The Midtown Portfolio
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M THE MIDTOWN PORTFOLIO A 376-UNIT PORTFOLIO LOCATED IN THE HISTORIC MUSEUM DISTRICT OF RICHMOND, VIRGINIA TABLE OF CONTENTS Executive Summary 4 Location Overview 20 The Gallery Property Overview 34 The Collection Property Overview 42 Apartment Market Overview 72 Rent Comparable Analysis 76 Financial Analysis 84 2 CONTACTS OFFER SOLICITATION PROCESS WINK EWING OFFER SUBMISSION Senior Managing Director Offers should be presented in the form of a non-binding Letter of Intent, spelling out the 703.575.2157 significant terms and conditions of Purchasers’ offers including, but not limited to (1) [email protected] asset pricing, (2) due diligence and closing time frame, (3) earnest money deposit, (4) a description of the debt/equity structure and (5) qualifications to close. Offers should be MIKE MARSHALL delivered to the attention of Wink Ewing at [email protected]. Executive Managing Director 703.575.2152 PROPERTY VISITATION [email protected] Prospective purchasers will have the opportunity to visit the Properties via prescheduled property tours. These tours will include access to a representative sampling of units and DREW WHITE access to maintenance and other similar facilities. No visitations will be permitted without Executive Managing Director advance notice and scheduling. 703.918.4661 [email protected] AVAILABLE TOUR DATES To schedule your tour of the Properties, please contact Ed Garnica at 703.918.4678 or ED GARNICA [email protected]. Financial Analyst 703.918.4678 [email protected] 3 EXECUTIVE SUMMARY THE OFFERING INVESTMENT HIGHLIGHTS ARA Newmark Mid Atlantic is pleased to present for sale the Irreplaceable Portfolio – Ideally located within Richmond’s Gallery Midtown and Collection Midtown apartment properties historic Fan and Museum District, the portfolio is unique in (the “Midtown Portfolio”), a portfolio consisting of 376 units size and location. These desirable urban neighborhoods located in the Museum District and Fan neighborhoods of are very walkable, boast among the highest occupancy Richmond, Virginia. rates in Richmond, and are fully built-out which places high barriers to entry for new supply. Gallery Midtown is a 157-unit garden style property that has been substantially renovated to a high standard through comprehensive Substantially Renovated Assets – Over the past two years, unit interior renovations, common area upgrades and the new the current owner has completed substantial renovations addition of a state-of-the-art clubhouse and pool. totaling $8.4 million in unit interiors, common areas and building exteriors throughout the portfolio, as well as Collection Midtown is comprised of 20 historic buildings totaling constructing a state-of-the-art clubhouse and pool at the 219 units, with buildings ranging from 6 to 19 units. This portfolio Gallery. has also undergone a substantial capital improvement program. A significant value-add opportunity remains by continuing the unit Value-Add Opportunity – Further upgrade opportunities exist in renovations to achieve higher rents and increased returns. the portfolio: + Collection – Kitchen upgrades, which cost Situated within a one-mile radius of one another, the Gallery and approximately $6,000 per unit and have achieved Collection properties are located within a concentrated footprint, over $200 in incremental monthly rent, have only affording considerable operational efficiencies. The Portfolio been completed in 25% of Collection units. is operated from the central office at the Gallery along with a satellite leasing office at 805 North Boulevard servicing the + Gallery – While in-unit renovations have been Collection. The residents of the entire portfolio share the dazzling substantial, bathrooms have not been upgraded new amenities offered at the recently completed clubhouse at the and the opportunity exists for additional exterior Gallery. amenities. The Collection and Gallery can be acquired individually or Sought-After Secondary Market – Opportunity for an together, and are offered on a free and clear basis. investor to gain a major foothold in the highly-sought after Richmond MSA, which has market-wide occupancy of Please see the map on the following page to see the individual 95.3% that exceeds national averages and also affords property locations. the opportunity to achieve outsized yields relative to comparable markets in the southeast such as Charlotte, Raleigh/Durham and Nashville. Stable Cash Flows – After completing portfolio-wide renovations in mid-2017, the current owner has stabilized the portfolio, which is currently 95.5% occupied. Given the upgraded condition and excellent locations of the properties, the portfolio offers an investor stable, long-term cash flows. 6 Executive Summary Executive Summary 7 INDIVIDUAL PROPERTY ADDRESSES 3 8 9 10 11 12 15 4 7 6 17 14 13 16 18 2 1 5 19 20 8 Executive Summary 1. 3224 Stuart Ave 8. 808 N Boulevard 15. 2730 W Grace St 12 Units 12 Units 12 Units 2. 3228 Stuart Ave 9. 811 N Boulevard 16. 2726 W Grace St 12 Units 12 Units 12 Units 3 3. 3408 Park Ave 10. 805 N Boulevard 17. 2716 W Grace St 8 9 12 Units 12 Units 12 Units 10 11 12 15 4 7 6 17 14 13 16 18 4. 2810 Monument Ave 11. 801 N Boulevard 18. 803-809 N Robinson St 2 1 5 6 Units 12 Units 4 Units 5. 2516-2518 W Grace St 12. 711 N Boulevard 19. 110 N Boulevard 12 Units 12 Units 19 Units 6. 2903 Monument Ave 13. 705 N Boulevard 20. 25 N Boulevard 19 7 Units 12 Units 9 Units 20 7. 706 N Boulevard 14. 2734 W Grace St 21. The Gallery 6 Units 12 Units 157 Units Executive Summary 9 IRREPLACEABLE & WELL LOCATED PORTFOLIO + Located in the heart of Richmond’s Museum District and + A few blocks from Carytown, a long-standing urban village Fan neighborhoods, the properties are surrounded by The with numerous dining options such as Can Can, East Coast Virginia Museum of Fine Arts, The Virginia Historical Society Provisions and The Daily; and shopping boutiques such as and the city’s most significant collection of early 20th century Need Supply, Walkabout Outfitters and Roan. architecture. + - Highly walkable to the many bars, restaurants and The Gallery and all Collection properties are situated within a shopping destinations within the Fan and Museum one-mile radius of four grocery stores, including Kroger, Fresh District. Market and the soon-to-be-open Publix and Whole Foods. + + The Collection and Gallery are positively differentiated from Less than a 10-minute drive from the Downtown Richmond competitive rental housing nearby, which are mostly small, one- area, which features excellent restaurants, premier shopping off properties that have not been recently renovated and do not destinations and multiple theaters such as the Hippodrome, have access to Class A amenities. Altria Theatre and Dominion Arts Center, among others. + + Adjacent to Scott’s Addition, the fastest growing neighborhood The Walk Score is an impressive 86 for the properties, with in Richmond with many popular restaurants, breweries and several grocery stores, restaurants, bars and museums within entertainment venues as well as the soon-to-open River City Roll blocks of most properties. bowling alley. TAX ABATEMENT BOOSTS CURRENT RETURNS As an incentive to renovate existing properties, the City of Richmond offers a 10-year tax abatement program. The Gallery and most of the Collection properties have been accepted into this program, with the Gallery having six years of full tax abatement and the Collection properties having an average of five years of full tax abatement remaining. The schedule below represents a summary of the remaining tax abatement for the Gallery and Collection assets. 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Collections Abatement $82,398 $82,716 $82,716 $82,716 $82,716 $74,919 $59,634 $38,955 $18,276 $2,697 Gallery Abatement $136,428 $136,428 $136,428 $136,428 $136,428 $136,428 $102,321 $68,214 $34,107 $0 TOTALS $218,826 $219,144 $219,144 $219,144 $219,144 $211,347 $161,955 $107,169 $52,383 $2,697 10 Executive Summary SUBSTANTIAL CAPITAL INVESTED RICHMOND’S HIGHLY FAVORABLE RISK-RETURN PROFILE + The current ownership has completed a substantial capital program at the Gallery and all Collection assets, having According to Real Capital Analytics, going-in cap rates for invested approximately $8,423,000 ($22,400 per unit) in all classes of multifamily assets are considerably higher capital improvements over the past two years. for the Richmond MSA when compared to other southeast markets such as Raleigh/Durham, Charlotte, Nashville and + Gallery Upgrade Summary – Brand-new clubhouse and Northern Virginia. On average, Richmond cap rates are pool, all new windows, exterior paint, landscaping, secured nearly 100 basis points higher than these markets. This access systems at building entrances, in-unit washers and affords investors the opportunity for outsized yields and dryers, new kitchen appliances, granite counters and cabinets, given Richmond’s excellent fundamentals, offers a favorable and upgraded lighting and flooring throughout the units. risk-return profile. + Collection Upgrade Summary – Secured access systems at building entrances, paint and refinished floors in unit interiors 4Q17 APARTMENT CAP RATE COMPARISON BY REGION and building corridors, roof work and roof replacement as necessary, and exterior paint. Approximately 75% of units NORTHERN VIRGINIA 5.1% were upgraded with new washer / dryers and 25% were upgraded with new kitchen appliances, cabinets and granite RALEIGH-DURHAM 5.2% counters. CHARLOTTE 5.4% NASHVILLE 5.7% RICHMOND 6.3% MID-ATLANTIC REGION 5.8% US NON MAJOR MARKETS 5.7% US MAJOR MARKETS 4.7% US NATIONAL 5.6% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Executive Summary 11 VALUE-ADD POTENTIAL The Midtown Portfolio provides the opportunity to enhance value through continuing renovations of unit interiors and creating new amenities. When comparing the rent differential between new high-end product nearby, such as the Preserve at Scott’s Addition, Carytown Crossing, Cary Street Station and the Cooperage, average market rents are approximately $200-$400 more per month when compared to the Collection.