INCOME PROPERTY ORGANIZATION - LoopNet · 2019-06-03 · Income Property Organization 6421 Inkster, Suite 200 Bloomfield Hills, MI 48301 Telephone: (248) 932-0300 Fax: (248) 932-0301

CONFIDENTIAL OFFERING MEMORANDUM

INCOME PROPERTY

ORGANIZATION

Table of Contents Income Property Organization (248) 932.0300 www.incomepo.com

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INCOME PROPERTY

ORGANIZATION

Maynard Court Apartments

Pontiac, Michigan 12 units For more information contact:

Income Property Organization

6421 Inkster, Suite 200 Bloomfield Hills, MI 48301 Telephone: (248) 932-0300 Fax: (248) 932-0301 Website www.incomepo.com

Please do not under any circumstances alert the management of the marketing of the property, this will discourage the principals. The information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness, Any projections, opinions, assumptions or estimates used are for the example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors, which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. Offering is subject to errors, prior sales, lease change, withdrawal without notice, and approval of the purchase/tenant by owner. It is hereby disclosed that the broker or his agents are representing the Seller unless otherwise state.

http://www.incomepo.com/


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INCOME PROPERTY

ORGANIZATION

Offering Summary

Income Property Organization is pleased to present Maynard Court Apartments, which consists of 12 units, and is located in Pontiac, Michigan.

LOCATION:

The city of Pontiac is located in Oakland County, at the crossroads of Woodward Ave.,

M-59 and Telegraph Road, a short distance from Detroit and Flint Michigan. It is

bounded by the city of Auburn Hills to the east and north, the city of Lake Angelus to

the north, Waterford Township to the west, and Bloomfield Township to the south.

Major Employers: General Motors Corporation, St. Joseph Mercy Oakland, County of

Oakland, HP Enterprise Services, United States Postal Service, Pontiac Osteopathic

Hospital, . Skilled Trade Services, Inc, State of Michigan, Michigan Bell Telephone

Company, and Adecco USA Inc.

The median household income for Pontiac was $30,152 as of the 2014 Census estimates.

PROPERTY:

Maynard Court Apartments is located at 1 Maynard Court, which is just east of N Paddock Street and on the south side of University Drive. It is

comprised of two townhouse style buildings on a site containing 0.48 acres. They were built in 1926, and are constructed of brick with a

combination of a hi-pitch (asphalt shingles) and a flat (Rubberized-Torch Down) roof. The property contains a unit mix of twelve 1,277 ft.2 two-

bedroom one bathroom units with a walk out basement. Each apartment has its own individual hot water tank, and HVAC system, with a window

AC unit (supplied by the tenant). The tenants are responsible for their own gas and electric with the landlord being responsible for the water.

Notable for investors is the excellent LOCATION and condition of this asset. Tenants can walk to downtown Pontiac.

https://en.wikipedia.org/wiki/Auburn_Hills,_Michigan

https://en.wikipedia.org/wiki/Lake_Angelus,_Michigan

https://en.wikipedia.org/wiki/Waterford_Township,_Michigan

https://en.wikipedia.org/wiki/Bloomfield_Township,_Oakland_County,_Michigan


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INCOME PROPERTY

ORGANIZATION

FINANCIAL:

Maynard Court Apartments is performing at a high level of operations with physical occupancy at 92%. However, even in light of this stellar level

of performance upside still remains for a multifamily investor. Based on our carefully conducted rent comparable study, it was determined that

rents are below market when analyzed under the average market rents. Our study found that the two-bedroom units are $43 below market. Such

a delta provides a new owner with the unique opportunity to greatly improve this asset’s cash-flow position without making any financial

investment in the property. For example, if a new owner were to increase average rents by $25 for the two-bedroom units, it would equate to an

increase of rental income of $3,600 per year. This would increase the asset’s value by over $35K.

Pricing Summary Financial Summary

Purchase Price: $719,000 Cap Rate: 9.57%

Price Per Unit: $59,917 Gross Rent Multiplier: 6.06

Price Per Ft.2: $46.92 Average Rent: $867

Proposed First Mortgage: $539,250 Effective Gross Income: $118,560

Down Payment: $179,750 Gross Expenses: ($49,780)

Estimated Interest Rate: 5.25% Expenses Per Unit: ($4,148)

Estimated Amortization 25 Net Operating Income: $68,780

Annual Debt Service: ($38,777) Pre-Tax Cash Flow: $30,002

Debt Coverage Ratio: 1.77 Pre-Tax Return on Investment: 16.69%


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INCOME PROPERTY

ORGANIZATION

Table of Contents

Section I – Property Summary

Offering Summary ............................................................................................................................... 3-4

Table of Contents .................................................................................................................................... 5

Executive Summary ................................................................................................................................. 6

Property Photos ................................................................................................................................... 7-8

Property Photos - Aerial ......................................................................................................................... 9

Map to Complex .................................................................................................................................... 10

Section II – Financial Summary

Unit Breakdown ..................................................................................................................................... 11

Pro Forma ............................................................................................................................................... 12

Purchase & Tax Information ............................................................................................................... 13

10-Year Appreciation and IRR Outlook ............................................................................................ 14

IRR for 10-Year Hold ..................................................................................................................... 15-16

Section III – Market Summary

Rent Comparables ............................................................................................................................ 17-18

Sales Comparables ........................................................................................................................... 19-20

Demographics ........................................................................................................................................ 21


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INCOME PROPERTY

ORGANIZATION

Executive Summary

General Information Building Information

Address: 1 Maynard Court Total Units: 12

Cross Streets: University Drive & E Huron Street Year Built: 1926

County: Oakland County Building Size ( Ft.2

): 15,324

Occupancy: 92% Leasable Ft.2 : 15,324

Pre-Leased Occupancy: n/a Foundation: Concrete Slab

Tenant Base: Working/Medium Income Exterior: Brick

Parcel Number: Multiple Parcel ID Style: Townhome

Zoning: R1 Number of Buildings: 2

Site Acreage: 0.48 Number of Stories: 2.0

Parking: Ample Parking Roof: Hi-Pitch (Asph.) & Flat (Rub.-Torch Down)

Laundry Facilities: In-Unit Hookup Patio/Balconies: Balconies

Amenities Heating: Individual, Gas-Forced Air

Dishwashers: No Cooling: Window Units (Tenant Supplied)

On-Site Office: No Water / Sewer: Landlord-Paid

Clubhouse: No Provider: City Water

Swimming Pool: No Electricity: Tenant-Paid

Fitness Center No Provider: DTE

Playground: No Natural Gas: Tenant-Paid

Newly Renovated: No Provider: DTE


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ORGANIZATION

Property Photos – Exterior


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INCOME PROPERTY

ORGANIZATION

Property Photos – Interior


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INCOME PROPERTY

ORGANIZATION

Property Photos - Aerial

If viewing this file on your computer, click the 360° icon to load an interactive street

level view of Maynard Court Apartments.

Internet Connection Required.

https://www.google.com/maps/@42.6447064,-83.2795736,3a,75y,126.59h,93.35t/data=!3m6!1e1!3m4!1sVxO437cZRa6lI2HCziE5Jg!2e0!7i13312!8i6656


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INCOME PROPERTY

ORGANIZATION

Map to Complex


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Unit Breakdown

IPO is utilizing rents based on current average rents, which have been supported by our Rental Comparison. Click here to be taken to the Rental Comparison.

Unit Breakdown

2 Bed / 1 Bath Town Home

Type UnitsAverage

Ft² +/-

Average

Rent$ /FT.²

Market

Rent$ /FT.²

Annual

Income

2 Bed / 1 Bath 12 1,277 $809 $0.63 $900 $0.70 $116,496

Total 12 15,324 $809 $0.63 $900 $0.70 $116,496

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Re

nt

/ FT

² /

Mo

nth

Re

nt

/ M

on

th

Unit Rent

Market Rent $ /FT.²


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Pro Forma

Income & Expenses

Information deemed reliable- not guaranteed. We

cannot assume responsibility for its accuracy. Any

assumptions, estimates, opinions or projections

used here within are for example purpose only and

do not represent the current or future

performance of the property.

Footnotes:

The Gross Potential is based on average market rents and applies a vacancy factor that is consistent with historical levels and mindful of market averages.

Operating expenses are market-rate expenses for apartment properties in the Detroit MSA, per annual IREM surveys, and our experience in underwriting like-kind properties.

Taxes have been adjusted to reflect a sale and have been increased to the SEV. Additionally, IPO has included a 1.0% administration fee.


Income & Expense 12

Pro Forma Budget Units

Income: Year-One Year-Two

Gross Potential: 116,496$ 129,600$

Vacancy: 5.0% (5,825) (6,480)

Adjusted Gross: 110,671 123,120

Other Income: 0

Gross Operating Income: 110,671$ 123,120$

Expenses:

Administrative/Operating: Expenses Yr. 2 - Expenses Per unit

Adv, Payroll, Prof. & Admin. 2,500$ 2,575$ 215$

Management Fee 5.00% 5,534$ 6,156$ 513$

Maintenance:

Repair & Maintenance 16,000$ 16,480$ 1,373$

Utilities:

Gas & Electric & Water & Sewer 7,000$ 7,210$ 601$

Fixed:

Insurance - Property & Liability 5,124$ 5,278$ 440$

Property Tax 13,228$ 13,625$ 1,135$

Total Operating Expense: (49,386)$ (51,324)$ (4,115)$

Net Operating Income: 61,285$ 71,796$


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Purchase & Tax Information

Purchase Price: $719,000

Terms: Cash to New Mortgage

The above mortgage information is for example purposes only.

Assessor Data

True Cash Value 464,780$

SEV 232,390$

Taxable Value 230,140$

Non-Homestead Millage 0.05635910

Land 30,000$

Parcel ID Multiple Parcel ID

Purchase Price: $719,000

Down Payment: 25.00%

Treasury Bills Date (10yr): 3.00%

Bank Basis Points: 2.25%

Amortization: 25

Initial Cash (Down Payment): $179,750

Mortgage

Mortgage: (PV) 539,250$

Interest Rate: 5.25%

Monthly ($3,231.44)

Annually ($38,777.32)

Pertinent Indicators

Cap Rate: (Potential) 8.52%

Price paying (Per Sq. Ft.): 46.92$

Price per unit 59,917$

Gross Rent Multiplier 6.50

Expenses per unit (4,115)$

Expense to Income ratio 44.62%

Income per unit (Monthly) 768.55$

Average Sq. Ft. (Per Unit) 1,277

Debt Service Coverage 1.58

Cash Flow (BT) 22,508$

ROI YR.1 (BT) 12.52%


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10-Year Appreciation and IRR Outlook

Income Increase 3.00%

Expense Increase 3.00%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

INCOME 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%

Gross Potential: 116,496 129,600 133,488 137,493 141,617 145,866 150,242 154,749 159,392 164,173 169,099

Vacancy & Bad Debt: (5,825) (6,000) (6,180) (6,365) (6,556) (6,753) (6,955) (7,164) (7,379) (7,600) (7,828)

Adjusted Gross: 110,671 123,600 127,308 131,128 135,062 139,113 143,287 147,585 152,013 156,573 161,271

Misc.: 0 0 0 0 0 0 0 0 0 0 0

EFFECTIVE GROSS INC.: 110,671 123,600 127,308 131,128 135,062 139,113 143,287 147,585 152,013 156,573 161,271

EXPENSES: 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%

Administrative: 8,034 8,275 8,523 8,778 9,042 9,313 9,592 9,880 10,177 10,482 10,796

Maintenance: 16,000 16,480 16,974 17,484 18,008 18,548 19,105 19,678 20,268 20,876 21,503

Utilities: 7,000 7,210 7,426 7,649 7,879 8,115 8,358 8,609 8,867 9,133 9,407

Fixed: 18,352 18,903 19,470 20,054 20,656 21,275 21,914 22,571 23,248 23,946 24,664

Total Expense: 49,386 50,867 52,393 53,965 55,584 57,252 58,969 60,738 62,560 64,437 66,370

NET OPERATING INC. 61,285 72,733$ 74,915$ 77,163$ 79,477$ 81,862$ 84,318$ 86,847$ 89,452$ 92,136$ 94,900$

Appreciation 15.74% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91%

% 1st Mort or Assumption (28,055) (27,478) (26,871) (26,230) (25,556) (24,844) (24,095) (23,306) (22,473) (21,597)

% 2nd Mort 0 0 0 0 0 0 0 0 0 0

Cost recovery Imp. 24,458$ 24,458$ 24,458$ 24,458$ 24,458$ 24,458$ 24,458$ 24,458$ 24,458$ 24,458$

R.E. Taxable Inc. 8,772$ 20,797$ 23,587$ 26,474$ 29,464$ 32,559$ 35,765$ 39,084$ 42,521$ 46,082$

Tax Liability % 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%

Tax Liability $ 3,070$ 7,279$ 8,255$ 9,266$ 10,312$ 11,396$ 12,518$ 13,679$ 14,882$ 16,129$

CFBT $22,508 $33,956 $36,138 $38,385 $40,700 $43,084 $45,540 $48,070 $50,675 $53,359

(R.O.I.) Cash on Cash (BT) 12.52% 18.89% 20.10% 21.35% 22.64% 23.97% 25.34% 26.74% 28.19% 29.68%

CFAT $19,438 $26,677 $27,882 $29,119 $30,388 $31,689 $33,023 $34,390 $35,793 $37,230

(R.O.I.) Cash on Cash (AT) 10.81% 14.84% 15.51% 16.20% 16.91% 17.63% 18.37% 19.13% 19.91% 20.71%

Cost Recovery Data

Value $464,780

Land $30,000

Improvment% 6.45%

Imp. Value @ Sale 672,591$

C. R. Method Straight line

Useful Life 27.5

In Service 1-Jan

0.00%

10.00%

20.00%

30.00%

Per Year Basis

10 Year ROI Outlook


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IRR for 10-Year Hold

IRR Calculation of adjusted basis Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Basis at acquisition 719,000 719,000 719,000 719,000 719,000 719,000 719,000 719,000 719,000 719,000

+ Capital Additions 0 0 0 0 0 0 0 0 0 0

- Cost Recovery (Depreciation) Taken 24,458 48,916 73,374 97,831 122,289 146,747 171,205 195,663 220,121 244,579

- Basis in Partial Sale 0 0 0 0 0 0 0 0 0 0

= Adjusted Basis at sale 694,542 670,084 645,626 621,169 596,711 572,253 547,795 523,337 498,879 474,421

Calculation of excess cost recovery

Total cost recovery taken 24,458 48,916 73,374 97,831 122,289 146,747 171,205 195,663 220,121 244,579

- Straight line cost recovery 24,458 48,916 73,374 97,831 122,289 146,747 171,205 195,663 220,121 244,579

= Excess Cost recovery 0 0 0 0 0 0 0 0 0 0

Current Cap Rate*Next Year NOI=Future Price

Calculation of Capital Gain On Sale

Sale Price 853,304 878,903 905,270 932,429 960,401 989,213 1,018,890 1,049,457 1,080,940 1,113,368

Cost of Sale 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%

- Commission 42,665 43,945 45,264 46,621 48,020 49,461 50,944 52,473 54,047 55,668

- Adjusted Basis at Sale 694,542 670,084 645,626 621,169 596,711 572,253 547,795 523,337 498,879 474,421

- Participation Payments 0 0 0 0 0 0 0 0 0 0

= Total Gain 116,097 164,874 214,380 264,639 315,671 367,500 420,150 473,647 528,014 583,279

- Excess Cost recovery 0 0 0 0 0 0 0 0 0 0

- Suspended Losses 0 0 0 0 0 0 0 0 0 0

= Gain or Loss 116,097 164,874 214,380 264,639 315,671 367,500 420,150 473,647 528,014 583,279

- Straight Line Cost Recovery 24,458 48,916 73,374 97,831 122,289 146,747 171,205 195,663 220,121 244,579

= Capital Gain from Appreciation 91,639 115,958 141,007 166,807 193,381 220,753 248,945 277,984 307,893 338,700

Calculation of Sale Proceeds After Taxes

Sale Price 853,304 878,903 905,270 932,429 960,401 989,213 1,018,890 1,049,457 1,080,940 1,113,368

- Cost of Sale 42,665 43,945 45,264 46,621 48,020 49,461 50,944 52,473 54,047 55,668

- Participation Payments 0 0 0 0 0 0 0 0 0 0

- Mortgage Balances 528,528 517,229 505,322 492,775 479,554 465,621 450,938 435,467 419,163 401,982

2nd Mort Balance 0 0 0 0 0 0 0 0 0 0

Total Mort. Balance 528,528 517,229 505,322 492,775 479,554 465,621 450,938 435,467 419,163 401,982

= Sales Proceeds Before Tax 282,111 317,729 354,685 393,032 432,828 474,132 517,007 561,517 607,730 655,718

35% Tax (Savings) Ordinary Income @

25% Tax on Straight Line Recapture @ 6,114 12,229 18,343 24,458 30,572 36,687 42,801 48,916 55,030 61,145

15% Tax on Capital Gain @ 13,746 17,394 21,151 25,021 29,007 33,113 37,342 41,698 46,184 50,805

= Sales Proceeds After Tax 262,251 288,107 315,190 343,553 373,248 404,332 436,864 470,904 506,516 543,768


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INCOME PROPERTY

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IRR for 10-Year Hold

Year Internal Rate of Return Amount

0 Down Payment $179,750 $179,750 $179,750 $179,750 $179,750 $179,750 $179,750 $179,750 $179,750 $179,750

1 CFAT Year 1 281,689 19,438 19,438 19,438 19,438 19,438 19,438 19,438 19,438 19,438

2 CFAT Year 2 56.71% 314,783 26,677 26,677 26,677 26,677 26,677 26,677 26,677 26,677

3 CFAT Year 3 37.85% 343,073 27,882 27,882 27,882 27,882 27,882 27,882 27,882

4 CFAT Year 4 31.85% 372,672 29,119 29,119 29,119 29,119 29,119 29,119

5 CFAT Year 5 28.78% 403,636 30,388 30,388 30,388 30,388 30,388

6 CFAT Year 6 26.84% 436,021 31,689 31,689 31,689 31,689

7 CFAT Year 7 25.48% 469,886 33,023 33,023 33,023

8 CFAT Year 8 24.46% 505,294 34,390 34,390

9 CFAT Year 9 23.64% 542,309 35,793

10 CFAT Yr 10+Sale Proceeds After Tax 22.98% 580,999

22.42%

IRR 56.71% 37.85% 31.85% 28.78% 26.84% 25.48% 24.46% 23.64% 22.98% 22.42%

Cash on Cash (AT) 10.81% 14.84% 15.51% 16.20% 16.91% 17.63% 18.37% 19.13% 19.91% 20.71%

CoC (AT)& Equity Buildup 12.07% 17.35% 19.26% 21.18% 23.12% 25.07% 27.04% 29.02% 31.02% 33.04%

Equity Build Up 1.26% 2.51% 3.75% 4.98% 6.22% 7.44% 8.67% 9.89% 11.11% 12.33%

0%

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0%

5%

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15%

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1 2 3 4 5 6 7 8 9 10

Cash on Cash (AT) CoC (AT)& Equity Buildup IRR


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Rent Comparables

Our rental survey takes into account comparable properties located within a 1.01-miles radius of


Address Utilities 2-Bed Ft.² $ / Ft.²

Cornerstone Townhomes 957 N Perry St, Pontiac W, H $699 850 $0.82

Oakland Hills Townhomes 639 Balboa Pl, Pontiac W $825 950 $0.87

Beacon Square Apartments 101 Mechanic St, Pontiac W $884 840 $1.05

Lafayette Place Lofts 151 Lafayette St, Pontiac W $1,000 1,000 $1.00

Low: $699 840 $0.82

High: $1,000 1,000 $1.05

Average: $852 910 $0.94

Subject Property 2-Bed Ft.² $ / Ft.²

Maynard Court Apartments W $809 1,277 $0.63

At Average $/Ft.² $1,195

$386 $0.30

$43

Property

Above / Below Market at Average $/Ft.²

Above / Below Market Average Rent:

1.

4.

3.

2.


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Rent Comparables – Map

Our rental survey takes into account comparable properties located within a 1.01-mile radius of

Sharon Estates Apartments.


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Sales Comparables

Units Purchase Price Per Unit Date Closed

5941 Hatchery Road 8 $478,250 $59,781 Nov-17

Waterford, MI

Map Reference: 1

Holcomb Road Apartments Units Purchase Price Per Unit Date Closed

101 N Holcomb Road 9 $600,000 $66,667 Oct-18

Clarkston, MI

Map Reference: 2

Bloomfield Lakes Units Purchase Price Per Unit Date Closed

2920 Schroeder Blvd 27 $1,550,000 $57,407 Dec-17

Keego Harbor, MI

Map Reference: 3

Summit View Apartments Units Purchase Price Per Unit Date Closed

131 Summit View Court 4 $325,000 $81,250 Sep-18

White Lake, MI

Map Reference: 4

Sold Low: 4 $325,000 $57,407 Nov-17

Sold High: 27 $1,550,000 $81,250 Oct-18

Sold Average: 12 $738,313 $66,276 Apr-18

Hatchery Road Apartments


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Sales Comparables - Map


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Demographics

Source: US Census & Citydata.com (Click here for access the US Census overview of this market)

Population & Economics Pontiac Michigan

Population - 2017 Estimate 59,792 9,928,300

Population - 2010 59,633 9,884,129

Population, Percent Change 2010-2017 0.3% 0.4%

Persons under 5 years 8.4% 6.0%

Persons under 18 years 26.4% 23.7%

Retail Sales Per Capita (2012) $6,892 $10,855

Accommodation and Food Service Sales ($1000) $76,281 $17,962,356

Geographic Facts Pontiac Michigan

Land Area in Square Miles 19.97 56,538.90

Persons per Square Mile (2010) 2,980.1 174.8

Households & Education Pontiac Michigan

Occupied Housing Units 23,225 4,532,233

Owner-Occupied 43.7% 70.8%

Rener Occupied 56.3% 29.2%

Mean Household Income $30,152 $50,803

Per Capita Income $16,610 $27,549

Persons per Household 2.49 2.51

High School Graduate or Higher 78.6% 88.9%

Population % Enrolled in College 12.1% 29.5%

2016 Average Home Value Pontiac Michigan

$53,700 $147,100

https://factfinder.census.gov/faces/nav/jsf/pages/community_facts.xhtml

Documents

INCOME PROPERTY ORGANIZATION - LoopNet · 2019-06-03 · Income Property Organization 6421 Inkster, Suite 200 Bloomfield Hills, MI 48301 Telephone: (248) 932-0300 Fax: (248) 932-0301