FOR SALE: 36 unit Apartment Complex
$1,700,000
6235 Chef Menteur Highway
New Orleans, Louisiana 70126
Presented By:
Robert Hand, MBA, SIOR, CCIM
Louisiana Commercial Realty
New Orleans, Louisiana
www.louisianacommercialrealty.com
504-289-8172
September 22, 2012
Table of Contents
Page
Property Location
3
Property Description
4-5
Comparable Properties
6-7
Supply Analysis
8
Demand Analysis
9
Financial Data
10
Traffic Count
11
Demographics
12-16
Flood Map
17
Summary
18
Property Location
36 unit apartment complex on Chef Menteur Highway, in
New Orleans East
The property is located in the eastern area of New Orleans, on Chef Menteur Highway near Interstate 10 which runs from Jacksonville, Florida to San Antonio, Texas. The eastern area of New Orleans enjoys traffic from both New Orleans’ Central Business District and French Quarter population as well as residents of Slidell, Louisiana, about 26 miles to the Northeast.
Property Description
The 36 unit apartment complex is 5 two-story buildings, wood framed on a concrete slab with built-up roof, brick veneer and aluminum windows, composed of 27 two bedroom units, 748sf to 870sf, and 9 one bedroom units, 600sf. Zoned C-1.
Property Description
The property received a major renovation in 2007, and is 85% leased, with 50% of the tenants in place the last two years. There are 39 parking spaces, 14 in front and 25 on the side. Each apartment includes a stove and refrigerator, 85% of the air conditioning units are new with a 10 year warranty on the compressor, and 100% percent of the hot water heaters are new. The roof is 1 ½ years old with a 10 year warranty.
Comparable Properties For Sale
In Louisiana, there are 23 apartment properties for sale that have over 25 units. Of those, only 4 are in New Orleans and producing rental income. Cap Rates range from 8.90% to 15%. The lower cap rates apply to properties with only one bedrooms and smaller square footage units. The closest competitor is 6000 Chef Menteur which was renovated in 2007 but only 50% of the HVAC was replaced and only 30% of appliances replaced, and the one bedrooms are 600sf, two bedrooms are 750sf and 3 bedrooms are 1,200sf. Based on competing properties and taking into account the target property has a new roof, newer appliances, HVAC and fixtures and larger two bedroom square footage, we expect the market to be willing to pay a 12 cap rate for the target property.
Address # Units Building Size Price Price/Unit NOI NOI/Price (Cap Rate) 2300 North Broad, New
Orleans 32 14,008 $1,950,000 $60,938 173,550 8.90% 6867 Tara Lane, New
Orleans 20 12,760 $1,200,000 $60,000 107,000 8.92% 4000 Florida,
Mandeville 48 51,589 $3,300,000 $68,750 320,100 9.70% 16121 Bristoe Avenue,
Baton Rouge 32 36,608 $2,100,000 $65,625 225,000 10.71% 6711 Tara Lane, New
Orleans 79 78,908 $4,875,000 $61,709 546,000 11.20% 400 Darby Lane, New
Iberia 104 81,475 $3,450,000 $33,173 441,050 12.78% 6000 Chef Menteur,
New Orleans 100 75,000 $3,150,000 $31,500 472,500 15.00% Source: Loopnet.com & LACDB.com
6711 Tara Lane
Apartments
6867 Tara Lane
Apartments
Comparable Properties For Sale
4000 Florida
10500 Hayne Boulevard
16121 Bristoe Avenue
6000 Chef Menteur
Supply Analysis
-Nearby Apartments
Many apartments in the area use Section 8 so the rent charged depends on the income of the tenant, but stated market rents for one bedrooms average $625 and for two bedrooms $850, with one apartment complex, Magnolia Gardens, below market rents with one bedrooms at $525 and two bedrooms at $575.
Demand Analysis-Nearby Universities
Near four Universities and Lakefront Airport
The property is centrally located among four universities in New Orleans: 1. William Carey College, 300 student population
2. Southern University, 3,140 student population 3. University of New Orleans, 12,000 student population 4. Dillard University, 950 student population
2012
Financial Data
Income Calculation, Monthly
Count SF Vacant Rent, Section 8 Rent, Market
One bedroom 9 600sf 1 2@$815/mo 6 @ $600/mo Two Bedroom 27 748sf to 870sf 1 12@$900/mo 11@$700/mo
GRAND TOTAL $ 24,574
Net Operating Income, Annual Calculation
Operating Expenses, Last 12 months ending March 2012
Actual Income, Last 12 months ending March 2012 Above Monthly Income, Annualized $ 294,888
Real Estate Taxes, estimated $7,632
Hazard Insurance $23,407
Flood Insurance $613
Property Management, Steve Patterson @ $750/month
$9,000
Repairs-Labor, Home Depot, Paint, Plumbing $5,145 Phone $1,584 Trash Removal $3,096 Water $10,256 Electricity $3,049 Pest $819 $64,601
Net Operating Income $230,287
Source: All information is provided by the seller or staff and believed reliable but cannot be guaranteed. Purchaser to verify all information during inspection period.
Traffic Count
At Interstate 10, the traffic count is 111,019 cars per day. In front of the apartment complex, at the corner of Majestic Oaks Drive and Chef Menteur, the traffic count is 37,024 cars per day.
TARGET
SITE
Demographics
In the 5 minute drive time, population from 2000 to 2009 declined from 67,717 to 32,391, while the renter occupied housing percent declined from 46% to 22%. In the apartment renters prime age bracket of 20-35, there are 6,717 people in the 5 minute drive time area. The household growth rate from 2009 to 2014 is among the highest in the US at 7.28%.
Source: Site To Do Business, CCIM.com
5 minute drive
time drive time 10 minute 15 minute drive time
Population Density, 2000 67,717 343,898 658,759 Population Density, 2009
32,391 200,007 478,534 Per Capita Income, 2009
14,405 16,875 20,391 Average Household Income, 2009
40,743 42,560 50,039 Renter Occupied Housing Units, 1990 45% 47% 45%
Renter Occupied Housing Units, 2000 46% 47% 45% Renter Occupied Housing Units, 2009 22% 29% 33% Renter Occupied Housing Units, 2014 32% 39% 39% 2009 Population, age 20-24
2,426 15,489 38,109 2009 Population, age 25-34
4,291 27,241 67,181
Households By Income, 2009 5 minute
drive time 10 minute drive time 15 minute drive time
under $10,000 14% 16% 13% $10,000-$19,999 17% 18% 16% $20,000-$29,999 14% 15% 13% $30,000-$39,999 14% 12% 12% $40,000-$49,999 9% 9% 9% $50,000-$59,999 9% 8% 8% over $60,000 19% 19% 19% Households By Income, 2009 11,440 77,589 191,851 2009 to 2014 Household Growth Rate 7.28% 5.92% 3.34%
Demographics
The annual growth rate in the area of 5 minute drive time is 7 times the state and national average.
Demographics
5 Minute Drive Time Percent Employed By Industry Group
10 Minute Drive Time Percent Employed By Industry Group
Demographics
Population within a 5 minute drive time exceeds the US average for apartment rental age group, 20-35.
59% of the population with a 5 minute drive time earns less than $40,000, creating demand for rental units since home buying is out of reach.
Demographics
Within the 5 minute drive time, renter occupied housing units have declined more rapidly than the decline in population, suggesting there is more demand than supply for rental units.
Population declined from 2000 to 2009 by 52% but renter occupied units declined by 57%. From 2009 to 2014, renter occupied household units is expected to grow 30%, but currently there is no new construction in the area, making demand more inelastic for existing units.
5 Minute Drive Time
2000
2009
2014
Renter Occupied Household Units
12,600
5,401
7,781
Population, 5 minute drive time
Flood Map
Summary
The value of the property is usually calculated using three methods: income, cost and market approach. The cost approach is not applicable in this situation since it fails to take into account demand for the property. Using a combination of market and income approaches, the value of the property is best calculated using the income derived after expenses and applying a reasonable cap rate which depends on competing properties. There are competing properties with cap rates of 9% but the square footage of the two bedroom units is smaller, thereby limiting future rental income. There is one property priced at a 15% cap rate, but it has older HVAC and appliances and does not have a recently repaired roof. Therefore, a reasonable cap rate for this property should be approximately 11% to 12%. Using the formula:
Value = Income ÷ Cap Rate
assuming the income is the same, a higher cap rate results in a lower value.
The average marketing period for commercial property in the New Orleans MSA ranges from 261 to 408 days, so for a more immediate sale, discount the property 10% to 15%. Incorporating the most recent net operating income of $230,236 from page 10, the market value should range from $1,900,000 to $2,100,000.
