5340 SE Milwaukie Offering Memorandum

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OFFERING MEMORANDUM

5340 SE MILWAUKIE AVENUE 8 Units • Portland, Oregon

www.hfore.com • (503) 241.5541


South Waterfront

Downtown Portland

Ross Island

Hardtack Island

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llamet

i n the W o r e t a ingw

Oaks Bottom Wildlife Refuge

Spr

5340 SE Milwaukie Avenue

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OFFERING MEMORANDUM

5340 SE Milwaukie Avenue Portland, OR 97202

TABLE OF CONTENTS Investment Highlights

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Location

16

Operations Analysis

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Offer Terms

24

www.hfore.com • 503.241.5541 Licensed in the States of Oregon and Washington


INVESTMENT HIGHLIGHTS 5340 SE Milwaukie Avenue provides potential buyers with a true one-of-a-kind opportunity to acquire a property with upside potential, both from the existing apartment units and from future development of the site. Sitting on a large corner lot with RM4 zoning, this property has the potential to expand vertically 7-10 stories with unobstructed views of Mt. Hood, the Willamette River and Downtown Portland. The lower density of the surrounding zoning and the increasing demand for a close-in SE Portland location make this a tremendous opportunity for a developer to build a true statement property.

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INVESTMENT HIGHLIGHTS

ASSET SUMMARY

In addition to the incredible development potential, the property currently boasts a very well-maintained, 8-unit apartment building. A reliable cash-producer for many years, the current apartment building provides an opportunity for a developer or owner to purchase the property with traditional financing while generating cash flow during the planning and development process. This unique investment provides a trophy development opportunity with flexible timing. DEVELOPMENT HIGHLIGHTS Unique development opportunity with strong in-place income RM4 Zoning that allows for high density residential construction Unobstructed views of Oaks Bottom Park and the Willamette River to the west and Mount Hood to the east 10,000+ sf corner lot near mass transit and retail corridors

ZONING Zoning Square Footage Acreage Height Limit FAR

Hardwood floors throughout

RM4 +/- 10,355 Sq Ft 0.24 Acres 75’ – 100’ 4:1 (6:1 with bonus provisions)

PRICING Price Price per Unit Price per Sq Ft Cap Rate

PROPERTY HIGHLIGHTS

5340 SE Milwaukie Avenue Portland, OR 97202 Multnomah 1963 8 +/- 6,400 Sq Ft +/- 800 Sq Ft

Address City, State County Year Built Total Units Total Sq Ft Avg Unit Size

$2,000,000 $250,000 $313 4.71%

Large two-bedroom floor plans Off street parking and green space

Tours and Inquiries:

Fantastic location with easy access to downtown Portland and Sellwood.

All tours and inquiries regarding the 5340 SE Milwaukie Avenue are to be directed to HFO Investment Real Estate at (503) 241.5541.

UNIT MIX Unit Type

Unit Count

Avg Sq Ft

Total Sq Ft

% of Total Units

2 Bedrooms

8

800

6,400

100.0%

Total / Averages

8

800

6,400

100.0%

Jack Stephens • jack@hfore.com Greg Frick • greg@hfore.com Lee Fehrenbacher • lee@hfore.com Licensed in the states of Oregon and Washington. 5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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SELLWOOD-MOORLAND NEIGHBORHOOD PORTLAND Sellwood has a small-town feel and a strong sense of community pride. It feels a little less hipster-y than the rest of the SE area—but there’s still a kidfriendly anything-goes vibe. While the Sellwood neighborhood maintains a strong family-friendly reputation, it offers many urban amenities. From coffee roasters to locally-owned bookshops to a wide swath of antique stores, the neighborhood is a browser’s paradise. No need to rush through this area—it invites you to slow down, take your time, and enjoy the sights. The eclectic mix of antiques and collectables at Stars Antique Mall is like an endless estate sale, while the breakfast cafe Fat Albert’s, among other Moreland restaurants, offers hurry-free noshing.

Transportation: Sellwood is not only a walker and biker paradise but has ample bus service and is closely located to the MAX Orange line. Walk Score: 65 (Somewhat Walkable) Bike Score: 88 (Biker’s Paradise) Transit Score: 51 (Good Transit) Sound Score: 72 (Active)

Schools:

Higher Education:

• Llewellyn Elementary School (5/10)

• Lewis & Clark College

• Sellwood Middle School (8/10)

• Oregon Health and Science University

• Cleveland High School (5/10)

• Reed College

Parks: Oaks Bottom Wildlife Refuge Crystal Springs Rhododendron Garden Sellwood Riverfront Park Springwater Corridor Trail

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LIFESTYLE CONVENIENCES PORTLAND

205 Orange Line

South Waterfront

213

ver

Ri tte

me

la Wil

5340 SE Milwaukie Avenue

Green Line

Milwaukie Happy Valley Milwaukie Marketplace Shopping Center 99E

5

43

Lake Oswego go L Oswe

ake

224

5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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• +/- 10,000 sq ft corner lot • 75’ – 100’ height limit • 4:1 – 6:1 FAR

5340 SE Milwaukie Avenue

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5340 SE Milwaukie Avenue

5340 SE Milwaukie Avenue 5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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PORTLAND REGION APARTMENT MARKET The Portland Metro Area consistently ranks among the nation’s lowest for apartment vacancy rates. According to Multifamily NW Portland’s Fall 2021 vacancy rate was 3.36% compared to the U.S. vacancy rate of 5.8%.

SKILLED WORKFORCE & STRONG EMPLOYMENT Portland is known for its extremely well educated workforce, and is among the top U.S. cities with advanced college degrees.

DIVERSIFIED ECONOMY Portland is home to the headquarters of Fortune 500 companies Nike and Lithia Motors. Fortune 1000 companies headquartered here include: Columbia Sportswear, Greenbrier Cos. and Portland General Electric. Fortune 500 companies based outside Oregon with major operations here are Precision Castparts and Intel. Companies which have opened major branches in Portland include:

Portland’s tech startup companies include: Viewpoint, Jama Software, Airship, Acquia, AWS Elemental, Act-On, Puppet, and The Clymb.

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PORTLAND MARKET SNAPSHOT PORTLAND METRO AREA

The Portland Metro Area is one of the strongest apartment markets in the nation. The area’s diversified job market and high quality of life continues to attract new residents. In 2021 the state economist released a report estimating that net in-migration will average 30,000 people per year in 2021 and 35,000 people per year in 2022 and beyond. The majority, between 55-70 people per day, move to the Portland metro area. Meanwhile, new apartment permit applications construction has not caught up to meet housing demand. Source: State of Oregon Housing and Economic Report, 2021

3.36%*

37.1%**

Metro-area vacancy

Metro area renteroccupied housing rate

18,670***

4,966***

New Portland residents (2018-2021)

Portland residents per square mile

76,231***

Median household income (2020-2021)

54.5%

Millennials 25-34 in Portland with a bachelor’s degree or higher

4-10%

Projected Rent Growth (next 3 years) *

Top Ten

ranking for Oregon inmigration in U.S. (since 2013) ****

* Multifamily NW Fall 2021 Apartment Report **Latest figures U.S. Census Bureau American Community Survey (2020) *** New Portland Residents (Portland State University Center for Population Research and Census, 2020-2021) ****United Van Lines annual survey, (2021 results)

5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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PORTLAND REGION HIGH TECH & CHIP MANUFACTURING Attracted by the Portland area’s educated workforce and relative low cost of doing business, tech companies continue opening branches or relocating entirely. With nearly 21,000 employees, Intel is the area’s largest private employer. The company is currently expanding its presence with forthcoming D1X microprocessor chip facilities at the Ronler Acres Campus in Hillsboro. This 1.1 million square foot factory is part of a five-year, $6 billion expansion, and is part of the company’s long-term plans for growth. Other notable Portland-area high-tech companies include ON Semiconductor and Tektronix.

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PORTLAND REGION SPORTSWEAR Nike has its world headquarters in Beaverton and employs 13,964 Portlandarea residents. Two of Nike’s competitors have a major local presence as well. Those employers include the North American headquarters of Adidas with 1,751 employees, and Under Armour.

GOVERNMENT The U.S. Federal Government is among Portland largest employers, with nearly 8,500 VA and Postal workers alone. The State of Oregon gives employment to an additional 15,100 residents in government and education.

HEALTHCARE AND RESEARCH Health services are another major employment sector for the Portland area. The top healthcare employers in the area are Providence Health Systems and The Oregon Health Sciences University (OHSU) with 18,048 employees.

MANUFACTURING In trucking and transportation, Daimler Trucks—with around 2,160 area workers. Others major manufacturers include Precision Castparts which reported 2,500 employees in 2021.

5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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TOP AREA EMPLOYERS (2021) 21,000 area employees Intel is the area’s largest private employer. Recently, following a five year, $6 billion expansion, the company unveiled vast, long-term plans for future growth.

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21,000 area employees Providence is a non-profit network of hospitals, health plans, physicians, clinics and related services. It operates in Alaska, Washington, Oregon, Montana and California. It was originally founded by the Sisters of Providence in Montreal Quebec in 1843.

18,048 area employees Oregon Health Sciences University (OHSU) leads the way in government-funded healthcare — and secures numerous grants for the advancement of health sciences. OHSU recently acquired a $1 billion gift for cancer research. Grants from the National Institutes of Health have held steady from around $184 million in 2011 to $281 million in 2019. This infuses the economy with jobs and income from outside the Portland MSA.


TOP AREA EMPLOYERS (2021) 13,120 area employees

11,163 area employees

Legacy is a locally-owned nonprofit based in Portland, Oregon. It is the only health system covering the Portland/Vancouver area south to Salem with multiple hospitals and a hospital dedicated to exclusively serving children.

Kaiser has 35 medical facilities, 18 dental offices and 1,400 doctors in the Pacific Northwest. It employs more than 12,000 in the Portland metro region and serves 12.4 million members nationally. Kaiser is headquartered in Oakland, California.

13,964 area employees The company is wrapping up a $1 billion expansion of office space to its campus headquarters.

9,525 area employees Fred Meyer offers one-stop shopping at 133 multi-department stores in four western states.

6,847 area employees With nearly 50,000 students, Portland Public Schools is Oregon’s largest district. Portland is currently in the midst of a massive voter-approved high school and middle school reconstruction and modernization program. Voters in 2020 approved $1.2 billion for school modernization. The funding was in addition to $790 million in 2017 and $480 million in 2012.

5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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OPERATIONS ANALYSIS

5340 SE MILWAUKIE AVENUE • 8 UNITS • PORTLAND, OREGON Income Scheduled Gross Rent Less: Vacancy/Credit Loss Net Rental Income Other Income Includes: Laundry Includes: Utility Billing (RUBs) Includes: Miscellaneous Gross Operating Income Expenses Real Estate Taxes Insurance Total Utilities Fee Management Landscaping Maintenance/Repairs Turnover Reserves Total Expenses Expenses per Unit % of Gross Operating Income Net Operating Income (NOI)

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December 2021 TTM $127,200

$15,900

$127,200 $1,000

$15,900 $125

$0

$1,000 $0 $0

$128,200 December 2021 TTM $11,071 $2,000 $7,397 $10,727 $1,200 $3,200 $1,600 $2,000 -$39,196 -$4,899 30.6% $89,004

$0

$125 $0 $0

Scheduled Rents of as 01/2022 0.0%

0.0%

$16,025

$129,600

$16,200

$125,712 $8,373

$15,714 $1,047

-$3,888

$1,000 $4,873 $2,500

$134,085

Per Unit

% GOI

$1,384 $250 $925 $1,341 $150 $400 $200 $250

8.6% 1.6% 5.8% 8.4% 0.9% 2.5% 1.2% 1.6%

Projected Operations $11,708 $2,000 $7,397 $10,727 $1,200 $3,200 $1,600 $2,000 -$39,832 -$4,979 29.7% $94,253

-$486

$125 $609 $313

-3.0%

75.0%

$16,761 Per Unit

% GOI

$1,463 $250 $925 $1,341 $150 $400 $200 $250

8.73% 1.49% 5.52% 8.00% 0.89% 2.39% 1.19% 1.49%


OPERATIONS ANALYSIS

5340 SE MILWAUKIE AVENUE • 8 UNITS • PORTLAND, OREGON Highest Achieved Rents $144,000

$18,000

$139,680 $8,373

$17,460 $1,047

-$4,320

$1,000 $4,873 $2,500

$148,053 Projected Operations $11,708 $2,000 $7,397 $11,844 $1,200 $3,200 $1,600 $2,000 -$40,949 -$5,119 27.7% $107,104

-$540

$125 $609 $313

RENT VARIATION BY UNIT TYPE

Note -3.0%

1 2

$1,600

3

$1,500

75.0%

$1,400

$18,507 Per Unit

% GOI

$1,463 $250 $925 $1,481 $150 $400 $200 $250

7.9% 1.4% 5.0% 8.0% 0.8% 2.2% 1.1% 1.4%

4

5 6

Scheduled Rent

Income Scheduled Gross Rent Less: Vacancy/Credit Loss Net Rental Income Other Income Includes: Laundry Includes: Utility Billing (RUBs) Includes: Miscellaneous Gross Operating Income Expenses Real Estate Taxes Insurance Total Utilities Management Fee Landscaping Repairs & Maintenance Turnover Reserves Total Expenses Expenses per Unit % of Gross Operating Income Net Operating Income (NOI)

$1,300 $1,200 $1,100

7

$1,000

2 Bedroom – 800 Sq Ft

Minimum Rent Average Rent Maximum Rent

5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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OPERATIONS ANALYSIS

5340 SE MILWAUKIE AVENUE • 8 UNITS • PORTLAND, OREGON 1. RENT

Rents at 5340 SE Milwaukie Avenue are based on a January 2022 rent roll and average $1,350 per unit, or $1.69 per sq ft. Projected rents are based on rents achieved at the property and are projected to average $1,500 per unit, or $1.88 per sq ft.

2. VACANCY/CREDIT LOSS, CONCESSIONS, AND BAD DEBT

The historical operations for 5340 SE Milwaukie Avenue do not include financial loss. Operations are stabilized at a market-rate vacancy of 3.0%, which is required by most lenders.

3. OTHER INCOME

The projected operations estimate other income to cover administrative fees, pet rent, parking, storage income and utility charges (RUBs). 5340 SE Milwaukie Avenue produced more than $17,034 in other income in 2020 but under utilized storage and parking can increase this income. 5340 SE Milwaukie Avenue is currently only generating other income from laundry services. They are not currently charging for RUBs. Projected operations are adjusted to include other income from utility charges, laundry income, and other miscellaneous charges. • RUBs. 5340 SE Milwaukie Avenue does not currently charge for RUBs. Projected operations include a recapture of 75% for utilities. The projected RUBs collections average $609 per unit, per month and cover approximately 75.0% of water, sewer, and garbage costs. • A total of $8,373 of other income is carried forward in the projected operations.

RENT ROLL ANALYSIS: SCHEDULED RENTS Unit Type

Unit Count

Square Feet

Lowest Achieved Rent

Highest Achieved Rent

% Diff

Average Scheduled Rent

Average Scheduled Rent per Sq Ft

2 Bedroom / 1 Bathroom

8

800

$1,100

$1,500

36.4%

$1,350

$1.69

Totals / Averages

8

800

$1,100

$1,500

36.4%

$1,350

$1.69

Square Feet

Average Scheduled Rent

Average Scheduled Rent per Sq Ft

Average Market Rent

Average Market per Sq Ft

% Change

RENT ROLL ANALYSIS: MARKET RENTS Unit Type

Unit Count

2 Bedroom / 1 Bathroom

8

800

$1,350

$1.69

$1,500

$1.88

11.1%

Totals / Averages

8

800

$1,350

$1.69

$1,500

$1.88

11.1%

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OPERATIONS ANALYSIS

5340 SE MILWAUKIE AVENUE • 8 UNITS • PORTLAND, OREGON EXPENSES 4. PROPERTY TAXES

Property taxes are based on current assessments. Oregon’s property taxes are evaluated on a fiscal year starting July 1. In Oregon, property taxes are not reassessed on sale and are limited to a 3.0% annual increase at the state level. Any annual increase in taxes above 3.0% is due to location or regional bond indebtedness not restricted by the state measure. Current property taxes for the 2021/2022 tax year for 5340 SE Milwaukie Avenue total $12,070. Property taxes paid before November 15th each year receive a 3.0% discount. Most property owners take advantage of this discount. The projected operations include the current net taxes (after discount), which total $11,708.

TAX HISTORY Tax Year Account # R104707 Total % Change

2019/2020

2020/2021

2021/2022

$10,665

$11,072

$12,070

$10,665

$11,072

$12,070

3.03%

3.82%

9.01%

5. MANAGEMENT FEE

The management fee is projected at 8.0% of GOI and includes property oversight, advertising, payroll, and other administrative expenses and is market rate for properties of similar size and vintage to 5340 SE Milwaukie Avenue.

6. REPAIRS & MAINTENANCE (R&M)

Repairs and maintenance have been projected and are carried forward at $400/unit or $3,200 annually.

7. RESERVES

Lenders require reserves be set aside to address future capital costs associated with any property as it ages. The projected operations include reserves of $250 per unit, a total of $2,000 annually.

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OFFER TERMS

5340 SE MILWAUKIE AVENUE • 8 UNITS • PORTLAND, OREGON ASSET SUMMARY Address City, State County Year Built Total Units Total Sq Ft Avg Unit Size Acreage Density

5340 SE Milwaukie Avenue Portland, OR 97202 Multnomah 1963 8 +/- 6,400 Sq Ft +/- 800 Sq Ft 0.24 Acres 33 Units per Acre

All tours and inquiries regarding 5340 SE Milwaukie Avenue are to be directed to HFO Investment Real Estate at (503) 241.5541. Please do not disturb the residents. Jack Stephens • jack@hfore.com Greg Frick • greg@hfore.com Lee Fehrenbacher • lee@hfore.com Rob Marton • rob@hfore.com Tyler Johnson • tyler@hfore.com Todd Tully • todd@hfore.com

PRICING Price Price per Unit Price per Sq Ft Cap Rate

QUESTIONS & TOUR REQUESTS:

Adam Smith • adam@hfore.com

$2,000,000 $250,000 $313 4.71%

Steve Wendt • stephen@hfore.com Aaron Douglas • aaron@hfore.com

HFO Investment Real Estate 2424 SE 11th Avenue Portland, Oregon 97214 www.hfore.com (503) 241.5541 Fax: (503) 241.5548 Brokers licensed in the States of Oregon and Washington.

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5340 SE Milwaukie Avenue

5340 SE MILWAUKIE • 8 UNITS • PORTLAND, OR

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HFO Investment Real Estate Passion • Collaboration • Specialization 2424 SE 11th Avenue • Portland, OR 97214 www.hfore.com • 503.241.5541

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Parties who receive this information from unauthorized parties shall not be recognized. ©2022 HFO Investment Real Estate LLC. Build your legacy is a service mark of HFO Investment Real Estate. Licensed in the states of Oregon and Washington.