offering memorandum...property overview 7 pheasant court apartments is a 22-unit apartment asset...

PHEASANT COURT APARTMENTS7015 SE Lake Rd • Milwaukie, OR 97267

Offering Memorandum

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

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provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest

in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation.

Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the

income or expenses for the subject property, the future projected financial performance of the property, the size and

square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or

asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or

the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its

occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from

sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the

information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and

makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided.

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reserved.

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PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

PHEASANT COURT APARTMENTS

Milwaukie, OR

ACT ID Y0210294

TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01Offering Summary

Regional Map

Local Map

Aerial Photo

FINANCIAL ANALYSIS 03Rent Roll Summary

Rent Roll Detail

Operating Statement

Notes

Pricing Detail

Acquisition Financing

Growth Rate Projections

Cash Flow

MARKET OVERVIEW 04Market Analysis

Demographic Analysis


3


5

INVESTMENT

OVERVIEW


#

EXECUTIVE SUMMARY

OFFERING SUMMARY

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

PCC Schlosser 2,000

Safeway 932

Clackamas Dental Office 800

Willamett FLS Hlth Educatn Ctr 760

Precision Castparts Corp 732

Providnce Wllmette FLS Med Ctr 730

Mattei Insurance Services Inc 715

Walmart 711

Small Structurals Bus Oper Div 700

Providence Milwaukie Hospital 672

Cash & Carry Smart Foodservice 650

Lewis & Clark College 645

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2017 Estimate Pop 9,177 112,723 270,847

2017 Census Pop 8,797 106,638 250,783

2017 Estimate HH 3,678 45,399 106,305

2017 Census HH 3,533 42,958 98,720

Median HH Income $64,337 $58,034 $62,616

Per Capita Income $30,131 $30,490 $34,289

Average HH Income $74,770 $75,292 $86,734

UNIT MIX

NUMBEROF UNITS

UNIT TYPEAPPROX.SQUARE FEET

20 2 Bedroom/ 1 Bath 805

2 3 Bedroom/ 1 Bath 900

22 Total 17,900

VITAL DATA

Price $3,150,000 CURRENT YEAR 1

Loan Amount $2,362,500 CAP Rate 6.52% 6.47%

Loan Type Proposed New GRM 11.18 10.68

Interest Rate / Amortization

4.30% / 30 Years

Net Operating Income

$205,408 $203,905

Price/Unit $143,182Net Cash Flow After Debt Service

8.27% / $65,112 2.74% / $21,609

Price/SF $175.98 Total Return 13.28% / $104,593 7.98% / $62,821

Number of Units 22

Rentable Square Feet 17,900

Year Built 1970

6


#

OFFERING SUMMARY

PROPERTY OVERVIEW

7

Pheasant Court Apartments is a 22-unit apartment asset located on the edge ofMilwaukie, Oregon bordering Clackamas, Oregon. Constructed in 1970, the propertyconsists of 20 two-bedroom/one-bathroom apartments that are 805 square feet andtwo three-bedroom/one-bathroom apartments that are 900 square feet each. 70% ofthe units are remodeled with some features such as new appliances, ceiling fans,laminate and carpet.

The city of Milwaukie is a suburb of Portland offering both a small town feel and closeproximity to downtown Portland which is only 15 minutes away. Milwaukie is home toseveral of Oregon's largest and most iconic employers including, Blount International,Bob’s Red Mill, Dark Horse Comics and Precision Castparts Corporation. Shopping,grocery stores, bars and restaurants are all under a mile from the property. It is alsoapproximately one and a half miles away from the Clackamas Mall. Mass transitincluding the MAX Light Rail Green and Orange Lines, as well as bus lines 152, 29and 30 are all nearby.

PROPERTY HIGHLIGHTS

• 22 Apartment Units

• Close to Shopping,

Restaurants,

and Retail

• 15 Minutes From Downtown

Portland

• Close to Mass Transit Via the

MAX Light Rail Green and

Orange Lines


#

OFFERING SUMMARY

▪ Lower Expense Rates Compared to the City of Portland

▪ Higher Rent Proven for Recently Remodeled Units

▪ Outside Portland's Restrictive Laws for Landlords

INVESTMENT HIGHLIGHTS

An investor for Pheasant Court Apartments has the opportunity to capitalize on a rapidly expanding submarket with steadilyincreasing rental rates. Tenants looking for larger units with more amenities are attracted to this location as it supports an urbanlifestyle on a moderate income. The location is near light rail and multiple freeways which offer many options for efficient transit towork and recreational activities. It is for these reasons that vacancy will remain extremely low and that an investor will seepredictable revenue increases year over year.

The City of Portland has declared a state of housing emergency and temporary measures are in place as they finalize new lawswhich include requiring landlords to pay moving costs for tenants they would like to evict in addition to some forms of rent control.In the near future, this temporary measure is predicted to become law, alongside a handful of additional restrictions. This hascreated an environment where it is very difficult to keep costs low for rehab projects and thus has handicapped investors lookingfor value-add projects within the city limits. An investor in Pheasant Court Apartments would be able to capitalize on the centrallocation of this asset and also avoid this impending legislation since it is located just outside of the city of Portland. The city ofMilwaukie is less expensive in terms of operating expenses when compared to Portland as well.

The current owner has successfully remodeled 15 of the units and has proven a higher rent for these upgrades. The buyer istherefore set up for a successful value-add scenario by following this model and by strategic rehab as the units turnover. There arecurrently 3 vacant units that should be filled at time of closing.

INVESTMENT OVERVIEW

8

KITCHEN AND LIVING ROOM INTERIORS


9

INTERIORS


10

INTERIORS


11

Washer and dryer hook-ups


PROPERTY SUMMARY

OFFERING SUMMARY

12

THE OFFERING

Property Pheasant Court Apartments

Price $3,150,000

Property Address 7015 SE Lake Rd, Milwaukie, OR

Assessor’s Parcel Number 432981

Zoning OC, Milwaukie

SITE DESCRIPTION

Number of Units 22

Year Built/Renovated 1970

Rentable Square Feet 17,900

Type of Ownership Fee Simple

PROPOSED FINANCING

First Trust Deed

Loan Amount $2,362,500

Loan Type Proposed New

Interest Rate 4.30%

Amortization 30 Years

Loan Term 10 Years

Loan to Value 75%

Debt Coverage Ratio 1.46

AERIAL PHOTO


13

MAP


14

NEIGHBORHOOD MAP


15


17

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


RENT ROLL SUMMARY

18

FINANCIAL ANALYSIS


19

RENT ROLL DETAIL

FINANCIAL ANALYSIS


OPERATING STATEMENT

20

FINANCIAL ANALYSIS


NOTES

21

FINANCIAL ANALYSIS


PRICING DETAIL

22

MARCUS & MILLICHAP CAPITAL CORPORATION

CAPABILITIES

MMCC—our fully integrated, dedicated financing arm—is committed to

providing superior capital market expertise, precisely managed execution, and

unparalleled access to capital sources providing the most competitive rates and

terms.

We leverage our prominent capital market relationships with commercial banks,

life insurance companies, CMBS, private and public debt/equity funds, Fannie

Mae, Freddie Mac and HUD to provide our clients with the greatest range of

financing options.

Our dedicated, knowledgeable experts understand the challenges of financing

and work tirelessly to resolve all potential issues to the benefit of our clients.

National platform

operating

within the firm’s

brokerage offices

$5.1 billion total

national

volume in 2016

Access to more

capital sources

than any other

firm in the

industry

Optimum financing solutions to

enhance value

Our ability to enhance buyer

pool by expanding finance

options

Our ability to enhance

seller control

• Through buyer

qualification support

• Our ability to manage buyers

finance expectations

• Ability to monitor and

manage buyer/lender progress,

insuring timely,

predictable closings

• By relying on a world class

set of debt/equity sources

and presenting a tightly

underwritten credit file

WHY MMCC?

Closed 1,651

debt and equity

financings

in 2016

ACQUISITION FINANCING


23

FINANCIAL ANALYSIS


GROWTH RATE PROJECTIONS

24

FINANCIAL ANALYSIS


CASH FLOW

25


26

MARKET

OVERVIEW

MARKET OVERVIEW

PORTLAND-VANCOUVEROVERVIEW

1

The Portland-Vancouver metro is located near the confluence of the

Columbia and Willamette rivers and stretches across the Oregon

border into Washington State. The region is composed of Multnomah,

Clackamas, Columbia, Washington and Yamhill counties in Oregon,

and Clark and Skamania counties in Washington. Mount Hood and the

Cascade Range stand to the east, and the Oregon Coast Mountain

Range lies to the west. The metro contains approximately 2.4 million

residents, with more than 600,000 people residing in Portland, the

area’s most populous city.

MARKET OVERVIEW

METRO HIGHLIGHTS

HIGH POPULATION GROWTH

The Portland-Vancouver metro has recorded more

than 20 years of positive net migration thanks to

expanding industries.

ALTERNATIVE-ENERGY INDUSTRY

Alternative-energy companies are attracted to the

local educated workforce and research institutions

and are locating within the region.

LOW BUSINESS COSTS

The cost of doing business is among the lowest on

the West Coast, supported by no state income tax in

Washington and no sales tax in Oregon.


MARKET OVERVIEW

ECONOMY▪ Lower land costs than other West Coast metros, a skilled labor pool and affordable,

abundant power attract companies to the region. The favorable tax structure, with no state

income taxes in Washington and no sales tax in Oregon, also lures businesses.

▪ The metro’s economy has shifted from timber to industries that include athletic and outdoor

activities, clean tech, advanced manufacturing and software.

▪ A diverse group of companies based in the metro include Nike, Daimler, Oregon Iron Works,

Intel and IBM.

SHARE OF 2016 TOTAL EMPLOYMENT

MAJOR AREA EMPLOYERS

Providence Health & Services

Oregon Health and Sciences University

Portland State University

Kaiser Foundation Health Plan of the NW

Legacy Health System

Nike, Inc.

Wells Fargo

Fred Meyer Stores

U.S. Bank

Intel Corp.* Forecast

2

MANUFACTURING

11%GOVERNMENT

HEALTH SERVICES

EDUCATION AND

+OTHER SERVICES

4%

LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES

18%

AND UTILITIES

TRADE, TRANSPORTATION CONSTRUCTION

PROFESSIONAL AND

BUSINESS SERVICES

2%INFORMATION

16%

5%

14% 10% 6%

15%


MARKET OVERVIEW

DEMOGRAPHICS

SPORTS

EDUCATION

ARTS & ENTERTAINMENT

▪ The metro is expected to add nearly 130,000 people through 2021, resulting in the

formation of nearly 50,000 households.

▪ A median home price well-above the U.S. level has afforded 60 percent of

households to own their home, which is below the national rate of 64 percent,.

▪ Of residents age 25 and older, 34 percent hold bachelor’s degrees, and 12 percent

have also obtained a graduate or professional degree.

The metro contains more than 37,000 acres of parks and provides numerous opportunities

for outdoor enthusiasts, including activities at Mount Hood and on the Hood River. The

metro lies 60 miles east of the Pacific Ocean, with 330 miles of beaches along the Oregon

coast. Professional sports teams represent basketball, soccer and hockey. Cultural activities

can be found at various local venues, including the Portland Art Museum, World Forestry

Center Discovery Museum and the Portland Children’s Museum, and plays are staged at the

Portland Center for the Performing Arts. Major colleges and universities including Lewis and

Clark, Pacific University, the University of Portland and Portland State University. The

University of Oregon and Oregon State University are nearby.

37.7

2016MEDIAN AGE:

U.S. Median:

37.7

$60,900

2016 MEDIAN HOUSEHOLD INCOME:

U.S. Median:

$54,500

2.4M

2016POPULATION:

Growth2016-2021*:

5.2%

933K

2016HOUSEHOLDS:

5.7%

Growth2016-2021*:

QUALITY OF LIFE

3

2016 Population by Age

0-4 YEARS

6%5-19 YEARS

19%20-24 YEARS

6%25-44 YEARS

30%45-64 YEARS

26%65+ YEARS

13%

* Forecast

Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s

Analytics; U.S. Census Bureau


MARKET OVERVIEW


30

PORTLAND METRO AREA

Substantial Rent Growth Drives Demand

In Portland’s Secondary Submarkets

High cost of homeownership fuels rental demand. Portland’s lower cost of doing business compared with

other West Coast metros and its highly skilled workforce will underpin hiring in 2017. Companies including

Nike, DiscoverOrg and Simple Financial are expanding local operations, bringing higher-paying jobs to the

metro and driving household formation. Despite rising incomes, the metro’s skyrocketing home prices and the

cost of a down payment will push many individuals to apartments. Developers have responded, delivering

thousands of new rentals. Several Class A complexes designed to target higher-income households are

slated for completion this year. While completions will moderate from the cycle high registered last year,

vacancy will inch up as new complexes begin to lease. As vacancy remains below 4 percent and

demographics strengthen, apartment rents will register another year of strong growth.

Tenant demand for lower rents draws buyers to suburban properties. Tight apartment vacancy and a healthy

economy will maintain investor interest in Portland. As rents rise for an eighth consecutive year, some tenants

will seek units in secondary submarkets for affordability, fueling buyer demand in these areas. In particular,

value-add opportunities within Gresham, Salem and Vancouver, where higher rents can be captured, will be

targeted. On average, a well-located Class B/C asset in these locales will trade with yields in the low-5 to

high-6 percent range while a Class A property in central Portland can start as low as 3 percent. Metrowide,

multifamily assets typically trade with cap rates in the mid-5 percent span. Additionally, Portland’s average

yield is nearly 150 basis points higher than the average in California markets, motivating out-of-state investors

to make acquisitions in the area. The competitive bidding environment may place further downward pressure

on cap rates and elevate property values this year.

*Estimate ** Forecast

Sources: Marcus & Millichap Research Services; BLS; CoStar Group, Inc.

MARKET OVERVIEW


31

PORTLAND METRO AREA

2017 Market Forecast

Portland climbs two rungs on its sub-4 percent vacancy and one of the

highest rates of rent growth nationwide.

This year, Portland employers will add 26,000 jobs. In 2016, roughly 28,000

positions were created, primarily in the trade, transportation and utilities

sector.

Developers are on track to complete more than 4,600 apartments in 2017.

Last year, 6,500 units were added to inventory.

The vacancy rate will tick up 20 basis points this year to 3.6 percent as

completions enter a period of lease-up. In 2016, the rate rose 30 basis

points.

The average effective rent will surge 7.1 percent in 2017 to $1,371 per

month, a decline from last year’s 10.1 percent increase.

Corporate expansions will generate new housing needs and elevate the

performance of assets near major employment hubs. Additionally, high

returns will lure California buyers to Portland.

* Estimate ** Forecast

Sources: Marcus & Millichap Research Services; CoStar Group, Inc.;

Real Capital Analytics

NMI Rank

6, up 2 places

Employment

up 2.2%

Construction

4,600 units

Vacancy

up 20 bps

Rent

up 7.1%

Investment

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2016 Experian

Created on June 2017

POPULATION 1 Miles 3 Miles 5 Miles

▪ 2021 Projection

Total Population 9,540 114,899 277,342

▪ 2016 Estimate


▪ 2010 Census


▪ 2000 Census


▪ Daytime Population

2016 Estimate 8,983 110,399 239,570

HOUSEHOLDS 1 Miles 3 Miles 5 Miles

▪ 2021 Projection

Total Households 3,889 46,498 109,182

▪ 2016 Estimate


Average (Mean) Household Size 2.46 2.44 2.49

▪ 2010 Census


▪ 2000 Census


Growth 2015-2020 6.43% 3.71% 4.18%

HOUSING UNITS 1 Miles 3 Miles 5 Miles

▪ Occupied Units

2021 Projection 3,889 46,498 109,182

2016 Estimate 3,746 46,319 107,630

Owner Occupied 2,329 26,523 66,194

Renter Occupied 1,326 18,311 38,605

Vacant 91 1,485 2,831

▪ Persons In Units

2016 Estimate Total Occupied Units 3,654 44,834 104,799

1 Person Units 27.23% 28.70% 27.20%

2 Person Units 35.60% 34.31% 34.41%

3 Person Units 16.39% 16.22% 16.39%

4 Person Units 11.63% 11.85% 12.87%

5 Person Units 5.64% 5.39% 5.48%

6+ Person Units 3.50% 3.54% 3.66%

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles

▪ 2016 Estimate

$200,000 or More 2.24% 2.79% 5.08%

$150,000 - $199,000 4.06% 4.26% 5.04%

$100,000 - $149,000 16.86% 14.42% 15.47%

$75,000 - $99,999 17.49% 14.73% 14.46%

$50,000 - $74,999 19.06% 19.94% 19.64%

$35,000 - $49,999 13.67% 14.12% 13.21%

$25,000 - $34,999 7.79% 9.78% 8.94%

$15,000 - $24,999 9.64% 9.61% 8.44%

Under $15,000 9.19% 10.33% 9.73%

Average Household Income $73,331 $73,068 $83,793

Median Household Income $63,709 $57,129 $61,732

Per Capita Income $29,571 $29,571 $33,149

POPULATION PROFILE 1 Miles 3 Miles 5 Miles

▪ Population By Age

2016 Estimate Total Population 9,113 111,414 266,913

Under 20 23.01% 23.17% 23.92%

20 to 34 Years 18.41% 20.84% 20.28%

35 to 39 Years 5.72% 6.72% 7.29%

40 to 49 Years 12.17% 12.94% 13.89%

50 to 64 Years 21.38% 20.44% 20.36%

Age 65+ 19.31% 15.88% 14.25%

Median Age 42.33 39.45 38.97

▪ Population 25+ by Education Level

2016 Estimate Population Age 25+ 6,443 78,370 186,729

Elementary (0-8) 0.64% 1.33% 1.73%

Some High School (9-11) 6.81% 6.93% 6.24%

High School Graduate (12) 29.05% 27.65% 23.16%

Some College (13-15) 30.51% 30.10% 26.32%

Associate Degree Only 9.23% 9.47% 9.02%

Bachelors Degree Only 15.42% 16.37% 21.17%

Graduate Degree 7.53% 7.49% 11.62%

▪ Population by Gender

2016 Estimate Total Population 9,113 111,414 266,913

Male Population 47.89% 48.98% 48.96%

Female Population 52.11% 51.02% 51.04%

32

Income

In 2016, the median household income for your selected geography is

$63,709, compare this to the US average which is currently $54,505.

The median household income for your area has changed by 25.23%

since 2000. It is estimated that the median household income in your

area will be $74,378 five years from now, which represents a change

of 16.75% from the current year.

The current year per capita income in your area is $29,571, compare

this to the US average, which is $29,962. The current year average

household income in your area is $73,331, compare this to the US

average which is $78,425.

Population

In 2016, the population in your selected geography is 9,113. The

population has changed by 27.99% since 2000. It is estimated that the

population in your area will be 9,540.00 five years from now, which

represents a change of 4.69% from the current year. The current

population is 47.89% male and 52.11% female. The median age of the

population in your area is 42.33, compare this to the US average

which is 37.68. The population density in your area is 2,892.82 people

per square mile.

Households

There are currently 3,654 households in your selected geography. The

number of households has changed by 32.78% since 2000. It is

estimated that the number of households in your area will be 3,889

five years from now, which represents a change of 6.43% from the

current year. The average household size in your area is 2.46

persons.

Employment

In 2016, there are 10,584 employees in your selected area, this is also

known as the daytime population. The 2000 Census revealed that

62.98% of employees are employed in white-collar occupations in this

geography, and 37.13% are employed in blue-collar occupations. In

2016, unemployment in this area is 5.08%. In 2000, the average time

traveled to work was 24.00 minutes.

Race and Ethnicity

The current year racial makeup of your selected area is as follows:

84.09% White, 1.57% Black, 0.25% Native American and 3.77%

Asian/Pacific Islander. Compare these to US averages which are:

70.77% White, 12.80% Black, 0.19% Native American and 5.36%

Asian/Pacific Islander. People of Hispanic origin are counted

independently of race.

People of Hispanic origin make up 10.87% of the current year

population in your selected area. Compare this to the US average of

17.65%.

PROPERTY NAME

MARKETING TEAM


Housing

The median housing value in your area was $279,771 in 2016,

compare this to the US average of $187,181. In 2000, there were

1,940 owner occupied housing units in your area and there were 812

renter occupied housing units in your area. The median rent at the

time was $593.

Source: © 2016 Experian

DEMOGRAPHICS

33

www.MarcusMillichap.com

Michael Shall

Senior Associate

Associate Member - National Multi Housing

Group

Portland Office

Tel: (503) 200-2067

Fax: (503) 200-2010

[email protected]

License: OR 201102054

P R E S E N T E D B Y

34

Boubacar Traore

Associate

Associate Member - National Multi Housing

Group

Portland Office

Tel: (503) 200-2061

Fax: (503) 200-2010

[email protected]

License: OR 201215654

mailto:[email protected]

offering memorandum...property overview 7 pheasant court apartments is a 22-unit apartment asset...

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