124-206 1ST Street Santa Cruz, CA 95060 · Located at 124-206 1st Street in Santa Cruz, Sandcastle Apartments offers an investor the rare opportunity to own a piece of Beach Hill,

124-206 1ST Street

Santa Cruz, CA 95060

Offering Memorandum

1

INVESTMENT OVERVIEW 01

Offering Summary

Executive Summary

Detailed Capital Improvements

Property Summary

Discover Santa Cruz

Aerial and Regional Maps

FINANCIAL ANALYSIS 02

Rent Roll Summary

Rent Roll Detail

Operating Statement

Pricing Detail

MARKET COMPARABLES 03

Sales Comparables

Rent Comparables

SECTION

Confidentiality and Disclaimer

The information contained in the following Marketing Brochure is proprietary and

strictly confidential. It is intended to be reviewed only by the party receiving it from

Marcus & Millichap and should not be made available to any other person or entity

without the written consent of Marcus & Millichap. This Marketing Brochure has been

prepared to 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. All potential buyers must take appropriate measures to verify all of the

information set forth herein. Marcus & Millichap is a service mark of Marcus &

Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights

reserved.

Non-Endorsement Notice

Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial

tenant or lessee identified in this marketing package. The presence of any

corporation's logo or name is not intended to indicate or imply affiliation with, or

sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or

subsidiaries, or any agent, product, service, or commercial listing of Marcus &

Millichap, and is solely included for the purpose of providing tenant lessee information

about this listing to prospective customers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.

PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

124-206 1st Street


Investment Overview

Located at 124-206 1st Street in Santa Cruz, Sandcastle Apartments offers an

investor the rare opportunity to own a piece of Beach Hill, an always-in-demand

area.

Built in 1925, Sandcastle Apartments features much of the original charm and

architecture, and offers the distinguishing investor the opportunity to acquire a 12-

unit property in a historically strong rental market. This gated community includes

(8) studio, (3) 1 bedroom/1 bath, and (1) 2 bedroom/1 bath apartments that offer

its residents natural light and breathtaking views. Recent improvements to the

community include a laundry care center with SMART machines, an inviting ocean

view rooftop sundeck with firepit and lounge furniture, BBQ, new exterior doors,

exterior paint, landscaping, and locking mailboxes. Renovated units feature new

appliances, lighting and ceiling fans, hardware, woodgrain LVT, new miniblind

window coverings and interior paint.

Subject property is located one block from Santa Cruz Beach Boardwalk & Wharf

founded in 1907, California's oldest surviving amusement park and the last

remaining seaside amusement park on the West Coast of the United States.

Downtown is just minutes away from Downtown Santa Cruz, offering over 100

shopping, dining and entertainment options.

Santa Cruz’ recent development plans include a fully entitled mixed-use high-

density development downtown at 555 Pacific Avenue which consists of a 4-story

building with 94 residential units and 4 commercial units. New to the area is

Fairfield Inn & Suites by Marriott. The anticipated development at the site of the

historic La Bahia is scheduled to begin this Summer resulting in a 165-room hotel

with event/meeting space, two restaurants, pool, spa and 244 on-site parking

spaces, just across the street from Sandcastle.

▪ Ongoing capital improvements throughout community

▪ Strong historical occupancy and rent increase levels

▪ Conveniently located to transportation, shopping, eateries and entertainment

Investment Highlights

INVESTMENT OVERVIEW

124-206 1st Street ~ Santa Cruz

OFFERING SUMMARY

Discover Santa Cruz

Situated 1 block from the ocean, Sandcastle Apartments is a community of (8) Studios, (3) 1

bedroom/1 bath, and (1) 2 bedroom/1 bathapartments, many with spectacular ocean views.

EXECUTIVE SUMMARY


UNIT MIX

NUMBEROF UNITS

UNIT TYPEAPPROX.

SQUARE FEET8 Studio 325-400

3 1 bedroom / 1 bathroom 400-760

1 2 bedroom / 1 bathroom 1250

12 Total 6,175

VITAL DATA

Price $4,500,000 CURRENT PRO-FORMA

Down Payment 40% / $1,800,000 CAP Rate 4.58% 5.06%

Loan Amount $2,700,000 GRM 14.2 13.4

Loan Type Proposed New Net Operating Income $206,048 $227,858

Interest Rate / Amortization 4.0% / 30 Years Net Cash Flow After Debt Service 2.6% / $47,166 3.8% / $68,975

Price/Unit $375,000 Total Return 5.3% / $94,713 6.5% / $116,522

Price/SF $818.18

Number of Units 12

Rentable Square Feet 6,175

Number of Buildings 4

Number of Stories 2

Year Built / Renovated 1925 / Ongoing

Lot Size .68 acres

OFFERING SUMMARY


OFFERING SUMMARYDETAILED CAPITAL IMPROVEMENTS

In the last 18 months, Sandcastle has received over $30,000 in capital improvements.

Project Cost Completed

Railing gap reduced with extra pickets, Front security gates installed $3,000.00 2018

Replaced roofs for #7 ,8, 9 and Maintenance shopNew Epoxy Seal coat for #10, 11, 12, 4, 5 & 6

$18,500.00 2018

New mail boxes $1,500.00 2018

Apartment 3 unit renovation $3,500.00 2019

New Exterior Paint $15,000.00 2019

Garage door replacements $1,300.00 2019

Unit front Door replacements: APTS 1,4,5,6,9,10,12 $5,440.00 2019

New rooftop deck furniture and firepit $7,900.00 2019

TOTAL $33,140.00

PROPOSED FINANCING

First Trust Deed

Loan Amount $2,700,000

Loan Type Proposed New

Interest Rate 4.00%

Amortization 30 Years

Loan Term 10 Years

Loan to Value 60%

Debt Coverage Ratio 2.6%

THE OFFERING

Property Sandcastle Apartments

Price $4,500,000

Property Address 124-206 1st Street, Santa Cruz

Assessors Parcel Number 007-213-08, 007-213-09

Zoning R3

SITE DESCRIPTION

Number of Units 12

Number of Buildings 4

Number of Stories 2

Year Built/Renovated 1925/ongoing

Rentable Square Feet 6,175

Lot Size .68 acres

Type of Ownership Fee Simple

Parking (4) single-car garagesPermit parking

UTILITIES

Water RUBS in place

Phone Tenant pays

Electric RUBS in place

Gas RUBS in place

CONSTRUCTION

Foundation Crawl

Framing Wood

Roof 30 year composition


OFFERING SUMMARYPROPERTY SUMMARY

Discover Santa Cruz

Discover Santa CruzSandcastle Apartments is 1 block from the ocean, and just minutes from the

Santa Cruz Boardwalk and Wharf, Downtown Santa Cruz/Pacific Avenue

Mall, and the iconic Catalyst Nightclub.

Santa Cruz – Area Overview

Offering a surplus of lifestyle amenities and located just 25 miles from Silicon Valley’s thriving employment base, Sant Cruz represents a highly sought-after place for Bay Area residents to call home. The city’s diverse and growing local economy, vibrant downtown district, surplus of recreation options, and favorable climate offer residents a superior quality of life. Santa Cruz has consistently ranked as one of the top 10 happiest places to live in the U.S. by publications and polling sources such as National Geographic, Forbes, and Gallup.

Santa Cruz boasts an eclectic employment base with a healthy balance of technology, healthcare, professional and business services, government, education, and biotechnology industries. The active and emerging tech scene in Santa Cruz has attracted both startups and more established tech companies, as well as tech investors, co-working programs and events.

Located just over 2 miles from Sandcastle Apartments, UC Santa Cruz is the city’s largest employer. Total enrollment at UCSC has grown by 13.4 percent over the past five years, now totaling approximately 18,765 students. The student population us expected to continue to increase with another 10,000 students by 2040. This growth, combined with a lack of new housing inventory, will continue to suppress vacancies and support rent growth at rental communities throughout Santa Cruz.

TOP 20 EMPLOYERS BY NUMBER OF EMPLOYEES

# COMPANY CITY EMPLOYEES DISTANCE

1 Google Mountain View 23324 39

2 eBay San Jose 16200 36.4

3 Apple Park (HQ) Cupertino 16000 33.8

4 University of California – Santa Cruz Santa Cruz 8569 2.4

5 Applied Materials Santa Clara 8500 33.9

6 Intel Santa Clara 7801 37.2

7 Lockheed Martin Santa Cruz 5600 19.2

8 Santa Clara Valley Medical Center San Jose 4000 28.8

9 Agilent Technologies Santa Clara 3280 29.7

10 San Jose State University San Jose 3251 33

11 LinkedIn Mountain View 3177 37.4

12 Advanced Micro Devices Santa Clara 3100 33.8

13 Hitachi Vanrtara Santa Clara 3000 33

14 PayPal San Jose 3000 34.4

15 Western Digital San Jose 3000 35.1

16 Adobe Systems San Jose 2750 32.5

17 County of Santa Cruz Santa Cruz 2438 1.4

18 Ericsson Inc. Santa Clara 2200 34

19 Good Samaritan Hospital San Jose 1950 25.1

20 Netflix Los Gatos 1864 24.7

MAJOR REGIONAL EMPLOYERS – RANKED BY DISTANCE FROM ASSET

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 theinformation.References tosquare footage orage are approximate.Buyer mustverify the information and bears all risk for any inaccuracies.


1 Looker Santa Cruz 209 .9

2 Amazon Santa Cruz 100 1.0

3 County of Santa Cruz Santa Cruz 2438* 1.4

4 Poly (Formerly Plantronics)

Santa Cruz 529 2.0

5 University of California –Santa Cruz

Santa Cruz 8569 2.4

6 City of Santa Cruz Santa Cruz 1000 2.5

7 Dominican Hospital Santa Cruz 1500 3.8

8 Northrop Grumman Sunnyvale 1226* 5.8

9 Threshold Enterprises Scotts Valley

515 7.6

10 Cabrillo College Aptos 1500 8.1

11 Lockheed Martin Santa Cruz 5600 19.2

12 Netflix Los Gatos 1864 24.7

13 Good Samaritan Hospital San Jose 1950 25.1

14 Barracuda Networks Campbell 350 25.3

15 Xilinx Inc. San Jose 1000 25.8

16 SAAMA Technologies Campbell 274 27.2

17 Santa Clara Valley Medical Center

San Jose 4000 28.8

18 Agilent Technologies Santa Clara 3280 29.7


19 Seagate Cupertino 750 31.1

20 Pricewaterhouse Coopers

San Jose 700 32.0

21 Santa Clara University Santa Clara 1200 32.0

22 Adobe Systems San Jose 2750 32.5

23 NVIDIA Santa Clara 850 32.8

24 San Jose State University

San Jose 3251 33.0

25 Hitachi Vanrtara Santa Clara 3000* 33.0

26 Atmel Corporation San Jose 1311 33.3

27 Apple Park (HQ) Cupertino 16000* 33.8

28 Advanced Micro Devices

Santa Clara 3100* 33.8

29 Applied Materials Santa Clara 8500* 33.9

30 Ericsson Inc. Santa Clara 2200 34.0

31 PayPal San Jose 3000 34.4

32 Western Digital San Jose 3000 35.1

33 eBay San Jose 16200* 36.4

34 Intel Santa Clara 7801* 37.2

35 LinkedIn Mountain View 3177 37.4

36 Google Mountain View 23324 39.0* Denotes employees at multiple metro locations in the immediate counties

124-206 1st Street ~ Santa Cruz124-206 1st Street ~ Santa Cruz


Sandcastle Apartments

Santa Cruz Beach Boardwalk&

Cocoanut Grove

Kaiser Permanente Arena

Pacific Avenue MallDowntown Sant Cruz

La Bahia Hotel215 Beach Street

Coastview Hotel301 Beach Street

Existing real estate

Current development projects

Courtyard Marriot Hotel307-313-321-335 Riverside Avenue

River Street Townhomes232 River Street1547 Pacific Avenue

Mixed use

Live/Work Townhouses1804-1812 Ocean Street


Financial Analysis


OFFERING SUMMARYRENT ROLL SUMMARY

Studio67%

1 bed/1bath25%

2 bed/1 bath8%

Unit Distribution

Current Potential

# of Avg Sq Rental Average Average Monthly Average Average MonthlyUnit Type Units Feet Range Rent Rent / SF Income Rent Rent / SF Income

Studio 8 325 $1,627 - $2,095 $2,018 $6.21 $16,142 $2,139 $6.58 $17,112

1 bedroom/1 bathroom 3 550 $2,310 - $2,735 $2,498 $4.54 $7,495 $2,648 $4.81 $7,944

2 bedroom/1 bathroom 1 1,250 $2,835 - $2,835 $2,835 $2.27 $2,835 $3,005 $2.40 $3,005

Totals/Weighted Averages 12 458 $2,206 $4.81 $26,472 $2,338 $5.10 $28,061

Gross Annualized Rents $317,664 $336,732

$0.00 SF

$1.00 SF

$2.00 SF

$3.00 SF

$4.00 SF

$5.00 SF

$6.00 SF

$7.00 SF

0

500

1000

1500

2000

2500

3000

Studio 1bedroom/1bathroom

2bedroom/1bathroom

Ren

t per SF/M

on

thRen

t p

er M

on

th

Unit Type

Unit Rent

Rent


OFFERING SUMMARYRENT ROLL DETAIL

Current Current Potential Potential

Square Rent / Rent / SF/ Rent / Rent/ SF/Unit Unit Type Feet Month Month Month Month

1 Studio 325 $2,045 $6.29 $2,139 $6.58

2 Studio 325 $1,995 $6.14 $2,139 $6.58

3 Studio 325 $2,095 $6.45 $2,139 $6.58

4 Studio 325 $1,627 $5.01 $2,139 $6.58

5 Studio 325 $2,095 $6.45 $2,139 $6.58

6 Studio 325 $2,095 $6.45 $2,139 $6.58

7 1 bedroom/1 bathroom 550 $2,735 $4.97 $2,648 $4.81



10 Studio 325 $2,095 $6.45 $2,139 $6.58

11 Studio 325 $2,095 $6.45 $2,139 $6.58

12 2 bedroom/1 bathroom 1,250 $2,835 $2.27 $3,005 $2.40

Total 5,500 $26,472 $4.81 $28,061 $5.10


OFFERING SUMMARYOPERATING STATEMENT

[1] Total includes the following: Maintenance & Repairs, Vendor Services, and Turnover

Income Current Proforma Notes Per Unit Per SF

Gross Current Rent 317,664 336,732 28,061 61.22

Physical Vacancy (9,530) 3.0% (10,102) 3.0% (842) (1.84)

Total Vacancy ($9,530) 3.0% ($10,102) 3.0% ($842) ($2)

Effective Rental Income 308,134 326,630 27,219 59.39

Other Income

Laundry/Fees/Retained Deps/RUBS 4,633 9,340 778 1.70

Parking/Garage, Pet Rent 4,250 4,250 354 0.77

Total Other Income $8,883 $13,590 $1,133 $2.47

Effective Gross Income $317,017 $340,220 $28,352 $61.86

Expenses Current Proforma Notes Per Unit Per SF

Real Estate Taxes 51,502 52,503 4,375 9.55

Insurance 3,900 3,900 325 0.71

Utilities 26,050 26,050 2,171 4.74

Vendor Services 3,000 3,000 250 0.55

Repairs & Maintenance 5,600 5,600 [1] 467 1.02

Marketing & Advertising 150 150 13 0.03

Payroll 6,500 6,500 542 1.18

General & Administrative 1,575 1,575 131 0.29

Management Fee 12,681 4.0% 13,609 4.0% 1,134 2.47

Total Expenses $110,958 $112,887 $9,407 $20.52

Expenses as % of EGI 35.0% 33.2%

Net Operating Income $206,059 $227,333 $18,944 $41.33


FINANCIAL ANALYSISPRICING DETAIL

Summary

Price $4,500,000

Down Payment $1,800,000 40%

Number of Units 12

Price Per Unit $375,000

Price Per SqFt $818.18

Rentable SqFt 6,175

Lot Size .68 Acres

Approx. Year Built 1925

Returns Current Year 1

CAP Rate 4.58% 5.05%

GRM 14.17 13.36

Cash-on-Cash 2.85% 4.04%

Debt Coverage Ratio 1.33 1.47

Financing 1st Loan

Loan Amount $2,700,000

Loan Type New

Interest Rate 4.00%

Amortization 30 Years

Year Due 2049

# Of Units Unit Type SqFt/Unit Market

Rents

Proforma

Rents

8 Studio 325 $2,018 $2,139

3 1 bedroom/1 bathroom 550 $2,498 $2,648

1 2 bedroom/1 bathroom 1,250 $2,835 $3,005

Operating Data

Income Current Year 1

Gross Scheduled Rent $317,664 $336,732

Less: Vacancy/Deductions 3.0% $9,530 3.0% $10,102

Total Effective Rental Income $308,134 $326,630

Other Income $8,883 $13,590

Effective Gross Income $317,017 $340,220

Less: Expenses 35.0% $110,958 33.2% $112,887

Net Operating Income $206,059 $227,333

Cash Flow $206,059 $227,333

Debt Service $154,683 $154,683

Net Cash Flow After Debt Service 2.85% $51,377 4.04% $72,651

Principal Reduction $47,548 $49,485

Total Return 5.50% $50,596 6.79% $122,136

Expenses Current Year 1

Real Estate Taxes $51,502 $52,503

Insurance $3,900 $3,900

Utilities $26,050 $26,050

Vendor Services $3,000 $3,000

Repairs & Maintenance $5,600 $5,600

Marketing & Advertising $150 $150

Payroll $6,500 $6,500

General & Administrative $1,575 $1,575

Management Fee $12,681 $13,609

Total Expenses $110,958 $112,887

Expenses/Unit $9,246 $9,407

Expenses/SF $20.17 $20.52

Market Comparables


SALES COMPARABLES

SALES COMPARABLES

Units Type

Offering Price $10,595,000 18 1 bed/1 bath

Price/SF $447.05 16 2 bed/2 bath

CAP Rate 4.98%

Year Built 1976

Price per unit $375,000

SUBJECT PROPERTY124-206 1st Street, Santa Cruz

Units Type

Close of Escrow 7/20/2018 6 2 bed

Sold Price $2,000,000 1 3 bed

Price/Unit $285,714

Price/SF $385.95

Total No. of Units 7

Year Built / Renovated

1906

CAP Rate 4.70%

2

132 Campbell Street, Santa Cruz

Units Type

Close of Escrow 6/8/2018S 1 Studio

Sold Price $2,150,000 1 1 bed/1 bath

Price/Unit $430,000 3 2 bed/1 bath

Price/SF $461.97



1918

GRM 19.36

1

208 1st Street, Santa Cruz


SALES COMPARABLES

SALES COMPARABLES

rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1

Units Type

Close of Escrow 1/25/2019 5 2 bedroom

Sold Price $1,800,000

Price/Unit $360,000

Price/SF $412.09



1964

CAP Rate 4.74%

5

238 San Lorenzo Boulevard, Santa Cruz

Units Type


Sold Price $1,860,000 3 2 bedroom

Price/Unit $372,000 1 3 bedroom

Price/SF $675.38



1926

CAP Rate 4.73%

4

505 Walnut Avenue, Santa Cruz

Units Type


Sold Price $2,075,000 1 2 bedroom

Price/Unit $518,750

Price/SF $790.48



1938

CAP Rate 4.84%

3

207 Oakland Avenue, Capitola


SALES COMPARABLES

SALES COMPARABLES

Units Type

Close of Escrow 1/15/2018 1 Studio



Price/SF $554.88



1968

CAP Rate 3.55%

7

404 High Street, Santa Cruz

Units Type

Close of Escrow 7/13/2018 8 2 bed/1 bath

Sold Price $2,930,000

Price/Unit $366,250 1 3 bedroom

Price/SF $675.38



1926

CAP Rate 4.73%

6

526 California Avenue, Santa Cruz

Units Type

Close of Escrow 1/5/2018 6 2 bed/1 bath


Price/Unit $475,000

Price/SF $559.29



1964

8

324 Mountain View Avenue, Santa Cruz


SALES COMPARABLES

SALES COMPARABLES

Units Type

Close of Escrow 11/5/2018 4 Studio



Price/SF $293.55



2008

CAP Rate 3.45%

9

132 Clay Street, Santa Cruz


SALES COMPARABLES

RENT COMPARABLES

SUBJECT PROPERTY124+206 1st Street, Santa Cruz 2

Pacific View Court – 81 Front StreetYear built: 1926

1

The Sands Apartments – 304 Cliff StreetYear built: 1930

Unit Type Units SF Avg Rent Rent/SF

Studio 8 325 $1756 5.40

1 bed/ 1 bath 3 550 2498 4.54

2 bed/1 bath 1 1250 $2835 2.27

Total/Avg. 34 669 $2,125 $3.18

Unit Type Units SF Rent Rent/SF

1 Bdr 1 Bath 8 437 $2035 4.66

2 Bdr 1 Bath 14 487 $2423 4.98

Total/Avg. 22


Studio 5 290 $1408 $4.85

1 Bdr 1 Bath 7 480 $1746 3.64

2 Bdr 1 Bath 2 675 $2503 3.71

Total/Avg. 14


SALES COMPARABLES

SALES COMPARABLES

5

221 Raymond StreetYear built:

4

711 3rd StreetYear built: 1960


1 Bdr 1 Bath 12 750 $1218 1.62

Total/Avg. 12


Studio 4 $1005 $4.85

1 Bdr 1 Bath 7 $1117 3.64

2 Bdr 1 Bath 1 $1563 3.71

Total/Avg. 14

3

Anchor Apartments – 321 2nd StreetYear built: 1966


1 Bdr 1 Bath 12 493 $850 1.72

Total/Avg. 12


RENT COMPARABLES

RENT COMPARABLES

8

324 Main Street, Santa CruzYear built: 1946

7

115 Canfield AvenueYear built: 1970

6

555 Pacific AvenueYear built: 2018

Unit TypeUnit

sSF Rent Rent/SF

Studio 1 Bath 47 440 $2,240 $5.09

1 Bdr 1 Bath 47 630 $2,800 $4.44

Total/Avg. 94 535 $2,520 $4.71

Unit TypeUnit

sSF Rent Rent/SF

Studio 1 Bath 2 323 $1,720 $5.33

1 Bdr 1 Bath 13 624 $1,870 $3.00

2 Bdr 1 Bath 2 789 $2,270 $2.88

Total/Avg. 17 608 $1,899 $3.12

Unit TypeUnit

sSF Rent Rent/SF

1 Bdr 1 Bath 9 600 $2,050 $3.42

Total/Avg. 9 600 $2,050 $3.42

Exclusively Listed byAndres LopezSenior Inves tment Assoc ia teAndres .Lopez@MarcusMi l l i chap .com


124-206 1st Street


Har mik AghakhaniAgent Cand ida teHarmik .Aghakhani@MarcusMi l l i chap .com

Eduardo CernaSenior Manag ing Direc tor Inves tmentsSenior Direc tor , na t iona l Mul t i Hous ing GroupEd.Cerna@MarcusMi l l i chap .com

Documents

124-206 1ST Street Santa Cruz, CA 95060 · Located at 124-206 1st Street in Santa Cruz, Sandcastle Apartments offers an investor the rare opportunity to own a piece of Beach Hill,