.38
Physical Vacancy -54,036 5.7% -39,836 4.0% -398 -0.46Economic Vacancy
Bad Debt -1,200 0.1% -19,918 2.0% -199 -0.23Concession -7,325 0.8% 0 0.0% 0 0.00
Total Vacancy -$62,561 6.6% -$59,754 6.0% -$598 -$1Economic Occupancy 93.40% 94.00%
Effective Rental Income 885,439 936,146 9,361 10.70Other Income
Utility Bill-Back 65,957 79,191 792 0.91All Other Income 61,270 61,270 613 0.70
Total Other Income $127,227 $140,461 $1,405 $1.61Effective Gross Income $1,012,666 $1,076,607 $10,766 $12.30
EXPENSESReal Estate Taxes 74,102 74,102 741 0.85Insurance 44,094 45,000 450 0.51Utilities - Electric 7,331 7,331 73 0.08Utilities - Water, Sewer, Submeter Fee 79,191 79,191 792 0.91Utilities - Gas 741 741 7 0.01Management Fee 30,380 3.0% 32,298 323 0.37Payroll 100,000 100,000 1,000 1.14Contract Services 35,000 35,000 350 0.40Repairs & Maintenance 50,000 50,000 500 0.57Operating Reserves 25,000 25,000 250 0.29General & Administrative 15,000 15,000 150 0.17Marketing & Advertising 2,400 2,400 24 0.03Total Expenses $463,239 $466,063 $4,661 $5.33Expenses as % of EGI 45.7% 43.3%Net Operating Income $549,427 $610,544 $6,105 $6.98
RIVER OAKS APARTMENTS | F I N A N C I A L A N A L Y S I S31
PRICING DETAIL
Income Year 1 Year 2Gross Scheduled Rent $948,000 $995,900Less: Vacancy/Deductions 6.6% $62,561 6.0% $59,754Total Effective Rental Income $885,439 $936,146Other Income $127,227 $140,461Effective Gross Income $1,012,666 $1,076,607Less: Expenses 45.7% $463,239 43.3% $466,063Net Operating Income $549,427 $610,544Cash Flow $549,427 $610,544Debt Service $319,200 $319,200Net Cash Flow After Debt Service 13.70% $230,227 17.34% $291,344Principal Reduction $0 $0Total Return 13.70% $230,227 17.34% $291,344
Expenses Year 1 Year 2Real Estate Taxes $74,102 $74,102Insurance $44,094 $45,000Utilities - Electric $7,331 $7,331Utilities - Water, Sewer, Submeter Fee $79,191 $79,191Utilities - Gas $741 $741Management Fee $30,380 $32,298Payroll $100,000 $100,000Contract Services $35,000 $35,000Repairs & Maintenance $50,000 $50,000Operating Reserves $25,000 $25,000General & Administrative $15,000 $15,000Marketing & Advertising $2,400 $2,400Total Expenses $463,239 $466,063Expenses/Unit $4,632 $4,661Expenses/SF $5.29 $5.33
SummaryPrice Down PaymentNumber of Units Price Per Unit Price Per SqFt Rentable SqFtLot SizeApprox. Year Built
Returns Year 1 Year 2 CAP Rate 6.54% 7.27%GRM 8.86 8.43Cash-on-Cash 13.70% 17.34%Debt Coverage Ratio 1.72 1.91
Financing 1st LoanLoan Amount $6,720,000Loan Type NewInterest Rate 4.75%Amortization 30Year Due 2027 Loan information is subject to change.
Contact your Marcus and Millichap Capital Corporation representative.
# Of Units Unit Type SqFt/Unit Current Rents Market Rents100 Two Bedroom 875 $790 $830
IRR Year IRR Unlevered IRR Levered5 9.66% 24.85%7 10.10% 25.05%10 10.13% 23.70%
$96.00
1975
87,5003.70 Acres
$8,400,000$1,680,000/20%
100$84,000
SummaryPrice Down PaymentNumber of Units Price Per Unit Price Per SqFt Rentable SqFtLot SizeApprox. Year Built
Returns Year 1 Year 2 CAP Rate 6.54% 7.27%GRM 8.86 8.43Cash-on-Cash 13.70% 17.34%Debt Coverage Ratio 1.72 1.91
Financing 1st LoanLoan Amount $6,720,000Loan Type NewInterest Rate 4.75%Amortization 30Year Due 2027 Loan information is subject to change.
Contact your Marcus and Millichap Capital Corporation representative.
# Of Units Unit Type SqFt/Unit Current Rents Market Rents100 Two Bedroom 875 $790 $830
IRR Year IRR Unlevered IRR Levered5 9.66% 24.85%7 10.10% 25.05%10 10.13% 23.70%
$96.00
1975
87,5003.70 Acres
$8,400,000$1,680,000/20%
100$84,000
SummaryPrice Down PaymentNumber of Units Price Per Unit Price Per SqFt Rentable SqFtLot SizeApprox. Year Built
Returns Year 1 Year 2 CAP Rate 6.54% 7.27%GRM 8.86 8.43Cash-on-Cash 13.70% 17.34%Debt Coverage Ratio 1.72 1.91
Financing 1st LoanLoan Amount $6,720,000Loan Type NewInterest Rate 4.75%Amortization 30Year Due 2027 Loan information is subject to change.
Contact your Marcus and Millichap Capital Corporation representative.
# Of Units Unit Type SqFt/Unit Current Rents Market Rents100 Two Bedroom 875 $790 $830
IRR Year IRR Unlevered IRR Levered5 9.66% 24.85%7 10.10% 25.05%10 10.13% 23.70%
$96.00
1975
87,5003.70 Acres
$8,400,000$1,680,000/20%
100$84,000
SummaryPrice Down PaymentNumber of Units Price Per Unit Price Per SqFt Rentable SqFtLot SizeApprox. Year Built
Returns Year 1 Year 2 CAP Rate 6.54% 7.27%GRM 8.86 8.43Cash-on-Cash 13.70% 17.34%Debt Coverage Ratio 1.72 1.91
Financing 1st LoanLoan Amount $6,720,000Loan Type NewInterest Rate 4.75%Amortization 30Year Due 2027 Loan information is subject to change.
Contact your Marcus and Millichap Capital Corporation representative.
# Of Units Unit Type SqFt/Unit Current Rents Market Rents100 Two Bedroom 875 $790 $830
IRR Year IRR Unlevered IRR Levered5 9.66% 24.85%7 10.10% 25.05%10 10.13% 23.70%
$96.00
1975
87,5003.70 Acres
$8,400,000$1,680,000/20%
100$84,000
SummaryPrice Down PaymentNumber of Units Price Per Unit Price Per SqFt Rentable SqFtLot SizeApprox. Year Built
Returns Year 1 Year 2 CAP Rate 6.54% 7.27%GRM 8.86 8.43Cash-on-Cash 13.70% 17.34%Debt Coverage Ratio 1.72 1.91
Financing 1st LoanLoan Amount $6,720,000Loan Type NewInterest Rate 4.75%Amortization 30Year Due 2027 Loan information is subject to change.
Contact your Marcus and Millichap Capital Corporation representative.
# Of Units Unit Type SqFt/Unit Current Rents Market Rents100 Two Bedroom 875 $790 $830
IRR Year IRR Unlevered IRR Levered5 9.66% 24.85%7 10.10% 25.05%10 10.13% 23.70%
$96.00
1975
87,5003.70 Acres
$8,400,000$1,680,000/20%
100$84,000
F I N A N C I A L A N A L Y S I S | 32
GROWTH RATE PROJECTIONS
Income Year 1 2018 2019 2020 2021 2022 2023 2024 2025 2026
Gross Potential Rent 1.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Loss / Gain to Lease(1) 1.00% 2.00% 2.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Physical Vacancy 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Economic Vacancy (1)
Non-Revenue Units 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Bad Debt 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Concession 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Total Vacancy 6.10% 6.10% 6.10% 6.10% 6.10% 6.10% 6.10% 6.10% 6.10%
Total Other Income 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Expenses Year 2 2019 2020 2021 2022 2023 2024 2025 2026 2027
Operating Expenses 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Real Estate Taxes 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Insurance 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Utilities 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
(1) Displayed as a % of Gross Potential Rent
(2) Management Fees Calculated by % of EGR
RIVER OAKS APARTMENTS | F I N A N C I A L A N A L Y S I S33
Income Year 1 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Gross Potential Rent 996,000 1,005,960 1,036,139 1,067,223 1,099,240 1,132,217 1,166,183 1,201,169 1,237,204 1,274,320 1,312,550
Loss / Gain to Lease (48,000) -$10,060 (20,723) (21,344) (10,992) (11,322) (11,662) (12,012) (12,372) (12,743) (13,125)
Gross Current Rent 948,000 995,900 1,015,416 1,045,879 1,088,247 1,120,895 1,154,522 1,189,157 1,224,832 1,261,577 1,299,424
Physical Vacancy (54,036) (39,836) (40,617) (41,835) (43,530) (44,836) (46,181) (47,566) (48,993) (50,463) (51,977)
Economic Vacancy
Non-Revenue Units
Bad Debt -$1,200 -$19,918 (20,308) (20,918) (21,765) (22,418) (23,090) (23,783) (24,497) (25,232) (25,988)
Concession -$7,325 $0 (1,015) (1,046) (1,088) (1,121) (1,155) (1,189) (1,225) (1,262) (1,299)
Total Vacancy (62,561) (59,754) (61,940) (63,799) (66,383) (68,375) (70,426) (72,539) (74,715) (76,956) (79,265)
Effective Rental Income 885,439 936,146 953,476 982,080 1,021,864 1,052,520 1,084,096 1,116,619 1,150,117 1,184,621 1,220,159
Expenses
Total Expenses (438,239) (441,063) (449,885) (459,212) (469,045) (478,779) (488,717) (498,866) (509,228) (519,810) (530,615)
Operating Reserves -$25,000 -$25,000 -$25,000 -$25,000 -$25,000 -$25,000 -$25,000 -$25,000 -$25,000 -$25,000 -$25,000
Net Operating Income 549,427 610,544 623,266 646,883 681,305 706,832 733,211 760,470 788,638 817,743 847,814
Purchase Price / Net Residual Value
Purchase Price/Net Residual Value (8,400,000) 11,304,188
Cash Flow Before Debt Financing 610,544 623,266 646,883 681,305 706,832 733,211 760,470 788,638 817,743 12,152,002
Debt Financing
Loan Amount 6,720,000 0 0 0 0 0 0 0 0 0 0
Remaining Balance 0 0 0 0 0 0 0 0 0 0
Loan Origination Fees -$67,200 0 0 0 0 0 0 0 0 0 0
Prepayment Penalty 0 0 0 0 0 0 0 0 0 0
Closing Costs 0 0 0 0 0 0 0 0 0 (452,168)
Debt Service - Interest (319,200) (319,200) (319,200) (316,962) (311,928) (306,649) (301,114) (295,311) (289,226) (282,845)
Debt Service - Principal 0 0 0 (103,695) (108,729) (114,007) (119,542) (125,346) (131,431) (137,812)
Cash Flow After Debt Financing (1,747,200) 291,344 304,066 327,683 260,648 286,175 312,555 339,814 367,982 397,086 11,279,179
Debt Coverage Ratio 1.912732314 1.952586661 2.026575925 1.619622338 1.680306026 1.74 1.807818587 1.87 1.943967791 2.02
Investor Return
IRR-Unleveraged 0.00% 9.27% 9.66% 9.92% 10.10% 10.24% 10.34% 10.13%
IRR-Leveraged 16.67% 23.91% 24.85% 25.10% 25.05% 24.84% 24.57% 23.70%
Capitalization Rate 7.27% 7.42% 7.70% 8.11% 8.41% 8.73% 9.05% 9.39% 9.74% 10.09%
CASH FLOW
F I N A N C I A L A N A L Y S I S | 34
N O T E S : [1] Year 1 Gross Potential Rent (GPR) is based on actual. Year 1 potential rent is based on submarket average.[2] Year 1 Physical Vacancy is a conservative assumption as to where the occupancy is expected to be at time of settlement. The pro forma Pysical Vacancy reflects a conserva-tive increase in occupancy.[3] Year 1 Bad Debt is based off of actual collections per the full year of 2017. The pro forma Bad Debt shows continued strong performance yet slightly more conservative bad debt. Year 1 Concessions are based on actual for 2017. Pro Forma Concessions reflects a conservative assumption.[4] Year 1 and Year 2 Real Estate Taxes are based off the actual amount paid by owner.[5] Year 1 Insurance Expense is based off the actual amount paid by owner, per T12. Pro Forma insurance expense has been estimated at $350/unit per year.[6] Year 1 and Year 2 Utility Expenses are based on actual amount paid by owner, per T12.[7] Management Fee has been estimated at 3%.[8] Payroll expenses have been estimated at $1,000/unit per year.[9] Contract Services have been estimated at a $350/u/year.[10] Repairs & Maintenance have been estimated at $500/unit per year.[11] Operating Reserves have been estimated at $250/unit per year.[12] General & Administrative have been estimated at $150/unit per year. Actual expenses are closer to $850/unit per year.[13] Marketing and Advertising expenses have been estimated at $200 per month.[14] The 10 Year DCF models a positive outlook for a continued improvement in operations and leaner expenses for a prospective Buyer throughout the next decade.
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
1,724,876HAMPTON ROADS POPULATION
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS S A L E S C O M PA R A B L E S
RIVER OAKS APARTMENTS | S A L E S C O M PA R A B L E S37
SALE COMPARABLES - SUMMARY
2
4
1
3
PROPERTY NAME NUMBER OFUNITS
ONE BEDROOM
TWO BEDROOM
THREE BEDROOM
FOUR BEDROOM
River Oaks Apartments - 1464 Gabriel Drive 100 0 100 0 0
Baywatch Pointe - 5414 Catina Arch 160 20 96 32 12
Sumler Terrace - 720 Appomattox St 126 32 38 38 18
Grand Cypress - 1200 Grand Cypress Square 55 0 55 0 0
Diamond Springs - 5742 Lenox Drive 153 32 121 0 0
MARKET AVERAGES
Price per Unit $95,908
Price per Square Feet $86.55
As a product type, apartments outperformed every other commercial real estate sector. The new influx of supply from the previous year has been met with strong demand, as the vacancy rates have decreased. With the benefit of republican leadership, new tax laws, and a stabilized market investors are moving out of major metro areas into secondary and tertiary markets, such as the Hampton Roads/ Tidewater area, in search of higher rates of return. Although a few distressed assets are still available at cap rates above eight percent, more investors are targeting stabilized properties with higher cash flows.
S A L E S C O M PA R A B L E S | 38
2
1
3
4
RIVER OAKS APARTMENTS | S A L E S C O M PA R A B L E S39
SALES PRICE $8,400,000
Number of Units 100
Year Built 1975
Price/Unit $84,000
Price Per SF $96.00
RIVER OAKS
1464 Gabriel Drive,Norfolk, VA 23502
21SUMLER TERRACE
720 Appomattox Street, Norfolk, VA 23523
SALES PRICE $12,200,000
Sale Date 04/19/2017
Number of Units 126
Year Built 1976
Price/Unit $96,825
Price Per SF $86.86
Terms: 720 Appomattox Street, known as Sumler Terrace, was sold on April 19th, 2017 for $12,200,000 ($96,825/Unit; $86.86/SF)
NOTES:
SALES PRICE $12,000,000
Sale Date 09/29/2017
Number of Units 160
Year Built 1977
Price/Unit $75,000
Price Per SF $82.33
Terms: Baywatch Pointe, a 160-unit apartment community was sold on August 1, 2017 for $12 million, or $75,000 per unit. The property was about 80% occupied at sale including 3 or 4 units that were offline. They have about $1.5 million in capital improvements planned for the property. The broker reported a cap rate of 6.39% for the transaction.
NOTES:
BAYWATCH POINT
5414 Catina Arch, Virginia Beach, VA 23462
S A L E S C O M PA R A B L E S | 40
SALES PRICE $13,500,000
Sale Date 03/11/2016
Number of Units 153
Year Built 1970
Price/Unit $88,235
Price Per SF $89.37
Terms: 153-unit apartment community known as Diamond Springs, was sold on March 11, 2016 for $13.5 million. The occupancy was reported as 94%. The buyer obtained financing in the amount of $11.071 million, a 7 year variable rate loan at an initial rate of 3.161%. The loan is interest-only for the first 3 years.
NOTES:
DIAMOND SPRINGS
5742 Lenox Drive, Virginia Beach, VA 23455
43
SALES PRICE $ 5,100,000
Sale Date 12/30/2016
Number of Units 55
Year Built 1988
Price/Unit $92,727
Price Per SF $77.27
Terms: Virginia Beach Community Development Corporation acquired a 55 unit apartment from two individual owners. The former paid $5.1M or around $92,727 per unit, at the time of the sale the property was 95% occupied.
NOTES:
GRAND CYPRESS
1200 Grand Cypress Square,Virginia Beach, VA 23231
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
$58,900MEDIAN HOUSEHOLD INCOME
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS R E N T C O M PA R A B L E S
RIVER OAKS APARTMENTS | R E N T C O M PA R A B L E S43
RENT COMPARABLES - SUMMARY
2
1
3
PROPERTY NAME NUMBER OFUNITS
ONE BEDROOM
TWO BEDROOM
THREE BEDROOM
River Oaks Apartments - 1464 Gabriel Drive 100 0 100 0
Diamond Springs - 5742 Lenox Drive 64 20 40 4
Baywatch Pointe - 5414 Catina Arch 148 0 148 0
Grand Cypress - 1200 Grand Cypress Square 407 0 335 72
MARKET AVERAGES
2 Bedroom Rent $898
Occupancy 96.83%
R E N T C O M PA R A B L E S | 44
2
3
1
RIVER OAKS APARTMENTS | R E N T C O M PA R A B L E S45
2
1 ROUND BAY944 Round Bay Road, Norfolk, VA 23502
BRITTANY PLACE6143 Edward Street, Norfolk, VA 23513
RIVER OAKS1464 Gabriel Drive, Norfolk, VA 23502
96%OCCUPANCY
97%OCCUPANCY
98%OCCUPANCY
1975YEAR BUILT
1966YEAR BUILT
1983YEAR BUILT
UNIT TYPE SQ. FT. RENT RENT/SF
1 Bedroom 778 $738 $.95
2 Bedroom 950 $950 $1.00
3 Bedroom 1,050 $1,015 $.97
UNIT TYPE SQ. FT. RENT RENT/SF
2 Bedroom 950 $890 $0.94
UNIT TYPE SQ. FT. RENT RENT/SF
2 Bedroom 875 $790 $0.90
R E N T C O M PA R A B L E S | 46
3 OAKMONT NORTH1324 Johnston Road, Norfolk, VA 23513
96%OCCUPANCY
1968YEAR BUILT
UNIT TYPE SQ. FT. RENT RENT/SF
2 Bedroom 700 $855 $1.22
3 Bedroom 850 $970 $1.14
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
$169,198HOUSING VALUE
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS M A R K E T O V E R V I E W
RIVER OAKS APARTMENTS | M A R K E T O V E R V I E W49
CITY OVERVIEW
PRIVATE SECTOR GROWTH
The Hampton Roads is home to several Fortune 500
Companies including Dollar Tree, Huntington Ingalls
Industries, and Norfolk Southern. Hampton Roads
also has the second-largest concentration of military
personnel in the U.S. with eight military installations
in the market providing a large portion of jobs.
HOSPITAL ITY AND TOURISM
Visitors are drawn to the Hampton Roads and the multiple
beaches and resorts in the area that have activities for
everyone.
METRO HIGHLIGHTS
SKILLED LABOR POOL
Technical knowledge learned in the military helps to provide
a highly educated and skilled labor force.
Norfolk is the cultural heart of the Hampton Roads, and quickly becoming
the prominent business district. Hampton Roads is recognized for its miles
of waterfronts and beaches, industrial and private sector strength, harbors,
shipyards and coal piers, and a dependable military presence. In 2017,
the Hampton Road’s invested nearly $3 billion in development and
redevelopment projects with growth continuing to rise exponentially
through local, national, and international investment. New projects such
as Wegmans Grocery Store, Norfolk Premier Outlets, The “Wave” Surf
Park, and internationally owned Ikea Furniture Store foreshadow a shift of
successful economic strength.
M A R K E T O V E R V I E W | 50
ECONOMY• The local economy is best known for tourism and defense, but
advanced manufacturing, maritime and logistics, cybersecurity
and biomedical technology are growing sectors.
• Top employment drivers for the area include Sentara Healthcare,
GEICO General Insurance Co., and Nasa Langley Research University
and more. Local companies, Norfolk Southern, Dollar Tree and
Huntington Ingalls Industries, ranked top 380 in the 2017 Fortune
500 List. Other internationally owned companies headquartered
within the Hampton Roads include Gold Key PHR, Amerigroup,
Anthem and Stihl.
• The only high speed transatlantic data cable put in place by
Microsoft, Facebook, and Telxius now runs 4,000 miles from Spain
to Virginia Beach sending record speeds of 160 terabits of data per
second. This is expected to lead to strong IT industry growth in
Hampton Roads for years to come.
2016POPULATION:
2.9%Growth
2016-2021*:
1.7M2016
HOUSEHOLDS:
3.6%Growth
2016-2021*:
654K2016
MEDIAN AGE:
37.7%U.S. Median:
35.32016 MEDIAN
HOUSEHOLD INCOME:
$57,200U.S. Median:
$58,900
RIVER OAKS APARTMENTS | M A R K E T O V E R V I E W51
Tight labor market restrains hiring as confidence surges. The steady economic tailwind benefiting
apartment performance is poised to carry through 2018 as a range of positive factors align to
support growth. Consumer confidence recently reached its highest point since 2000 while small-
business sentiment attained a 31-year record level, both reinforcing indications that consump-
tion and hiring will be strong. The total number of job openings has hovered in the low-6 million
range through much of 2017, illustrating that companies have considerable staffing needs, but
with unemployment entrenched near 4 percent, companies will continue to face challenges in
filling available positions. These tight labor conditions should place additional upward pressure
on wages, potentially boosting inflationary pressure in the coming year. The strong employment
market, rising wages and elevated confidence levels could unlock accelerated household forma-
tion, particularly by young adults. Last year, the number of young adults living with their parents
ticked lower for the first time since the recession, signaling that these late bloomers may finally
be considering a more independent lifestyle.
Housing preferences may change under new tax laws. The new tax laws could play a significant role
in shaping both the economy and housing demand in 2018. Reduced taxes will be a windfall
for corporations, potentially sparking invigorated investment into infrastructure. The rise in CEO
confidence over the last year already boosted companies’ investment by more than 6 percent,
accelerating economic growth. However, the tax incentive-based stimulus will likely offer only
a modest bump to GDP in 2018 because corporate investment comprises just 12 percent of
economic output. One factor that could weigh on economic expansion under the new tax laws
is the housing sector, which added just 3 percent to the economy last year, about two-thirds of
normal levels. The increased standard deduction and restrictions on housing-related deductions
will reduce some of the economic incentive to purchase a home, further sapping the strength
of the housing sector. Nonetheless, the increased standard deduction could benefit apartment
investors, encouraging renters to stay in apartments longer and reducing the loss of tenants to
homeownership.
Growth Cycle Invigorated by Confidence; Tax Laws Could Transform Housing
U.S. ECONOMY
M A R K E T O V E R V I E W | 52
• Labor force shortage weighs on job creation. The economy has added jobs every month for more
than seven years, the longest continuous period of job creation on record. The trend will continue
in 2018, but the pace of job additions will moderate, falling below 2 million for the year as the
low unemployment rate restricts the pool of prospective employees.
• Wage growth poised to accelerate. Average wage growth has been creeping higher in the post-
recession era, with compensation gains in construction, professional services and the hospital-
ity sectors outpacing the broader trend. The tight labor market will continue to pressure wage
growth, potentially sparking inflation in the process.
• Tax laws could invigorate apartment demand. Since 2011 household formations have outpaced
total housing construction, a key ingredient in the tightening of apartment vacancies. The new
tax laws could cause homebuilders to reduce construction while shifting a portion of the hous-
ing demand from homeownership to rentals, and a rental housing shortage could ensue. If this
behavior change occurs in conjunction with additional young adults moving out of their own,
apartment demand could dramatically outpace completions.
2018 National Economic Outlook
U.S. ECONOMY
RIVER OAKS APARTMENTS | M A R K E T O V E R V I E W53
Investors wary of apartment construction. The wave of apartment completions entering the market
in recent years has permeated the investor psyche, raising concerns of overdevelopment and
escalating vacancy rates, but numerous demand drivers have held this risk in check. Steady job
creation, positive demographics, above-trend household formation and elevated single-family home
prices have converged to counterbalance the addition of 1.37 million apartments over the last five
years, at least on a macro level. Though a small number of markets have faced oversupply risk,
the affected areas tend to be concentrated pockets, with upper-echelon units facing the greatest
competition. For traditional workforce housing, Class B and C apartments, the risks stemming from
overdevelopment have been nominal, and in most metros, even the Class A tranche has demonstrated
sturdy performance. In the coming year, rising development costs, tighter construction financing and
mounting caution levels will curb the pace of additions from the 380,000 units delivered in 2017 to
approximately 335,000 apartments. However, the list of markets facing risk from new completions
will stretch beyond the dozen metros that builders have concentrated on thus far. This will heighten
competition, requiring investors to maintain an increasingly tactical perspective integrating vigilant
market scrutiny and strong property management.
Competitive nuances increasingly granular. Although the pace of apartment completions will moderate
in 2018, additions will still likely outpace absorption. This imbalance will most substantively affect
areas where development has been focused, such as the urban core where vacancy rates have risen
above suburban rates for the first time on record. Nationally, Class A vacancy rates have advanced
to 6.3 percent in 2017 and will continue their climb to the 6.8 percent range over the next year.
Vacancy rates for Class B and C assets will rise less significantly in 2018, pushing to 5.0 percent and
4.7 percent, respectively. Although vacancy levels are rising, three-fourths of the major metros have
rates below their 15-year average. Still, the magnitude of new completions coming to market and the
high asking rents these new units command will spark increased competition for tenants, generating
a more liberal use of concessions in 2018 as landlords attempt to entice move-up tenants.
Demand Outlook Sturdy as Pace Of Construction Begins to Retreat
U.S. APARTMENT OVERVIEW
M A R K E T O V E R V I E W | 54
• Rent growth tapers as concession use edges higher. Average rent growth will taper to 3.1 percent
in 2018 as concessions become more prevalent, particularly in Class A properties. Rent gains in
the Class C space, which were particularly strong last year, will face greater challenges as afford-
ability restrains demand. Although job growth has been steady for seven years, wage growth has
been relatively weak, particularly for low-skilled labor.
• Congress may nudge apartment demand. The new tax laws could reinforce apartment living as the
larger standard deduction reduces the economic incentive of homeownership. Previous tax rules
encouraged homeownership with itemized deductions for property taxes and mortgage interest
that often surpassed the standard deduction. These advantages have largely been eliminated,
particularly for first-time buyers.
• Are millennials finally moving out on their own? The 80 million-strong millennial age cohort,
now pushing into their late 20s, may finally be showing independence. Since the recession, the
percentage of young adults living with their parents increased dramatically, but last year that
trend reversed. Should the share of young adults living with family recede toward the long-term
average, an additional 3 million young adults would need housing.
2018 National Apartment Outlook
U.S. APARTMENT OVERVIEW
RIVER OAKS APARTMENTS | M A R K E T O V E R V I E W55
Fed cautiously pursues tighter policies. Investors have largely adapted to the modestly higher in-
terest rate environment, and most anticipate additional increases in 2018 as the Federal Reserve
normalizes both its policies and its balance sheet. The Fed is widely expected to continue raising
its overnight rate through 2018 as it tries to restrain potential inflation risk and create some dry
powder to combat future recessions. The Fed will, however, be cautious about pushing short-term
rates into the long-term rates, which would create an inverted yield curve. The spread between
the two-year Treasury rate and the 10-year Treasury rate has tightened significantly, and if the
Fed is too aggressive in its policies, the short-term interest rates could climb above long-term
rates. This inversion is a commonly watched leading indicator of an impending recession. The
new chairman of the Fed, Jerome Powell, will likely make few changes to the trajectory of Fed
policies, and he is widely expected to continue the reduction of the Fed balance sheet. Powell
may consider accelerating the balance sheet reduction to ensure long-term rates move higher.
That said, Powell is widely perceived to be a dovish leader who will advance rates cautiously.
Readily available debt backed by sound underwriting. Debt availability for apartment assets re-
mains abundant, with a wide range of lenders catering to the sector. Apartment construction
financing has experienced some tightening, a generally favorable trend for most investors. Fannie
Mae and Freddie Mac will continue to serve a significant portion of the multifamily financing,
with local and regional banks targeting smaller transactions and insurance companies handling
larger deals with low-leverage needs. In general, lenders have been loosening credit standards
on commercial real estate lending, but underwriting standards remain conservative with loan-
to-value ratios for apartments in the relatively conservative 66 percent range. An important con-
sideration going forward, however, will be investors’ appetite for acquisitions as the yield spread
between interest rates and cap rates tightens.
Fed Normalization Portends Rising Interest Rates;Capital Availability for Apartments Elevated
U.S. CAPITAL MARKETS
M A R K E T O V E R V I E W | 56
2018 Capital Markets Outlook
U.S. CAPITAL MARKETS
• Yield spread tightens amid rising interest rates. Average apartment cap rates have remained
relatively stable in the low-5 percent range for the last 18 months, with a yield spread above the
10-year Treasury of about 280 basis points. Many investors believe cap rates will rise in tandem
with interest rates, but this has not been the case historically. Given the strong performance of
the apartment sector, it’s more likely the yield spread will compress, reducing the positive lever-
age investors have enjoyed in the post-recession era.
• Inflation restrained but could emerge. Inflation has been nominal throughout the current growth
cycle, but pressure could mount as the tight labor market spurs rising wages. Elevated wages and
accelerating household wealth could boost consumption, creating additional economic growth
and inflation. The Fed has become increasingly proactive in its efforts to head off inflationary
pressure, but the stimulative effects of tax cuts could overpower the Fed’s efforts.
• Policies likely to strengthen dollar and could pose new risks. One wild card that could create
an economic disruption is the strengthening dollar. The economic stimulus created by tax cuts
together with tightening Fed monetary policy place upward pressure on the value of the dollar
relative to foreign currencies. This could restrain foreign investment in U.S. commercial real es-
tate, but it could also weaken exports and make it more difficult for other countries to pay their
dollar-denominated debt, which in turn weakens global economic growth.
RIVER OAKS APARTMENTS | M A R K E T O V E R V I E W57
Appreciation flattens as buyers recalibrate expectations. The maturing apartment investment cli-
mate has continued its migration from aggressive growth to a more stable but still positive trend.
Investors have reaped strong returns in the post-recession era through significant gains in fun-
damentals and pricing, but the growth trajectory has flattened as the market has normalized.
The pace of apartment rental income growth has moved back toward its mid-3 percent long-term
average and investor caution has flattened cap rates, moderating appreciation. With much of the
gains created by the post-recession recovery absorbed and most of the value-add opportunity al-
ready extracted, it has been increasingly difficult for investors to find opportunities with substan-
tive upside potential. At the same time, apartment construction has finally brought macro-level
housing supply and demand back toward equilibrium, restraining upside potential in markets
with sizable deliveries. These challenges have been compounded by a widened bid/ask gap, with
many would-be apartment sellers retaining a highly optimistic perception of their asset’s value.
It will take time for investor expectations to realign, but buyers and sellers are discovering a flat-
tening appreciation trajectory. Still, a range of opportunities remain.
Investors broaden criteria as they search for yield upside. Investors are recalibrating strategies,
broadening their search and sharpening their efforts to find investment options with upside po-
tential. They have expanded criteria to include a variety of Class B and Class C assets, outer-ring
suburban locations, and properties in secondary or tertiary markets. The yield premium offered
by these types of assets has drawn an increasing amount of multifamily capital. In the last year,
nearly half of the dollar volume invested in apartment properties over $1 million went to second-
ary and tertiary markets, up from 42 percent of the capital in 2010. This influx of activity has
caused cap rates in tertiary markets to fall from the high-8 percent range in 2010 to their cur-
rent average near 6 percent. During the same period, national cap rates of Class B/C apartment
properties have fallen by 200 basis points to the mid-5 percent range. Considering the low cost
of capital, these yields have remained attractive to investors with longer-term hold plans.
Apartment Investors Recalibrate Strategies;Broaden Criteria to Capture Upside Opportunities
U.S. INVESTMENT OUTLOOK
M A R K E T O V E R V I E W | 58
2018 Investment Outlook
U.S. INVESTMENT OUTLOOK
• New tax laws could shift investor behavior. Additional clarity on taxes should alleviate some of
the uncertainty that held back investor activity over the last year while helping to mitigate the
expectation gap between buyers and sellers. Reduced tax rates on pass-through entities could
spark some repositioning efforts, bringing additional assets to market and supporting market
liquidity.
• Tighter monetary policy could narrow yield spreads. Prospects of a rising interest rate environ-
ment could weigh on buyer activity as the yield spread tightens. Cap rates have held relatively
stable over the last two years, and the sturdy outlook for apartment fundamentals is unlikely to
change substantively in the coming year. As a result, investors’ pursuit of yield will likely push
activity toward assets and markets that have traditionally offered higher cap rates.
• Transaction activity retreats from peak levels. Apartment sales continued to migrate toward more
normal levels last year as investors’ search for upside and value-add opportunities delivered
fewer candidates. Markets with a limited construction pipeline but with respectable employment
and household formation growth will see accelerated activity, while markets facing an influx of
development could see moderating investor interest.
RIVER OAKS APARTMENTS | M A R K E T O V E R V I E W59
Five-Year Apartment Income Growth by MetroPercent Change 2013-2018*
FIVE-YEAR TREND:Outperforming Through Development Cycle 2013-2018*• U.S. creates 11.8 million jobs over five years
• Developers add 1.5 million new apartments
• Absorption totals 1.4 million apartments
• U.S. vacancy rate to match 2013 at 5.0 percent
• U.S. average rent rises 23.2 percent
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M A R K E T O V E R V I E W | 60Sources: Marcus & Millichap Research Services; MPF Research
Five-Year Development Wave Transforms Rental LandscapeInventory Growth 2013-2018
2018 NATIONAL INVENTORY TREND
Inventory Change by Market 2013 to 2018
Multifamily Inventory Growth1% - 5%
6% - 9%
10% - 15%
16% - 24%
FIVE-YEAR TREND:Outperforming Through Development Cycle 2013-2018*• U.S. creates 11.8 million jobs over five years
• Developers add 1.5 million new apartments
• Absorption totals 1.4 million apartments
• U.S. vacancy rate to match 2013 at 5.0 percent
• U.S. average rent rises 23.2 percent
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS
$84,000PER UNIT
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. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap is a
service mark of Marcus & Millichap Real Estate Investment Services of Florida, Inc. © 2018 Marcus & Millichap ACT ID Y0600073
R I V E R O A K S APARTMENTS D E M O G R A P H I C A N A L Y S I S
RIVER OAKS APARTMENTS | D E M O G R A P H I C A N A L Y S I S63
1,724,876
$58,900
$169,198
HAMPTON ROADS POPULATION
MEDIAN HOUSEHOLD INCOME
HOUSING VALUE
DEMOGRAPHIC HIGHLIGHTS
D E M O G R A P H I C A N A L Y S I S | 64
2018 DEMOGRAPHICS
POPULATION 1 Miles 3 Miles 5 Miles
2022 Projection
Total Population 18,921 110,381 282,607
2017 Estimate
Total Population 18,468 110,986 282,508
2010 Census
Total Population 17,888 108,496 273,046
2000 Census
Total Population 18,567 111,018 254,797
Daytime Population
2017 Estimate 14,453 104,046 354,914
HOUSEHOLDS 1 Miles 3 Miles 5 Miles
2022 Projection
Total Households 7,338 44,105 103,050
2017 Estimate
Total Households 7,066 43,908 101,861
Average (Mean) Household Size 2.6 2.51 2.44
2010 Census
Total Households 6,867 43,092 98,329
2000 Census
Total Households 7,072 43,411 96,464
Growth 2015-2020 3.85% 0.45% 1.17%
HOUSING UNITS 1 Miles 3 Miles 5 Miles
Occupied Units
2022 Projection 7,338 44,105 103,050
2017 Estimate 7,684 47,940 111,182
Owner Occupied 3,639 22,259 46,856
Renter Occupied 3,427 21,649 55,005
Vacant 618 4,032 9,321
Persons In Units
2017 Estimate Total Occupied Units 7,066 43,908 101,861
1 Person Units 26.95% 28.07% 30.03%
2 Person Units 30.07% 32.03% 32.17%
3 Person Units 19.01% 17.98% 17.16%
4 Person Units 12.82% 12.06% 11.74%
5 Person Units 6.43% 5.90% 5.41%
6+ Person Units 4.73% 3.96% 3.49%
HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles
2017 Estimate
$200,000 or More 0.96% 2.43% 3.36%
$150,000 - $199,000 1.76% 2.78% 3.42%
$100,000 - $149,000 7.95% 9.54% 10.44%
$75,000 - $99,999 11.16% 11.66% 11.78%
$50,000 - $74,999 22.24% 21.77% 20.39%
$35,000 - $49,999 17.87% 16.52% 15.17%
$25,000 - $34,999 11.68% 11.05% 10.56%
$15,000 - $24,999 11.71% 10.70% 10.76%
Under $15,000 14.68% 13.55% 14.12%
Average Household Income $54,581 $63,559 $68,637
Median Household Income $45,400 $48,483 $49,409
Per Capita Income $20,890 $25,233 $26,561
POPULATION PROFILE 1 Miles 3 Miles 5 Miles
Population By Age
2017 Estimate Total Population 18,468 110,986 282,508
Under 20 25.03% 24.56% 23.77%
20 to 34 Years 26.08% 25.62% 33.50%
35 to 39 Years 6.21% 6.42% 6.26%
40 to 49 Years 11.43% 11.46% 9.92%
50 to 64 Years 19.33% 19.57% 16.05%
Age 65+ 11.90% 12.37% 10.49%
Median Age 34.25 34.87 30.54
Population 25+ by Education Level
2017 Estimate Population Age 25+ 12,347 75,003 175,482
Elementary (0-8) 3.00% 2.66% 2.31%
Some High School (9-11) 11.59% 10.96% 9.32%
High School Graduate (12) 31.30% 30.40% 27.16%
Some College (13-15) 29.95% 26.32% 25.97%
Associate Degree Only 7.60% 7.90% 7.62%
Bachelors Degree Only 10.20% 13.10% 16.04%
Graduate Degree 4.71% 7.27% 10.46%
Population by Gender
2017 Estimate Total Population 18,468 110,986 282,508
Male Population 48.02% 48.62% 51.77%
Female Population 51.98% 51.38% 48.23%
RIVER OAKSAPARTMENTS
PRESENTED BY
ALTAY UZUNTeam Lead
Hampton Roads OfficeTel (757) 777-3737 Fax (757) 493-3953
[email protected] VA 0225214405
O F F I C E S N A T I O N W I D E A N D T H R O U G H O U T C A N A D A
WWW.MARCUSMILLICHAP.COM
NICHOLAS BALOGAssociate
Hampton Roads OfficeTel (804) 205-5008 Fax (757) 493-3953
[email protected] VA 0225226429
JUSTIN FERGUSONAssociate
Hampton Roads OfficeTel (804) 205-5022 Fax (757) 493-3953
[email protected] VA 0225225369
CHANDLER MORTAgent Candidate
Hampton Roads OfficeTel (757) 777-3737 Fax (757) 493-3953
[email protected] Coming Soon