Market Analysis Sunset Hampton Apartments Hampton, Virginia

Prepared for:

Mr. Brian Staub Marlyn Development Corporation

June, 2018

S. Patz and Associates, Inc. 46175 Westlake Drive, Suite 400 Potomac Falls, Virginia 20165

June 11, 2018

Mr. Brian Staub Chief Financial Officer Marlyn Development Corporation 308 35th Street, Suite 101 Virginia Beach, VA 23451

Dear Mr. Staub:

This will set forth our full narrative market study for the proposed development of the 160-unit Sunset Hampton Apartments that are planned to be built during 2019 and 2020 for 2021 delivery and occupancy on an attractive site in the Sunset Creek neighborhood of Hampton, Virginia. The apartments units are to be affordable, with rents limited at or below 60% of AMI for the Hampton Roads Region of Virginia. Once built, Sunset Hampton will have rent and income restrictions, but no age restrictions.

Our analysis determined that the Sunset Hampton proposal was very attractive and will be very competitive for the Newport News/Hampton affordable apartment market. The units are properly priced, and the proposed rents are slightly below market. The units are spacious in size. The unit mix will serve a wide range of renter households. Sunset Hampton has basic amenities and an adequate number of on-site surface parking spaces.

The income market for Sunset Hampton, consisting of affordable units at or below 60%of AMI, has a low vacancy rate and a limited supply of affordable apartments units that are comparable with the Sunset Hampton proposal. Vacancy does exist for older and less attractive properties. Two apartment pipeline proposals are under construction or in active planning and will add 150± new units to the market. However, with these additions, the market area has a net demand of 670 units for the forecast period to 2021. The resulting capture rate for the Sunset Hampton proposal, is 17.9 percent, which is well within the acceptable supply-demand range. We expect full market support for the proposal, with a likely lease-up period of 6 months from the start of active planning.

Mr. Brian Staub June 11, 2018

The detailed market and economic data that are required for market studies to be presented to VHDA, are included in the attached report. Please call if additional data or clarification are required.

Sincerely,

Stuart M. Patz President

SMP/mes

TABLE OF CONTENTS

PAGE Section I Introduction ...... 5 Description of Market Area ...... 7 Sunset Hampton Apartments ...... 8 Site Description ...... 8 Site Setting ...... 12 Development Program ...... 21 LIHTC Rent Comparison ...... 22 Site Plan and Building Design ...... 22 Building Floor Plans...... 25 Unit Floor Plans ...... 26 Development Costs ...... 29 Summary ...... 29 Market Area Economic Overview ...... 30 At-place jobs ...... 30 Employment and Labor Force ...... 33 Current Developments ...... 35 Section II Apartment Market Analysis ...... 38 Demographic Trends and Projections ...... 38 Households ...... 39 Renter Households ...... 40 Target Renter Households ...... 40 Renter Households by Size ...... 41 Competitive Apartment Market ...... 41 Characteristics of the Market ...... 41 Unit Mix by Income Restriction ...... 50 Rental Rates ...... 51 Recent Rent Changes ...... 53 Rent Per Square Foot...... 54 Apartment Unit Sizes ...... 54 Apartment Unit Mix ...... 55 Community Amenities ...... 56 Section III Conclusions ...... 58 Analysis of Affordable Apartment Unit Demand ...... 59 Affordable Apartment Pipeline ...... 59 VHDA Demand Chart ...... 62

Section I Introduction

Following is the full narrative market study for the proposed 160-unit, Sunset Hampton Apartments proposal, planned for development along Victoria Boulevard in Hampton, Virginia during 2019 with project opening and initial lease-up expected in 2020. The proposal is for affordable housing, to be financed under the Low Income Hosing Tax Credit (LIHTC) program, with non-taxable bonds and at rents at or below 60 percent of AMI for the Hampton Roads marketplace. Once built, Sunset Hampton Apartments will have rent and income restrictions, but no age restrictions.

The market study will be submitted to officials of Virginia Housing Development Authority (VHDA) for tax credit financing. Thus, the report has been prepared under the current VHDA market study guidelines for 2018 applications.

To follow these guidelines, the report is prepared in three separate sections. The first, the Introduction, presents a detailed description of the apartment proposal and its setting within the Sunset Creek community of Hampton. Along with the analysis of the development proposal, Section I evaluates the site and its setting within a mature section of the City of Hampton and the community and public facilities that serve this neighborhood. Proximity to schools, medical care, shopping and recreation are key neighborhood components for study.

A second part of Section I is the economic overview analysis of the defined market area for the site. This includes an analysis of at-place jobs and employment growth, including active development proposals that will generate net new employment. These economic factors are key determinants of the market area stability and setting for new real estate investments of the type proposed.

Also, employment is a factor that generates population and household growth, and in turn, housing unit demand. Key changes in market area employment have

5 generated market support for new housing development, particularly affordable housing, as planned at Sunset Hampton Apartments.

Section II is the supply/demand analysis. Demand for new affordable apartment units is based on household income growth for renter households with incomes between $30,000 and $45,000, when incomes are reported in constant 2018 dollars. Renters in this income category can afford the proposed rents at Sunset Hampton Apartments, as presented below and are within the household income guidelines for tax credit housing in the market area.

The forecast date for the study is 2020. Sunset Hampton Apartments is expected to be started by late-2018 and available for occupancy by late-2019. Lease-up of the 160 units are likely to extend into mid-2020.

The second part of Section II is the competitive apartment analysis. We identified 26 apartment properties in the market area that are LIHTC communities with rents at or below 60 percent of AMI. These apartment properties were built new, and are not rehabs of mature properties. These seven apartment communities are the best comps. All 26 apartment complexes are listed and analyzed to show the depth and growth of the market.

These LIHTC apartment properties are studied for occupancy, rent, unit features and characteristics and project amenities. The site locations are studied. Trend data on occupancy and rents are noted. These community characteristics are compared with the Sunset Hampton Apartments proposal to evaluate the feasibility of the proposal.

Section III presents the conclusions and includes the VHDA Demand Analysis Chart.

Description of the Market Area

The market area for Sunset Hampton Apartments (see Map A) is Newport News City and Hampton City, which together represent the eastern part of the Virginia Peninsula, within the Hampton Roads Region. These adjoining cities are similar in character in that they have large numbers of affordable rental apartments and have an orientation towards the military due to the multiple military installations in each city. The cities blend together and renters move easily within the two cities depending on job locations and other factors. The market area determination was based on our interviews with on-site managers of several area apartment complexes. The small City of Poquoson was not included in the market area, as it has no competitive apartment properties. York County was excluded, as it has few LIHTC apartment properties and is a long distance from the Sunset Hampton Apartments site location.

The two jurisdictions of York County and Poquoson represent separate market areas. The Newport News and Hampton areas are too far removed from Norfolk to compete with affordable apartment complexes there. Isle of Wight County and the adjacent counties of York and James City County to the north also do not have apartment properties that compete directly with the LIHTC properties in the defined market area, based on input from area on-site managers.

Map A - Sunset Hampton Apartments Market Area

Sunset Hampton Apartments Site Description

The study site consists of six irregularly-shaped parcels located on the south side of Victoria Boulevard and west of Route 60 (Kecoughtan Road) in the southeastern portion of the City of Hampton, approximately 2.3 miles southwest of Downtown Hampton and 1.5 miles southeast of Interstate 64. Map B below shows the location of the study site within the Sunset Creek neighborhood of Hampton.

Map B - Site Location

Shown next is a southern aerial of the study site. The site is currently improved with one structure that fronts Victoria Boulevard, which is the vacant American Legion Hampton Roads Post 31 building. This one-story, 2,660± square foot building was constructed in 1980 and will be demolished as part of the development program. A gravel roadway circles this building and runs slightly south of the structure on its eastern side.

Most of the remaining land within the study site is occupied by a baseball diamond, Trimble Field, which is accessible from the east from Kecoughtan Road. The baseball diamond also includes stands, two dugouts and a shed. The ballfield does not appear to be an active recreation area. Most of the remaining land within the study site is cleared, with trees growing along the perimeter. Also shown in the aerial is that both Victoria Boulevard and Kecoughtan Road are lined with sidewalks.

The aerial view also identifies adjacent developments. Development on the south side of Victoria Boulevard consists almost entirely of mature single-family homes that were largely constructed in the 1970’s and prior. Three non-residential developments are located in this area and include the following:

. Sunset Marine Co. (Note 1). This structure houses the offices of a boat repair and storage facility. This 1,210± square foot building was constructed in 1937, originally as a service garage.

. Bay Area Landscaping (Note 2). This landscaping company is located in a 4,410± square foot structure that was constructed in 1941.

. Therapeutic Recreation Center (Note 3). This 6,880± square foot facility was constructed in 1997 and is operated by Hampton Parks, Recreation, and Leisure Services to provide a variety of programs to give disabled youth and adults in Hampton the opportunity to participate in recreation and leisure programs. Programs are designed to accommodate individuals who have mild to moderate intellectual disability, physical disability, learning disability, moderate autism, and moderate behavior disorder.

To the north of the study site, on the north side of Victoria Boulevard, is Eason Park (Note 4) and Darling Stadium (Note 5). Eason Park is an underutilized park that generates minimal traffic. It contains several walking trails and a small playground. Darling Stadium serves primarily as a high school football stadium, but also houses track- and-field meets, as well as marching band competitions. The 8,000-seat brick facility opened in 1987.

Apart from a 2,670± square foot Citgo fueling station and convenience store (Note 6) that was constructed in 1965, an historic 9,370± square foot art gallery called Charles H Taylor Art Center (Note 7), and the 53,140± square foot Hampton Public Library (Note 8) that opened in 1987, the only other non-residential developments near the study site are located along the Hampton River, on the eastern side of Kecoughtan Road (Note 9). Businesses in this area include water-related companies, such as Hampton Roads Seafoods, Pete’s Top Shop, Trident Marine Electronic, Hampton Boat & RV Storage and Nautique Marine Sunset Creek.

Southern Aerial

Next shown are photos of the study site. As previously noted, much of the site is occupied by a baseball diamond. The property is largely buffered from adjacent uses by fences and trees.

American Legion Building

View of Baseball Area

Adjacent to American Legion Building

Site Setting

Map C is the first of two site maps of the neighborhood. It shows a built up residential setting, one that is close to the James River, Hampton University Campus, I-64 and U.S. Route 60 and surrounds water-related businesses, especially along Sunset Creek.

Map C – Site Location

Map D shows that the site is located near the southwestern intersection of Victoria Boulevard and Kecoughtan Road, across the street from Darling Stadium. I-64 is accessible roughly 1.5 miles northeast of the study site by way of LaSalle Avenue. This interstate runs for nearly 300 miles from West Virginia to the Hampton Roads Region. It accesses many of the adjacent communities, including Williamsburg, Newport News, Virginia Beach and Norfolk. Near the study site, the interstate makes up part of the Hampton Roads Beltway, a loop of I-64 and I-664, which links the communities of the Virginia Peninsula and South Hampton Roads.

Victoria Boulevard, which marks the northern boundary of the study site, generally runs in an east-west direction between Buxton Avenue in the west and S. Armistead Avenue in the east. Essentially all of the developments along this roadway

13 consists of mature single-family homes. Apart from the previously mentioned gas station, art gallery and public library, non-residential developments along this roadway include:

. The Hampton Health Department . Hunter B. Andrews PreK-8 School . Hampton Roads Transit . USPS . Third Baptist Church . Citgo . Cooke Brothers Funeral Chapel . Mac’s Barbershop . Mountain Moving Faith Outreach Ministries . Pine Supermarket

Victoria Boulevard’s eastern terminus is within the Victoria Boulevard Historic District (Note 1). This neighborhood encompasses 87 contributing buildings in a former streetcar suburb originally laid out in 1888. The historic residential district includes notable examples of the Queen Anne and Colonial Revival styles. It was listed on the National Register of Historic Places in 1984.

Of greater importance is the close proximity of the site to Downtown Hampton (Note 2), which is less than two miles northeast of the study site and accessible from Victoria Boulevard and S. Armistead Avenue. In addition to housing a number of office buildings, Downtown Hampton is also a regional tourist destination with a variety of specialty retail, restaurants and museums. Downtown Hampton is also a boating destination and hosts a number of seasonal festivals and special events.

Approximately 8,600± people are currently employment in Downtown Hampton, many of whom are government employees. Major public-sector employers in Downtown Hampton include: Hampton District Court, Hampton Juvenile Court, Hampton Police, Hampton City Schools, Hampton City Hall, US Post Office and the DMV. Major private- sector employers include Zel Technologies, M2 Pictures and the 172-room Crowne Plaza, which was recently sold. Several regional and national financial institutions are also located in Downtown Hampton including Towne Bank, SunTrust Bank, Wells Fargo Advisors and Old Point National Bank.

In total, Downtown Hampton is currently home to one hotel (Crowne Plaza), 20± restaurants, approximately fifteen small boutiques, several banks, several government buildings and a fourteen-story, 162,670± square foot office building owned by Hampton University.

In addition to the above are several community facilities located in downtown. These are briefly detailed in the paragraphs below.

. Carousel Park is located at 602 Settlers Landing Road in Downtown Hampton. This is a two-acre urban park and plaza on the waterfront. Carousel Park features a restored wooden carousel from 1920.

. Mill Point Park is a two-acre park located on the Downtown Hampton waterfront. It includes a 300-seat amphitheater and a picturesque view of the Hampton River. The park hosts a variety of special events, concerts and festivals.

. Virginia Air and Space Center (VASC) is the largest tourist draw to Downtown Hampton and opened in 1992. The Center occupies an 110,000± square foot building on 2.2 acres of land. The VASC is located on Settlers Landing Road in the heart of Downtown Hampton. The VASC also serves as the visitor center for NASA Langley Research Center and Langley Air Force Base. A significant expansion of this facility was completed in 2003 to create an aviation gallery.

. St. John's Episcopal Church . St. John’s was built in 1728 and is located at 100 Queens Way in Downtown Hampton.

. Hampton History Museum . Opened in 2003, this museum is located in Downtown Hampton at 120 Old Hampton Lane. This facility includes six exhibit rooms, administrative offices, and a gift store in an 18,000± square foot building.

To the east of Downtown Hampton are two major employers: Hampton University (Note 3) and the Hampton VA Medical Center (Note 4). Hampton University is a private historically black university that was founded in 1868 on a 314-acre campus that currently totals 118 buildings. Current enrollment exceeds 4,600 undergraduate and graduate/ professional students. With over 1,000 employees, Hampton University is among the largest private-sector employers in the city.

The Hampton VA Medical Center is located to the south of Hampton University and caters to veterans throughout southeastern Virginia and northeaster North Carolina. The 390-bed facility provides primarily and specialty care in medicine, surgery and psychiatry and recently opened a Women’s Clinic. This facility employs over 1,600 people.

Kecoughtan Road, to the east of the study site, is a J-shaped roadway that runs from Settlers Landing Road in the north, just west of Downtown Hampton in Olde Hampton, southwest into the industrial portions of southern Newport News. Olde Hampton is one of the oldest neighborhoods in Hampton that was developed beginning at the end of the Civil War by freed slaves. This neighborhood is almost entirely residential, as is most of the development flanking Kecoughtan Road.

Approximately 0.5 miles south of the site on this roadway is the Food Lion- anchored Kecoughtan Shopping Center (Note 5). Other tenants include Dollar Tree, Number 1 Kitchen, Virginia ABC, Chanello’s Pizza, Boost Mobile and H&R Block. This shopping center, which was built in 1994, houses the closest grocery store to the study site.

This roadway is also the location of the Save-A-Lot-anchored Wythe Shopping Center (Note 6). Smaller tenants include AutoZone and Papa John’s. A Family Dollar is adjacent to this shopping center.

Map D - Site Setting

Medical Care . Apart from the nearby Hampton VA Medical Center, which was previously described, the closest hospital to the study site is Sentara Careplex Hospital. This 224-bed facility is located at 3000 Coliseum Drive, approximately 4.4 miles northwest of the site. This is an acute care facility that includes an emergency department and specializes in cardiac, vascular and cancer treatment. The Sentara Center for Health and Fitness is located adjacent to the hospital.

Education. Hampton City Schools serves 20,700± students in 1 early childhood center, 19 elementary schools, 1 gifted center, 1 early childhood center, 2 PK-8 schools, 5 middle schools and 4 high schools. None are within walking distance from the subject. School-aged children residing in the property are served by the following schools:

Schools to Serve Sunset Hampton Apartments School Address Driving Distance Hunter B. Andrews PreK -8 School 3120 Victoria Blvd 0.9 miles SW Phoebus High School 100 Ireland St 3.0 miles NE Source: Hampton City Schools

In terms of higher education, the City of Hampton is served by Thomas Nelson Community College on Thomas Nelson Drive. Public universities that are outside but near Hampton include Christopher Newport University, Old Dominion University, Norfolk State University and The College of William and Mary. Hampton University, as previously noted, is located near the study site south of Route 60 and west of I-64.

Community Facilities . The closest post office is located at 405 Chesterfield Road, approximately 1.5 miles southwest of the study site. The closest fire department is the Hampton Fire & Rescue Station #3, located 2.9 miles southwest of the study site at 1430 Kecoughtan Road. Hampton Public Library is located at 4207 Victoria Boulevard, a quarter mile northeast of the study site.

Religious Institutions . Numerous churches are located within close proximity to the study site. The locations of nearby churches are listed below.

Locations of Nearby Religious Institutions Church Address First Presbyterian Church 514 S Armistead Ave Memorial Baptist Church 317 Lee St Queen Street Baptist Church 190 W Queen St St John ’s Episcopal Church 100 W Queens Way Hampton Baptist Church 40 Kings Way First United Methodist Church 110 E Queen St First Baptist Church -Hampton 229 N King St Bethel AME 94 Lincoln St Gray ’s Missionary Baptist Church 380 Union St Church of Jesus 630 Anderson Ln Source: S. Patz & Associates field survey

Parks and Recreation . Apart from Eason Park and the facilities in Downtown Hampton, two parks are located near the study site. Each is briefly detailed below.

. Armstrong Neighborhood Par k. This small park, located at 3401 Matoka Road, features two-lighted tennis courts, a playground, little league baseball field and asphalt-walking trail.

. Y.H. Thomas Neighborhood Park is located at 1300 Thomas Street, behind the Y.H. Thomas Building. The park features a basketball court, youth baseball field, football field, softball field, playground, and two picnic shelters. The park is also the location of the Y.H. Thomas Community Center, which offers various sports activities and educational programs.

Shopping . As previously noted, two grocery-anchored shopping centers are located near the study site along Kecoughtan Road. More expansive retail options are located in and around Peninsula Town Center, approximately 4.4 miles northwest of the site along the intersection of W Mercury Boulevard and I-64. Retailers in this area are detailed below.

. Peninsula Town Center opened in 2010 as the redevelopment of the Coliseum Mall at the southwestern intersection of Coliseum Drive and Cunningham Drive. The town center includes 1.1 million square feet of mixed-use space, including 850,000± square feet of retail space and 131,810± square feet of office space. In addition, it includes a multiplex cinema. Anchor tenants include Macy’s, JCPenney and Target. The shopping center includes more than 70 specialty retailers.

. Coliseum Crossing is located at the intersection of Coliseum Drive and Cunningham Drive, adjacent to the Peninsula Town Center. Anchor tenants at this 221,000± square foot retail center include Petco, David’s Bridal, Dollar Tree, Food Lion, Marshall’s and Ross Dress For Less.

. Power Plant at Hampton Roads is located at the southeastern intersection of Power Plant Parkway and W Mercury Boulevard. This is a 480,000± square foot shopping center that is anchored by Bass Pro Shops Outdoor World, Lowe’s, BJ’s and Joe’s Crab Shack.

. Riverdale Plaza Shopping Center is a 221,000± square foot community retail center located at 1044 W Mercury Blvd. Anchor tenants include JoAnn Fabrics, Bare Feet Shoes and Cinema Cafe 10.

. Coliseum Marketplace is a 106,000± square foot shopping center located at 2170 Coliseum Drive. Anchor tenants include a 57,620± square foot Farm Fresh and 23,980± square foot Michael's.

. Coliseum Square is a 43,310± square foot shopping center located at 2040 Coliseum Drive. This mature retail strip includes 43,310± square feet of retail space. It is anchored by Sleepy’s, Supercuts and GNC.

. Langley Square Shopping Center is a 120,650± square foot shopping center located at 11-77 West Mercury Boulevard. The shopping center is anchored by 43,650± square foot Food Lion.

In addition to the above are several large, free-standing big-box retailers including a Walmart supercenter and Home Depot.

Map E provides a summary of the locations of all of the nearby facilities that will serve the residents of Sunset Hampton Apartments. The map legend is attached.

Map E Key Downtown Hampton 1 Hampton VA Medical Center 2 Sentara Careplex Hospital 3 Hunter B. Andrews School 4 Phoebus High School 5 Hampton University 6 USPS 7 Hampton Fire & Rescue 8 Hampton Public Library 9 Eason Park 10 Armstrong Neighborhood Park 11 Thomas Neighborhood Park 12 Kecoughtan Shopping Center 13 Wythe Shopping Center 14 Peninsula Town Center 15 Coliseum Crossing 16 Power Plant at Hampton Roads 17 Riverdale Plaza 18 Coliseum Marketplace 19 Coliseum Square 20 Langley Square 21 Walmart Supercenter 22 Home Depot 23 Map E – Location of Area Community and Public Facilities

Development Program

Table 1 shows the apartment unit mix proposed for Sunset Hampton Apartments. The apartment community will contain 32 one-, 84 two- and 44 three-bedroom units. All of these units will be restricted households earning 60% of the Area Median Income (AMI). As shown, all one-bedroom units will have a single bathroom while the two- and three-bedroom units will each be equipped with two full bathrooms.

Table 1: Proposed Unit Mix, Sunset Hampton Apartments, June, 2018 1/ Total 1BR/ 1BA 32 2BR/ 2BA 84 3BR/ 2 BA 44 Total 160 Notes: 1/ All units restricted to 60% of AMI Source: Marlyn Development Corporation

Table 2 provides a more detailed description of the apartment proposal, with data presented on apartment unit sizes and proposed rents. Shown in Table 2 are net rents that tenants will pay, which exclude the cost of cold water, sewage and electricity. Rents will include trash collection only.

 One-bedroom tenant net rent will be $760.  Two-bedroom tenant net rent will be $890  Three-bedroom tenant net rent will be $1,020

The apartment unit sizes for the one-bedroom units will range between 848 and 865 square feet. The two-bedroom units, each with two full bathrooms, will measure 1,113- 1,234 square feet. The three-bedroom units will also have two full bathrooms and will measure 1,264 to 1,294. All units will be equipped with full-size washers and dryers.

Table 2: Proposed Rents and Sizes of Apartment Units, Sunset Hampton Apartments, June, 2018 1/ Total Units Size (SF) Net Rent One -Bedroom 32 848 -865 $7 60 Two -Bedroom 84 1,113 -1,234 $8 90 Three -Bedroom 44 1,264 -1,294 $1,020 Total 160 Notes: 1/ Includes full-size washers and dryers. Source: Marlyn Development Corporation

LIHTC Rent Comparison. The proposed LIHTC rents at Sunset Hampton Apartments are 60% of the Area Median Income (AMI) for the Virginia Beach–Norfolk– Newport News, VA–NC MSA. The proposed rents will include only trash collection. Added to that rent, as shown below, is a $81 cost for electricity, water and sewage for a one-bedroom apartment unit, $109 for a two-bedroom apartment unit and $146 for a three-bedroom apartment unit to determine gross rents. These proposed gross rents are below the HUD maximum allowable gross rents, as shown.

Comparative Rent Chart, Sunset Hampton Apartments Utility Electric Gross HUD Maximum Net Rent Allowance Allowance Rent Allowable Gross Rent One -Bedroom $7 60 $38 $43 $8 41 $843 Two -Bedroom $8 90 $50 $59 $9 99 $1,012 Three -Bedroom $1,020 $76 $70 $1,1 66 $1,170 Source: Marlyn Development Corporation; HUD

The UA is based on an energy audit prepared for the apartment property by a professional in the field. That audit is available, if needed.

Site Plan and Building Design

Following is the proposed site plan and location of Sunset Hampton Apartments. As shown, access to the community will be via the north from Victoria Boulevard with the access road serving the entire site and parking area. The buildings are attractively clustered on the north side of the property.

The community will contain a total of five residential buildings. These will be of different sizes. A free-standing clubhouse building will be located at the center of the community. A picnic area and dog park will be situated north of the clubhouse. Also shown is that Sunset Hampton Apartments will be served by 278 parking spaces, a ratio of 1.74 spaces per unit. These parking spaces will front each of the buildings.

Sunset Hampton Apartments Site Plan

Next shown is a rendering and elevations of a typical residential structure. As depicted, these will be four-story wood-framed garden apartment buildings with pitched roofs. The building will have large windows to allow for an abundance of light and air into each apartment unit. These windows will be located in each bedroom and living room. Building exteriors will contain a combination of brick, high-grade vinyl siding and pvc/hardi board. All buildings will follow green design and building practices.

The buildings will be served by one or two stairwells, depending upon the building size and design. The stairwells will be open and will provide direct access to each apartment unit. The buildings will have pitched roofs. Each apartment unit will have a spacious balcony or patio.

Sunset Hampton Rendering

Sunset Hampton Elevations

Building Floor Plans

Typical building floor plans for each level of Sunset Hampton Apartments are presented next. First shown is the ground level, which will be fully residential. A central corridor will access each of the residential units with several sets of stairs accessing the corridor.

Ground Level Floor Plan

Building floor plans for the second, third and fourth levels are identical. All levels are fully residential, with units accessed from a central corridor.

The floorplans are shown for Building 3, the largest building with 32 apartment units. The site leasing office and other recreation facilities are in the clubhouse. The other buildings have similar floor plans, but only one stairwell.

Next shown are the floor plan for the single-level clubhouse. The clubhouse will contain the following uses:

. A 1,241 square foot great room (assembly area)

. A 214 square foot reception area . A 151 square foot leasing office . An 82 square foot work room . A 25 square foot janitors closet . A 136 square foot kitchen . A 48 square foot mechanical/ electrical room . A 424 square foot maintenance office . A 208 square foot conference room . A 759 square foot fitness center . Restrooms

Clubhouse Floor Plan

Unit Floor Plans

The proposed unit floor plans are described below. Units will have a combination of carpet and sheet vinyl flooring. Appliances will have a stainless-steel finish, including a built-in microwave. There will be premium laminate countertops and either balconies or patios. As previously noted, each unit will contain a full-size washer and dryer.

Shown below is the floor plan of typical one-bedroom unit. This unit will be square-shaped with entry into a combined living and dining room area. The living room

26 will access the balcony or patio, depending on the level. The kitchen will have an open design and will be located opposite a small linen closet. Opposite the living room will be the laundry room, which will be adjacent to the full bathroom on one end and the bedroom on the other. The bedroom will include a walk-in closet.

One-Bedroom Floor Plan

The two-bedroom floor plan is shown next and will share a similar design to the one-bedroom unit. Entry will be into a combined living and dining room area that will access a patio or balcony. Adjacent to this area will be an open kitchen. Opposite the kitchen will be the laundry room, which will also be adjacent to a coat closet, linen closet and full bathroom. The master bedroom will contain a full bathroom and walk-in closet. The second bedroom will contain a standard closet. It is located next to the master bedroom.

Two-Bedroom Floor Plan

As with the one- and two-bedroom units, entry into the three-bedroom units will be into a combined living and dining room area that will access a patio or balcony and will be adjacent to an open kitchen. A corridor will access the remaining portions of the unit that will include a linen closet, coat closet, full bathroom, laundry room and each of the three bedrooms. The master bedroom will contain a full bathroom and walk-in closet. The two smaller bedrooms will each contain standard closets.

Three-Bedroom Floor Plan

Development Costs

The proposed building costs, excluding soft costs, but including land acquisition, is $16.3 million, or approximately $101,980± per apartment. With land and soft costs, total unit cost will increase by 30± percent.

Summary

Sunset Hampton Apartments is an attractively designed garden apartment complex. The apartment unit sizes are spacious, building designs are upscale, apartment units are fully amenitized with an in-unit washer/dryer within a laundry room, and each apartment has sufficient closet space. The site design is attractive and ample on-site parking will be available. The proposal will be very competitive within the Newport News/Hampton affordable apartment market.

The Sunset Creek neighborhood is mature, but contains a wide range of community facilities and services for area residents. There are several affordable apartment complexes in the nearby areas and all have been successful.

Given this positive evaluation of the site, setting and development proposal, the next “task” is the evaluation of the market area economy. That analysis follows.

Market Area Economic Overview

This part of the market analysis presents an economic overview of the market area in terms of job and employment growth. Three economic factors are presented: (1) at- place job growth, (2) employment and labor force trends, and (3) new active development plans that are expected to generate net new job growth.

The three economic factors under study are analyzed in the paragraphs to follow. Key to this analysis is that job growth supports growth in population and households, and therefore, housing unit demand, particularly of the type under study. Thus, the establishment of market area economic stability is a key issue related to new housing demand in the market area.

At-Place Jobs

As of year-end 2016 (2017 data are not yet available), the two-jurisdictional market area had 150,170± at-place jobs. That total is 6,380± jobs below the 2006 total and 7,220± jobs below the peak period for at-place jobs of 2008. There was net growth of at-place jobs in the market area over the 2006 to 2008 period, but that trend was reversed during the recession of the last part of the 2000 decade. A considerable decrease in total at-place jobs occurred after 2008 and the market area has not yet fully rebounded. The at-place job total for 2011 and 2012 fell below the 2009 and 2010 totals. Job growth did occur in 2013, though 120± jobs were eliminated in 2014. Market area employment fell in 2015 by 730± jobs. 1,310± jobs were lost in the market area between 2015 and 2016.

Since 2006, the market area realized the most net job growth in the Health Care sector, with 4,070± new jobs. This is one of the few sectors that grew during the recession. Major medical employers in the market area include the Riverside Regional Medical Center, Sentara Hampton General Hospital and Hampton Veteran’s Affairs Medical Center. Over 540 Health Care jobs were added in 2015. Other industrial sectors with significant growth during the past decade include Management of Companies (1,050± new jobs) and State Government (230± new jobs).

Despite growth in the above sectors, at-place job gains were fully offset by losses in Admin./Waste Services, Local Government and other industrial categories. With 2,340± jobs eliminated since 2006, the Construction sector has faced the heaviest layoffs over the past decade.

Though the Manufacturing sector added nearly 3,000 new jobs between 2006 and 2014, losses in 2015 and 2016 fully offset these gains. 1,390± Manufacturing jobs were eliminated in 2015 and an additional 1,870± jobs were lost in 2016. Most of these reductions were a result of layoffs associated with Newport News Shipbuilding.

The Admin./Waste Services sector has also faced major job losses over the past decade, with the loss of 1,580± jobs since 2006.This includes several call center closures in Hampton by companies including NCO Financial Systems (70± layoffs in 2006 and 670± layoffs in 2010), TeleTech Holdings (530± layoffs in 2008), West Corporation (180± layoffs in 2009 and 450± layoffs in 2010), Luke & Associates (180± layoffs in 2012), and TRG Customer Solutions (370± layoffs in 2012). In Newport News Northrop Grumman Technical Services laid off 620 employees between 2010 and 2012.

Other sectors with significant job losses over the past decade include: Local Government (2,080± jobs lost), Information (1,570± jobs lost), Retail Trade (1,270± jobs lost), Federal Government (800± jobs lost), Real Estate (750± jobs lost), Professional/Tech. Services (490± jobs lost), Accommodations/Food (480± jobs lost), Finance/ Insurance (420± jobs lost), Educational Services and (420± jobs lost).

Of note is that the BLS data shown in Table 3 are for civilian jobs. The Hampton Roads area has a sizable number of military jobs. Much of the recent apartment unit growth in the area was in support of military-related demand. Thus, it is not possible to just rely on published job data for the following market analysis.

Table 3: Trends in Average At-Place Employment, Newport News-Hampton, VA, 2006-2016

Industry 2006 2008 2009 2010 2011 2012 2013 2014 2015 2016 Agriculture, Forestry, Fishing ND ND ND 35 ND ND ND ND ND ND Mining ND ND ND ND ND ND ND ND ND ND Utilities ND ND ND ND ND ND ND ND ND ND Construction 6,773 6,075 5,251 5,395 5,121 4,884 4,502 ND 4,384 4,438 Manufacturing 26,363 26,249 25,956 25,928 26,248 27,446 28,562 29,358 27,966 26,101 Wholesale Trade 2,965 2,898 2,781 2,592 2,698 2,794 2,834 2,806 ND ND Retail Trade 17,663 16,703 15,732 16,134 15,944 15,957 16,331 16,365 16,620 16,395 Transport. & Warehousing ND ND ND ND ND ND ND ND ND ND Information 3,291 3,180 2,657 2,362 2,436 2,495 ND 2,169 1,825 1,722 Finance/Insurance 2,726 2,614 2,486 2,405 2,388 2,357 2,341 2,444 2,339 2,304 Real Estate 3,066 3,023 2,833 2,799 2,716 2,696 2,532 2,467 2,431 2,314 Professional/Tech. Services 9,619 10,107 10,344 9,749 9,149 8,757 9,252 9,024 9,080 9,129 Management of Companies 1,435 1,401 1,275 1,765 1,850 1,961 2,094 2,005 2,319 2,480 Admin./Waste Services 10,159 11,246 9,840 9,192 8,828 8,005 7,632 7,955 8,460 8,579 Educational Services 3,066 3,213 3,228 3,250 3,197 3,264 3,217 3,078 2,944 2,770 Health Care 14,645 15,958 16,103 16,274 16,961 16,953 17,331 17,762 18,301 18,712 Arts/Enter./Recreation 1,399 1,249 1,187 1,247 1,364 1,387 1,443 1,362 1,376 1,381 Accommodations/Food 13,089 12,811 12,260 12,231 11,945 11,901 12,310 12,354 12,459 12,607 Other Services 3,749 3,796 3,556 3,507 3,568 3,671 ND 3,723 3,668 3,724 Local Government 17,751 17,800 17,921 17,609 17,284 17,614 16,937 16,490 15,918 15,674 State Government 3,098 3,033 2,927 2,978 3,086 3,229 3,270 3,318 3,334 3,325 Federal Government 13,178 13,576 13,682 13,907 13,784 13,269 12,974 12,636 12,601 12,375 Total 156,447 157,289 152,139 151,563 150,843 151,221 152,250 152,133 151,374 150,068 Notes: ND = Data do not meet BLS or State agency disclosure standards. Source: United States Department of Labor, Bureau of Labor Statistics

Table 4 show the net change in at-place job totals over the past ten years in Hampton and Newport News. As shown, several sectors have faced heavy job losses, with most growth taking place in the Health Care sector.

Table 4: Trends in Average At-Place Employment, By City, 2006-2016

Industry Newport News Hampton Total Agriculture, Forestry, Fishing ND ND -- Mining ND ND -- Utilities ND ND -- Construction -574 -1,761 -2,335 Manufacturing -738 476 -262 Wholesale Trade -- -195 -- Retail Trade -903 -365 -1,268 Transport. & Warehousing ND ND -- Information -1,721 152 -1,569 Finance/Insurance -143 -279 -422 Real Estate -226 -526 -752 Professional/Tech. Services 26 -516 -490 Management of Companies -38 1,083 1,045 Admin./Waste Services -1,058 -522 -1,580 Educational Services -228 -68 -296 Health Care 1,634 2,433 4,067 Arts/Enter./Recreation 196 -214 -18 Accommodations/Food -399 -83 -482 Other Services 46 -71 -25 Local Government -549 -1,528 -2,077 State Government -20 247 227 Federal Government -955 152 -803 Total -4,631 -1,748 -6,379 Source: United States Department of Labor, Bureau of Labor Statistics

Employment and Labor Force

At-place jobs refer to where the job is located, and in this instance, that refers to jobs located in one of the three jurisdictions that comprise the market area. Employment refers to the number of market area residents who are employed, no matter where the job is located. Employment totals are slightly lower compared with at-place jobs, which means that some net in-commuting occurs from locations outside the market area. This is likely from the adjacent communities of Williamsburg, James City County, and Norfolk.

The same “growth” pattern exists for employment and labor force as for at-place jobs, which is a decrease in employment following the recession. For market area employment, growth has not yet fully rebounded.

In 2015, total employment fell by 2,110± while, perhaps more importantly, the labor force shrank by 3,580±. 2016 showed some improvement, with employment increasing by 840± and the labor force increasing by 280±. 2017 showed continued improvement with total employment growing by nearly 3,000± and the labor force expanding by 2,200±.

The total number of persons unemployed and the unemployment rate are still high and confirm that the market area has yet to fully recover from the recent recession, though the economy is trending toward continued improvement. Much of the cause for the employment drop is the decrease in employment at the Newport News Shipbuilding.

Table 5: Trends in Employment and Unemployment, Newport News-Hampton, VA, 2008-2017 Labor Force Employment Unemployment Percent Unemployed 2008 158,582 151,166 7,416 4.7% 2009 161,733 149,468 12,265 7.6% 2010 157,330 143,791 13,539 8.6% 2011 157,142 143,812 13,330 8.5% 2012 156,016 143,828 12,188 7.8% 2013 156,319 145,242 11,077 7.1% 2014 156,293 146,153 10,140 6.5% 2015 153,068 144,369 8,699 5.7% 2016 152,602 144,334 8,268 5.4% 2017 154,801 147,318 7,483 4.8% Net Change -3,781 -3,848 67 0.1% Source: United States Department of Labor, Bureau of Labor Statistics

The key data in the economic analysis is employment, as that data refers to where people live, i.e., within the market area. Data in Table 5 show net employment growth, generally since 2012, a total 3,500± jobs were lost in the market area, but new housing development generate new employment growth. These are workers who may commute to Williamsburg/York County or the greater Norfolk area.

Current Developments

Following is a list of active and proposed developments in the market area. The purpose of this list is to show the net new job growth expected from these new projects, as the basis for evaluating future job and employment trends.

. Huntington Ingalls Industries completed construction in the fall of 2017 on a 52,000± square foot expansion at its headquarters facility in Newport News. The facility, at 182 Enterprise Drive, was expanded to house production areas, heavy cranes and plate-forming equipment. The expansion supports the company’s heavy steel fabrication in the commercial nuclear power industry and created 120 new jobs. Additional parking as also be added to support the larger workforce. Huntington Ingalls Industries is America’s largest military shipbuilding company and a provider of engineering, manufacturing and management services to the nuclear energy, oil and gas markets. . Virginia Seafood Agricultural Research and Extension Center (AREC) . Hampton City officials are currently in talks with Virginia Tech, which operates the facility, on a project involving the renovation and expansion of this seafood research facility. The facility could possibly measure between 14,000± and 15,000± square feet, at a minimum. The City would like the facility to be larger, and has suggested that Virginia Tech partner with them and possibly Hampton University to make the complex larger and to add a restaurant. Virginia Tech has also expressed interest in adding a visitor’s experience area. While talks are ongoing, there is no timeline for this project . Jefferson Lab , a laboratory in Newport News specializing in particle physics, has begun early project development of a Medium-Energy Electron Ion Collider (MEIC) in preparation to compete for a high-priority, next-generation Department of Energy multi-phased science initiative. This investment is estimated to support 5,000 new jobs by 2026. A corporate research center is planned adjacent to Jefferson Lab to facilitate the application of its basic research. . Riverdale Plaza Shopping Center . This shopping center in Hampton, which will be renamed Riverpointe, is currently being redeveloped to include a 123,000± square foot Kroger Market Place grocery store and a 91,000± square foot At Home, a home décor and furniture store. Additional plans also call for Kroger to install an 18-pump gas station on the property. . Ferguson Enterprises announced in June, 2017 that it would open a campus with the potential for multiple buildings at City Center at Oyster Point. The project will house 1,400 information technology and other administrative workers. About 1,000 will be moved from other local 35

offices, while 434 people will be hired. The first, six-story, 260,000 square foot building will be erected along the fountain, next to the Marriott, bounded by Lakefront Commons Road, Canon Boulevard and Town Center Drive. Construction is expected to begin in 2018 and be completed in 2019. The additional buildings also planned for future phases: an 88,000 square foot, four-story building next door to the first one, along Lakefront Commons, and two six-story buildings — 105,000 square feet and 190,000 square feet. The six-story buildings would face each other on Town Center Drive near Canon Boulevard. Salaries at the new campus will start at $45,000, before benefits. . NASA Langley Research Center . GSA announced in December, 2016 that it will construct a new building at Langley. The Measurement Systems Laboratory is scheduled for completion in 2019. The 175,000± square foot facility will allow the consolidation of many existing labs currently spread out across the Langley grounds. . Holiday Inn . The Magnuson Hotel and Convention Center at City Center Newport News was recently converted into a Holiday Inn. The hotel’s 183 rooms were fully restored, as will the lobby and restaurant. The construction scope created more than 10,000± square feet of meeting space. Construction was completed in late-2017. . Lidl . Construction was recently completed on this 20,000± square foot grocery store at 2000 W Mercury Boulevard in Hampton. . Riverside Regional Medical Center Pavilion . Construction is ongoing on the addition of two levels to this medical facility in Newport News. The construction, which will add about 150,000± square feet of space, will be completed by the summer of 2018. . At Home Group opened a new 91,000± square foot store in the Riverdale Plaza Shopping Center in April, 2017. . E-Commerce Center . This three-story, 90,000± square foot facility opened in November, 2017 with 70,000± square feet of storage and 15,000± square feet of office space. The office spaces in the center are called Work/Place and offer a combination of services for small businesses including more than a dozen office spaces, dedicated desks, shared conference and meeting rooms, and temperature-controlled storage units ranging from 25 to 300 square feet with month-to-month lease terms. An in-house UPS Store – one of the largest in the state – provides printing, order fulfillment and shipping. . Tech Center Research Park . Construction began in August, 2017 on an 80,000± square foot building, the first of several other buildings in the 50- acre research park located at the intersection of Jefferson Avenue and Hogan Drive. W. M. Jordan, Virginia Tech and the city of Newport News are the developers behind the project, which is adjacent to Marketplace at

Tech Center and Venture Apartments. First tenants are expected to move in by August, 2018. . Maximus , which operate a call center in Hampton that supports federal government contracts, announced in October, 2017 that it would expand its facility and add 230 additional jobs. . Muhlbauer International opened its new Smart Factory Competence Center that added 51,200± square feet to its U.S. headquarters in Oakland Industrial Park in Newport News in March, 2018. The new space adds a showroom for product demonstrations and training, as well as additional assembly capacity. The expansion added 20 new employees to its staff of 31. . J&F Alliance Group , a tech company that offers services in augmented reality and integrated logistics, announced in November, 2017 that it would expand its Hampton facility by adding 119 new employees. . ACO Development completed construction in February, 2018 on a 10,000± square foot building with office and warehouse space on Incubator Road in the Copeland Industrial Park. . The Hampton Veterans Affairs Medical Center added a 25,000± square foot building in April, 2018 intended to help streamline mental health services. It features exam and group rooms, including two for art therapy, and has a staff of about 90. The building also houses a team that is part of a 30-site national VA clinical study of the use of a repetitive magnetic stimulation technique to treat patients with resistant depression. Transcranial Magnetic Stimulation involves a machine with a helmetlike device used to repetitively pulse the brain. . Fairlead Boatworks , a ship builder and repairer, announced in March, 2018 that it would add 60 new jobs to its facility in Newport News. This follows 25 new jobs that were added at the facility in April, 2017. There have been no major layoffs in the market area over the past year.

The new job totals described above exceed 7,000, and do not include construction jobs and other job growth at smaller area companies. A large number of the new jobs will be in technical fields and generate high salaries. Several of the new businesses will provide hourly wage jobs.

Section II Apartment Market Analysis

The supply/demand analysis for the Sunset Hampton Apartments proposal is presented below. Of note, the demographic projections are based on past trends. It is difficult to judge where new employees will live, so increasing population and household growth in support of the 7,000 job growth is speculative. However, there is net growth; our projections exceed trend data because of new employment, but should be considered conservative.

Demographic Trends and Projections

Published Census data are shown in Table 6. The trends are “skewed”. There was an error in the Census count in 2000, with a major over count for the Group Quarters population, which refers to the military population. 1990 data are correct and 2010 data are thought to be correct. The 2017 population based on the Weldon Cooper Center is likely to be close to accurate, although it is slightly higher than the 2017 Census estimate.

Under all scenarios, there was a population increase in the market area between 1990 and 2010, of approximately 15,000. That was based in part by an increase in military due to growth in the Defense Department. Census data show a “no” growth or population loss by 2017, from 2010. That loss was likely due to employment losses in 2007 and 2010 and after. These would be for low paying jobs.

Thus, the 2017 population is approximately 318,900. It is projected to increase to 324,000 by 2021 based solely on the level of new jobs projected in the market area. The ability to achieve this level of growth will be based on housing availability in the market area. However, the demand for housing will generate the potential to reach a population of 324,000 by 2021; it is therefore an opportunity projection.

The Group Quarters data and trends in Table 6 show the Census error in 2000. That is the over count of the Group Quarters population and thus an over estimate of the total population. The 2017 data should be correct. 38

Table 6: Trends and Projections of Population and Household by Tenure and Income, Sunset Hampton Apartments Market Area, 1990-2021 (Constant 2018 dollars)

1990 2000 2010 2017 2020 Population 303,840 326,590 318,160 318,900 1/ 324,000 Group Quarters Population 10,260 18,300 11,950 13, 300 2/ 13, 600 3/ Household Population 293,580 308,260 306,210 305,600 311,400 Persons Per Household 2.58 2.50 2.44 2.42 2.4 0 Total Households 113,630 123,570 125,700 126,280 12 9,750 Rental Households 52,200 55,490 57,650 58,720 61,000 Percent Rental 45.9% 44.9% 45.9% 46.5% 47.0 %

Renters within Income Category 4/ HHs Within Income Category 9,870 11,160 12,800 13,740 14,650 Percent Within Income Category 18.9% 20.1% 22.2% 23.4% 24.0%

Notes: 1/ Based on Weldon Cooper Center for Public Service 2017 population estimates. 2/ Increase due to opening of 32-bed Huntington at the Newport, 106-bed Crossings on the Peninsula. Also due to on-campus occupancy increase of 950± at Christopher Newport University and 210± at Hampton University. 3/ Includes proposed 212-bed Shenandoah River Hall at Christopher Newport University, to deliver in August, 2019. 4/ Renter households earning annual incomes between $30,000 and $45,000. Source: 1990, 2000 and 2010 Census, U.S. Census Bureau, U.S. Department of Commerce; S. Patz & Associates, Inc.

Households

The 2000 household count shown in Table 6 is likely to be current, as the Household Population accounts for an over counting of the Group Quarters population. The trend data on households show a sizable increase during the 1990’s and a more modest increase during the 2000’s and the 2010 to 2017 period. Part of the reason for this trend is the reduction of developable land in the market area for new housing unit development. Thus, more area growth expanded into York County and James City County than in the past.

By 2017, the household total estimate is 126,300±, which shows a slow but steady increase in households since 2000. That trend is expected to continue for the 2017 to 2020 period.

Of note is the average household size in 2017 is low, at 2.42. This is compared with 2.44 in the 2010 Census, 2.50 in 2000 and 2.58 in 1990. The fact that much of the new housing development in the market area is multifamily, the average household size is likely to decrease, even faster than national trends. That appears to be the case in Newport News and Hampton. A continued trend in the market area’s average household size by 2021 will likely cause the number of market area households to increase between 2017 and 2020, as shown.

Renter Households

Since 1990, and based on Census counts, the market area had between 45.9 and 46.5 percent renters. That percentage is well above the state and national averages, which are 36 to 38 percent, respectively. A slight increase to 47.0 percent is projected in 2021, as the built-up communities in the market area are attracting primarily multi-story rental housing developments, and the for-sale market has not yet stabilized. Thus, a net growth of 2,300± renters is forecasted for the 2017 to 2021 period.

The market area has a high percentage of renter households due to the large military population in the area, and also, the large “blue collar” population. Renter households are increasing due to the stagnant for-sale housing market, and the fact that almost all of the multifamily housing is rental.

Target Renter Households

The target market under study for Sunset Hampton Apartments is renter households earning annual incomes ranging between $30,000 and $45,000, when reported in constant 2018 dollars. Our estimate is that in 2010, 22.2 percent of all renter households earned incomes at this level. Trend data presented in Table 6 show that this percentage is above the 2000 percentage of 1.2 percent and the 1990 percentage of 4.5 percent. Based on these estimates, there are approximately 13,740 renter households within this income category as of 2017. By 2021, the number of renter households earning incomes between $30,000 and $45,000 is expected to increase by 900± to reach 14,650± households.

Rental Households by Size

Nearly 35 percent of all market area renters are one-person households. Another 27+ percent are two-person households. Combined these two household sizes equal over 62 percent of all renters.

Table 7: Trends in Renter Household Sizes, Newport News-Hampton, VA, 2000-2010 2000 2010 Households Percent Households Percent Rental Households 55,490 100.0% 57,650 100.0% 1-person household 18,360 33.1% 20,120 34.9% 2-person household 15,560 28.0% 15,820 27.4% 3-person household 10,250 18.5% 10,060 17.5% 4-person household 6,750 12.2% 6,590 11.4% 5-person household 2,980 5.4% 3,130 5.4% 6-person household 1,050 1.9% 1,240 2.2% 7-or -more -person household 550 1.0% 690 1.2%

Source: 2000 and 2010 Census, U.S. Census Bureau, U.S. Department of Commerce

Competitive Apartment Market

Characteristics of the Market

As shown in Table 8, we identified 26 LIHTC apartment properties in the market area as comps. These communities contain 3,720± apartment units that have rents restricted at or below 60% of AMI. The current vacancy rate is approximately 6.4 percent, but this figure includes several communities that have had a large number of recent evictions, move-outs and units taken offline for renovations. Excluding the units in five communities, the market area has a 2.8 percent vacancy rate.

The newest LIHTC apartment community to open is the 42-unit Ada Park Apartments, which opened in January, 2018 with 21 units with rents restricted to 50% of AMI and 21 units restricted to rents at 60% of AMI. All units were leased up in less than

41 five months. This community replaced a blighted apartment community that was demolished as part of the development program. The 44-unit Brennan Pointe opened in mid-2016 and is at near-full occupancy. Phase I at Heritage Forest opened in March, 2012 and was at 94 percent occupancy by year-end 2012, indicating a 13.5± average annual lease-up pace. The lease-up phase at Heritage Forest II was 11+ units per month, on average.

In addition to Ada Park Apartments, Brennan Pointe and Heritage Forest, there are three other LIHTC apartment properties that opened since 2010. These include Forrest Landing (new construction), Noland Green (adaptive-reuse) and Wilsondale (new construction) -- Heritage Forest, Ada Park Apartments and Brennan Pointe are new construction communities. In total, 590 LIHTC apartment units with rents at 60% of AMI were placed on the market since 2010. To date, 580± of these units were occupied at an average annualized rate of 80±. Thus, the level of vacancy in the market area is due in part to older units and management issues, because newer attractive apartment units have leased quickly.

The market area has ten LIHTC apartment complexes that were built prior to 1975, all of which have undergone some level of renovation over the past twenty years. These contain a total of 1,660± apartment units, or 44.5 percent of the apartment properties under study. The vacancy rate of these older units is 8.5 percent (140± units). This includes the three properties with a large number of recent evictions. Approximately 59.5 percent of the vacant units are at these older properties. That means that the vacancy rate for the 16 newer apartment properties is 4.6 percent.

The notes in Table 8 show that 800± apartment units are occupied by families with Section 8 vouchers. That is at least 23 percent of the total number of occupied apartment units. However, Hampton’s LIHTC apartment properties have a higher average number of residents with Section 8 vouchers. As an example, Waterford Pointe, with 120 households, has 84 voucher holders, or 70 percent.

Table 8: Characteristics of Competitive LIHTC Apartment Communities, Sunset Hampton Apartments Market Area, June, 2018 Map F Year Total Vacant Restrictions Key Built Units 1/ Units Ada Park Apartments 1 01/2018 50%/60% 21 0 Admiral Pointe 2 1949/02 60% 208 7 Arboretum Place 3 1995 60%/Market 74 4 Auburn Pointe 2/ 4 1976/99/18 50%/60% 214 28 5/ 6/ Autumn Lakes 5 1969/01 60% 296 50 7/ Bay Creek 3/ 6 1966/99 60% 184 11 Brennan Pointe 7 2016 60% 44 1 Bridgeport 8 1999 60% 180 0 Chestnut Square 9 2000 60% 40 1 Derby Run I & II 10 1995/18 60% 304 43 5/ Forrest Landing 11 2010 60% 120 0 Harpers Landing 4/ 12 1973/99/14 60% 296 18 Heritage Forest I & II 13 2012/13 50%/60% 225 4 Ivy Farms 14 1965/10 60% 168 25 7/ Kings Ridge 15 1996 60% 182 4 Monterey 16 1969/02 50%/60% 24 0 Noland Green 17 2011 60% 54 0 Patriots Crossing 18 1974/92 60% 240 22 8/ Pilot House 19 1992/14 60% 132 0 River Trace 20 1973/98 50%/60% 34 3 Sharps Landing 21 1697/11 60% 180 0 Shell Gardens 22 1967/02 50%/60% 28 5 Waterford Pointe 23 1993/14 60% 120 0 Wellesley Woods 24 1997 60% 120 4 Westover Station 25 1993 60% 108 2 Wilsondale 26 2010 60%/Market 126 5 Total 3,722 9/ 237 Vacancy Rate 2.8% Notes: 1/ Only units with 60% rents shown. 2/ Formerly Mariners Landing. 3/ Formerly King Street commons 4/ Formerly Pinedale Manor. 5/ Several units offline for renovation. 6/ Management notes there have been several recent evictions. 7/ Recent management change has led to large number of recent evictions. 8/ Management attributes high vacancy to several recent move-outs. 9/ Approximately 800 section 8 voucher holders. 10/ Excludes problem properties and communities with off-line units for renovations. These include Auburn Pointe, Autumn Lakes, Derby Run, Ivy Farms and Patriots Crossing. Source: Field and Telephone Survey by S. Patz and Associates, Inc.

It is not unusual for market areas with an abundance of LIHTC properties to have some communities facing eviction issues. This is, unfortunately, “part of the game.” It is more of a “wake-up call” for some property owners and management companies and shows that area moderate-income renters are willing to relocate to newer properties to

43 avoid properties with “problem” tenants. Our competitive apartment complex analysis will show a reduction of vacancy since 2014.

The following chart shows positive market data in the market area affordable apartment market. It shows a reduction in vacancy over the 2014 to 2018 period, in spite of the addition of Brennan Point and Ada Park Apartments during that period. This overshadows the vacancy issues related to evictions and indicate continued demand for well-managed properties.

Changes in Apartment Unit Vacancy Rate, 2014-2018 Vacancy Rate May, 2018 6.4% June, 2017 6.7% June, 2014 8.5% Change -2.1% Source: S. Patz & Associates, Inc.

Map F shows that the competitive apartment complexes are scattered throughout the market area, but with most of the LIHTC properties being located in Newport News/Hampton. Also shown in Map F is the close proximity of two apartment properties -- Monterey and Shall Gardens -- to the study site.

Map F - Locations of Competitive Apartments

Following are photos of each of these LIHTC apartment communities. Of note is the quality of the newer properties, and thus, their marketing success. The market area does have a number of older apartment properties, though many have undergone recent upgrades and are well-maintained.

Admiral Pointe Arboretum Place

Auburn Pointe Autumn Lakes

Brennan Pointe Bridgeport

Chestnut Square Derby Run

Forest Landing Heritage Forest

Ivy Farms Bay Creek Apartments

Kings Ridge Monterey

Noland Green Patriots Crossing

Pilot House Harper’s Landing

River Trace Sharps Landing

Shell Gardens Waterford Pointe

Wellesley Woods Westover Station

Wilsondale Ada Park Apartments

The market area has a mix of quality and more modest affordable apartment units. In terms of design, Sunset Hampton Apartments will be equal or more attractive than any of the current properties. Market data show a pent-up demand for newer and better affordable housing, particularly when rents are comparable to rates at older properties.

Unit Mix by Income Restriction

Table 9 analyzes the competitive units by income restrictions. As shown, 92.7 percent of market area units under study are restricted to 60% of AMI, compared to just 4.0 percent that are restricted to 50% of AMI and 3.3 percent that have no income restrictions. Eighteen of the competitive apartment communities rent units exclusively to households earning 60% of the area median income. As with the vast majority of LIHTC properties in the market area, all of the units at Sunset Hampton Apartments are proposed to be restricted to 60% of AMI.

Table 9: Distribution of Units by Income Restriction, Sunset Hampton Apartments Market Area, June, 2018 50% of AMI 60% of AMI Market Rate Total Units Ada Park Apartments 21 21 0 42 Admiral Pointe 0 208 0 208 Arboretum Place 0 77 107 184 Auburn Pointe 60 214 0 274 Autumn Lakes 0 296 0 296 Bay Creek 0 184 0 184 Brennan Pointe 0 44 0 44 Bridgeport 0 180 0 180 Chestnut Square 0 40 0 40 Derby Run I & II 0 304 0 304 Forrest Landing 0 120 0 120 Harpers Landing 0 296 0 296 Heritage Forest I & II 23 225 0 248 Ivy Farms 0 168 0 168 Kings Ridge 0 182 0 182 Monterey 16 24 0 40 Noland Green 0 54 0 54 Patriots Crossing 0 240 0 240 Pilot House 0 132 0 132 River Trace 22 34 0 56 Sharps Landing 0 180 0 180 Shell Gardens 20 28 0 48 Waterford Pointe 0 120 0 120 Wellesley Woods 0 120 0 120 Westover Station 0 108 0 108 Wilsondale 0 126 24 150 Total 162 3,725 131 4,018 Percent of Total 4.0% 92.7% 3.3% 100.0%

Sunset Hampton Apartments 0 160 0 160 Source: Field and Telephone Survey by S. Patz and Associates, Inc.

Rental Rates

Data in Table 10 show the current net rents at the 26 LIHTC apartment properties under study. Rents were adjusted to exclude cold water and sewage to remain consistent with the proposed rents at Sunset Hampton Apartments. As shown, there is a wide range of rents among these properties, depending on the age, condition, location and features of the apartment complexes.

The average one-bedroom rent in the market area is $685, compared to $770 for the two-bedroom units and $918 for the three-bedroom units. Five communities—Forrest

Landing, Patriots Crossing, Heritage Forrest, Waterford Pointe and Wilsondale—have in- unit washers and dryers. Sunset Hampton Apartments will also include full size washers and dryers in each unit. Given the fact that Sunset Hampton Apartments will be an attractive new community, rents will exceed the market area averages by:

 One-bedroom units - $75  Two-bedroom units - $120  Three-bedroom units - $102

Several LIHTC properties, including Waterford Point, Forrest Landing, Sharps Landing, Derby Run, Bridgeport and Wilsondale, have comparable rates to the subject proposal. These rents are being readily accepted. Nevertheless, the market area does contain a large number of apartment properties with much lower rents. These are typically older properties with a single bathroom in the two-bedroom units.

Overall, the net rents proposed for Sunset Hampton Apartments are being accepted for similar market area apartment complexes. The rents are above the rates at mature rehabs, in particular, but are in line with more directly comparable properties.

Related to specific apartment properties, the following analysis will further support the proposed rents at Sunset Hampton Apartments:

• Autumn Lakes , a 1969 built apartment property that was renovated in 2001, has one- and two-bedroom rents equal to that of the Sunset Hampton Apartments proposal.

• Derby Run I & II, a 1985 built property, but recently renovated, generates two- and three-bedroom rents on par with Sunset Hampton Apartments.

• Heritage Forest & Waterford Pointe generate rents equal to the proposed rates at Sunset Hampton Apartments.

Autumn Lakes and Derby Run also do not include an in-unit washer/dryer. The market study conclusion is that the proposed rents at the very attractive Sunset Hampton area at market.

Table 10: Net Rental Rates at Competitive Apartment Communities Sunset Hampton Apartments Market Area, June, 2018 1/ One-Bedroom Two-Bedroom Three-Bedroom Ada Park Apartments -- $821 $1,039 Admiral Pointe -- $647 -$687 -- Arboretum Place $702 $787 -- Auburn Pointe $732 $767 $941 Autumn Lakes $735 $862 -$868 $948 Bay Creek -- $717 $836 Brennan Pointe -- $744 $877 Bridgeport -- $841 $952 Chestnut Square -- -- $845 Derby Run I & II -- $852 -$875 $985 -$1,040 Forrest Landing 3/ $698 $800 $900 Harpers Landing $643 $657 -$722 $771 -$836 Heritage Forest I & II 3/ $722 $869 $988 Ivy Farms -- $690 -- Kings Ridge $708 $762 -$840 $959 Monterey -- $637 -- Noland Green 2/ $640 $750 $850 Patriots Crossing 3/ $645 $741 -$745 $827 Pilot House -- $798 $900 River Trace $553 $672 -- Sharps Landing $731 $860 -- Shell Gardens -- $587 -- Waterford Pointe 3/ $731 $865 $990 Wellesley Woods -- $798 $903 Westover Station $665 $777 -- Wilsondale 3/ -- $835 $951 Average $685 $770 $918

Sunset Hampton Apartments $760 $890 $1,020 Notes: 1/ Rents adjusted to exclude utilities. Only 60% rents shown. 2/ Estimate 3/ Includes washer and dryer. Source: Field and Telephone Survey by S. Patz and Associates, Inc.

Recent Rent Changes. As with the increased market area occupancy rate since 2014, market area net rents have also increased steadily over the past four years. The following chart shows the sizable rent increases during this period. Since 2014, one- bedroom rents have increased by an average of $67, two-bedroom rents have increased by an average of $73 and three-bedroom rents have increased by $72. The overall annual monthly average rent increase per apartment unit is $17.50.

Change in Net Rent, 2014-2018

One-Bedroom Two-Bedroom Three-Bedroom May, 2018 $685 $770 $918 June, 2017 $654 $754 $891 June, 2014 $618 $697 $846 Change $67 $73 $72 Source: S Patz & Associates, Inc.

Rent Per Square Foot

We did not do this calculation, as LIHTC properties have too many variables for a viable comparison. The more important factor is net/gross rent. The above rent data comparison is very positive related to the Sunset Hampton Apartments proposal.

Apartment Unit Sizes

Apartment unit sizes are shown in Table 11. The one-bedroom units average 706 square feet compared to an average of 920 square feet for the two-bedroom units and 1,166 square feet for the three-bedroom units. Many of the more mature LIHTC rehabs have only one full bathroom in their two-bedroom units. These apartment units are smaller, and their rents are lower.

The proposed apartment units at Sunset Hampton Apartments will be above the market area averages for all unit sizes.

Table 11: Unit Sizes at Competitive Apartment Communities Sunset Hampton Apartments Market Area, June, 2018 One-Bedroom Two-Bedroom Three-Bedroom Ada Park Apartments -- 779 929 -932 Admiral Pointe -- 800 -950 -- Arboretum Place 700 850 -1,000 -- Auburn Pointe 739 1,076 1,282 Autumn Lakes 725 900 -950 1,100 Bay Creek -- 780 1,064 Brennan Pointe -- 1,130 1,562 Bridgeport -- 980 1,170 Chestnut Square -- -- 1,150 Derby Run I & II -- 963 1,185 Forrest Landing 800 1,056 1,232 Harpers Landing 650 900 1,050 Heritage Forest I & II 720 1,035 1,222 Ivy Farms -- 830 -- Kings Ridge 750 950 1,156 Monterey -- 759 -- Noland Green 626 -783 849 -1,009 950 -1,187 Patriots Crossing 850 950 1,020 Pilot House -- 980 1,220 River Trace 598 798 -- Sharps Landing 650 880 -- Shell Gardens -- 759 -- Waterford Pointe 624 818 1,023 Wellesley Woods -- 1,000 1,320 Westover Station 661 868 -- Wilsondale -- 1,054 1,235 Average 706 920 1,166

Sunset Hampton Apartments 848-865 1,113-1,234 1,264-1,294 Source: Field and Telephone Survey by S. Patz and Associates, Inc.

Apartment Unit Mix

Next shown are the unit mixes at the competitive apartment communities under study. The vast majority of the LIHTC apartment units in the market area are two- bedroom units (69.5 percent). The percentage of three-bedroom units is larger than the percentage of one-bedroom units, 18.8 percent versus 11.9 percent. The proposed unit mix at Sunset Hampton Apartments differs slightly from the market area average, as the proposal is to have 32 one-bedroom, 84 two-bedroom and 44 three-bedroom units. For LIHTC apartment units with higher rents compared with the market area average, one-

55 bedroom units will be in greater demand. With the high occupancy rate at the newer, affordable apartment properties, indicates that demand exists for all unit sizes.

Table 12: Unit Mix at Competitive Apartment Communities Sunset Hampton Apartments Market Area, June, 2018 1/ One-Bedroom Two-Bedroom Three-Bedroom Total Units Ada Park Apartments 0 9 12 21 Admiral Pointe 0 208 0 208 Arboretum Place 36 38 0 74 Auburn Pointe 55 127 32 214 Autumn Lakes 52 216 28 296 Bay Creek 0 128 56 184 Brennan Pointe 0 28 16 44 Bridgeport 0 132 48 180 Chestnut Square 0 0 40 40 Derby Run I & II 0 200 104 304 Forrest Landing 18 72 30 120 Harpers Landing 72 176 48 296 Heritage Forest I & II 22 151 52 225 Ivy Farms 0 168 0 168 Kings Ridge 32 94 56 182 Monterey 0 24 0 24 Noland Green 11 38 11 54 Patriots Crossing 74 150 16 240 Pilot House 0 102 30 132 River Trace 10 24 0 34 Sharps Landing 16 164 0 180 Shell Gardens 0 28 0 28 Waterford Pointe 9 68 43 120 Wellesley Woods 0 84 36 120 Westover Station 36 72 0 108 Wilsondale 0 84 42 126 Total 443 2,585 700 3,722 Percent of Total 11.9% 69.5% 18.8% 100.0%

Sunset Hampton Apartments 32 84 44 160 Notes: 1/ Unit mix for 60% units shown. Source: Field and Telephone Survey by S. Patz and Associates, Inc.

Community Amenities

Next shown are the community amenities at the competitive LIHTC apartments. Nearly all of the communities that don’t provide washers and dryers have on-site laundry facilities. Several communities, particularly the newer ones, are amenitized with a

clubhouse, fitness center and outdoor swimming pool. Very few communities have business centers and only Arboretum Place has a tennis court.

Table 13: Community amenities at Competitive LIHTC Apartment Communities, Sunset Hampton Apartments Market Area, June, 2017 Business Tennis Swimming Fitness Laundry Clubhouse Center Court Pool Center Facility Ada Park Apartments ● ◌ ◌ ◌ ● Admiral Pointe ◌ ◌ ◌ ◌ ◌ ● Arboretum Place ● ● ● ● ● ● Auburn Pointe ● ◌ ◌ ● ● ● Autumn Lakes ◌ ◌ ◌ ● ◌ ● Brennan Pointe ● ◌ ◌ ◌ ◌ ● Bridgeport ● ◌ ◌ ● ● ● Chestnut Square ◌ ◌ ◌ ◌ ◌ ◌ Derby Run I & II ● ◌ ◌ ● ◌ ● Forrest Landing ● ● ◌ ● ● ◌ Heritage Forest I & II ● ◌ ◌ ● ● ◌ Ivy Farms ◌ ◌ ◌ ● ◌ ● Bay Creek Apartments ◌ ◌ ◌ ◌ ◌ ● Kings Ridge ◌ ◌ ◌ ◌ ◌ ● Monterey ◌ ◌ ◌ ◌ ◌ ● Noland Green ◌ ● ◌ ◌ ● ● Patriots Crossing ◌ ◌ ◌ ● ◌ ● Pilot House ● ◌ ◌ ● ● ● Harper’s Landing ◌ ◌ ◌ ◌ ◌ ● River Trace ◌ ◌ ◌ ◌ ◌ ● Sharps Landing ● ◌ ◌ ● ◌ ● Shell Gardens ◌ ◌ ◌ ◌ ◌ ● Waterford Pointe ● ◌ ◌ ● ● ● Wellesley Woods ● ◌ ◌ ● ● ● Westover Station ◌ ◌ ◌ ● ● ● Wilsondale ● ◌ ◌ ● ● ◌

Sunset Hampton Apartments ● ◌ ◌ ◌ ● ◌ Source: Field and Telephone Survey by S. Patz and Associates, Inc.

For affordable housing, amenities are “nice” but unit quality and rent/affordability are the key issues for market success. Sunset Hampton Apartments is well conceived to meet the market in terms of the key issues. Sunset Hampton Apartments will have an attractive clubhouse, fitness center and in-unit washer/dryer.

Section III Conclusions

The analysis presented in Section I and II show a very strong apartment market for affordable housing in the Newport News/Hampton marketplace. Data show a sizable number of mature properties and some of these have vacant units due to recent evictions or inadequate product. The new units are at or nearly full and have leased up quickly.

The site for Sunset Hampton Apartments is competitive and in close proximity to two other competitive affordable apartment properties. The Sunset Creek neighborhood is mature, but stable and contains all of the commercial and public facilities that are required for area residents.

The Sunset Hampton Apartments proposal is attractively designed, with spacious apartment units and with units that include a washer/dryer. Adequate on-site parking is provided and basic community amenities are planned. The most telling part of the analysis is the rent comparison analysis. The proposed rents are fully competitive within the market.

Our overall market area study shows that 20+ percent of LIHTC apartment properties are occupied by families with Section 8 housing vouchers. The Hampton area apartments have a higher percentage of families with vouchers, compared with Hampton properties. While full market support exists for the Sunset Hampton proposal, the likelihood, based on market data, is that a higher percent of residents will have vouchers, as competition for quality affordable housing in Hampton is very limited.

Given these market study findings and conclusions, the following paragraphs will analyze the supply-demand for new apartment units of the type proposed.

Analysis of Affordable Apartment Unit Demand

Affordable Apartment Pipeline

Table 14 details the two apartment communities in the pipeline within the market area that will add a total of 184 affordable apartment units to the market. Forrest Landing II is the second phase of the fully-occupied Forrest Landing Apartments. This phase, which is under construction and will deliver units in late-June, 2018 or early-July, 2018, will add 64 units, all with rents restricted to 60 percent of AMI. Fifty-four (54) of the units are preleased. Town Center Apartments is proposed for 120 units, with a mix of 36 units at rents restricted 50 percent of AMI and 84 units at rents restricted to 60 percent of AMI. Construction on this community is not expected to commence until April, 2019.

Table 14: Affordable Apartment Pipeline, Sunset Hampton Market Area, June, 2018

Map G 50% of 60% of Total Status Key AMI AMI Units Forrest Landing II 1 0 64 64 UC – June, 2018 Delivery Town Center Apartments 2 36 1/ 84 120 Planned – April, 2019 start Total 36 148 184

Notes: 1/ Includes eight vouchers. Source: S. Patz& Associates, Inc.

Map G shows the locations of Forest Landing II and Town Center Apartments. Forest Landing II is located along Forrest Drive in the greater Oyster Point section of Newport News. Town Center Apartments is located on the east side of Saville Row and south of West Mercury Boulevard near the Hampton Coliseum in Hampton.

Map G - Locations of Pipeline Apartments

The paragraphs below detail the two apartments in the pipeline. . Forrest Landing II . Construction will be completed in June, 2018 on this 64 unit affordable apartment community. Forrest Landing II will consist of two four-story garden apartment buildings, each with 32 units. The apartment community will contain 24 one-bedroom, 16 two-bedroom and 24 three-bedroom units, all to be set aside for affordable rents at or below 60% of AMI. Each one-bedroom unit will have a single bathroom, while the two- and three-bedroom units will have two full bathrooms. Amenities will be shared with Forrest Landing I, which includes a clubhouse, outdoor swimming pool, fitness center, business center and playground. The table below details the proposed rents, unit sizes and unit mix.

Proposed Unity Characteristics, Forrest Landing II Total Units Size Gross Rent Rent/ SF 1BR/ 1 BA 24 744 -747 $740 $0.99 2BR/ 2 BA 16 1,017 $866 $0.85 3BR/ 2 BA 24 1,154 $990 $0.86 Total 64 Source: Marlyn Development Corporation

Forrest Landing II

. Town Center Apartments . This is proposed affordable apartment that will consist of four garden style, three-level apartment buildings totaling 120 units. All units will be restricted to households earning up to 50 or 60 percent of AMI. Phase I will contain 72 one-, two- and three-bedroom units. The developer is applying for 9% tax credits through VHDA to finance this portion of the community. Phase II will be constructed simultaneously with 48 units restricted to 60% of AMI. This portion of the development will be financed through 4% tax credits through VHDA. Eight of the proposed 50 percent AMI units will have vouchers issued by the Hampton Redevelopment and Housing Authority. Amenities provided include a clubhouse with community room and leasing office. Construction is expected to begin April, 2019 with delivery slated for January, 2020. The table below details the proposed rents, unit sizes and unit mix.

Proposed Unit Characteristics, Town Center Apartments Units Net Rent Sizes Net Rent/ SF One -Bedroom 50% of AMI 8 $555 727 $0.76 60% of AMI 4 $700 727 $0.96 (Subtotal) (12) Two -Bedroom 50% of AMI 23 $660 971 $0.68 60% of AMI 43 $825 971 $0.85 (Subtotal) (66) Three -Bedroom 50% of AMI 5 $750 1,142 $0.66 60% of AMI 37 $940 1,142 $0.82 (Subtotal) (4 2) Total 120 Source: Lake View Apartments, L.P

Town Center Apartment Site

VHDA Demand Chart

The demand chart shows a projected net growth of 910 renter households that qualify for 60% of AMI rents. We added to that total 50 rent overburdened households, which we define as “voucher holders”, and which we note is a conservative estimate. This reflects the fact that a high percentage of renters at LIHTC apartment complexes in Hampton have Section 8 rental assistance. The market area does not have a large substandard housing problem and those renters would be included in the rent overburdened numbers. Any elderly households likely to convert to rental housing are included in the overall net renter household growth projections.

The total demand equals 930. Subtracted from total demand is 140 competitive vacant units and 150 new (60%) pipeline units for a net demand of 640.

There are 100± vacant units at apartment properties with lower rents. These are not competitive and largely do not market to renters in the target market shown.

Demand Table (2017-2021)

Income Restrictions Up to 60%

New Rental Households 910 PLUS Existing Households - Over -Burdened 50 1/ PLUS Existing Households- Substandard Housing 0 PLUS Elderly Households- Likely to Convert to Rental Housing 0 PLUS Existing Qualifying Tenants – to Remain After Renovation 0

Total Demand 960 MINUS Supply (includes directly 140 Vacant 2/ comparable vacant units 150 New Additions 3/ completed or in pipeline in PMA EQUALS 290 NET DEMAND 670

ABSORPTION PERIOD (in months) 6 Notes: 1/ Section 8 voucher holders based on market trends 2/ Vacancies at direct comps with comparable rents 3/ Rounded

Some of the vacant affordable apartment units are in properties that typically have vacancies, due to management, outdated units, poor project reputation, etc. Overall, the vacancy rate is low. Two properties have units off-line for renovation. These are included in the vacant unit total, as are units where tenants were evicted, that are at competitive rents.

Our research shows that new, well priced apartment units rent well, even where older, lower rent units are available. The demographic analysis shows sizable growth for

63 renter households within the income category under study. Sunset Hampton is likely to have a large number of preleased units, both from voucher holders and target renters, which will generate full lease-up within six months.

The VHDA capture rate chart is as follows: Number Project Wide Capture Rate - LIHTC Units 17.9%

Project Wide Capture Rate - Market Units --

Project Wide Capture Rate - All Units 17.9%

Project Wide Absorption Period (in months) 6

Note: 1/ Units expected to be preleased

I affirm the following:

1. I have made a physical inspection of the site and market area.

2. The appropriate information has been used in the comprehensive evaluation of the need and demand for the proposed rental units.

3. To the best of my knowledge, the market can support the demand shown in this study. I understand that any misrepresentation in this statement may result in the denial of participation in the Low Income Housing Tax Credit Program in Virginia as administered by the Virginia Housing Development Authority.

4. Neither I nor anyone at my firm has any interest in the proposed development or relationship with the ownership entity.

5. Neither I nor anyone at my firm nor anyone acting on behalf of my firm in connection with the preparation of this report has communicated to others that my firm is representing VHDA or in any way acting for, at the request of, or on behalf of VHDA.

6. Compensation for my services is not contingent upon this development receiving a LIHTC reservation or allocation.

June 8, 2018 ______Market Analyst Date