The Apartment Association of North Alabama (AANA) December ...aanahq.org/resources/Documents/HuntsvilleMarketReview2019.pdf · 2 Huntsville Place (student) West B 84 2008 1,250 02/21/19

MultifamilyMarket Overview

HUNTSVILLE, ALABAMA

Presented to:

The Apartment Association of North Alabama (AANA)

December 19, 2019

By: David Wilson, MAI

§ Market Fundamentals

§ New Construction

§ Renovations

§ Transaction Activity

TOPICS TO COVER TOPICS TO COVER

MARKET FUNDAMENTALS

Market Fundamentals

Source: Axiometrics

Record-Setting Effective Rent Growth – 5.9%+ for 3 Straight YearsHighest Occupancy Rate, EVER - at 97.7%

a Berkshire Hathaway and Jeffries Financial Group Company

Huntsville Area Rent & Occupancy Trends

Most Recent Survey Attributes

Total Properties: 105Total Units: 19,100Average Year Built: 1993Average Unit Size (SF): 959

Source: Axiometrics


Average Occupancy: 97.74%Average Effective Rent: $867Average Eff. Rent/SF: $0.90

Source: Axiometrics


Huntsville Area Concession Trends


Average Concession: $17.00Average % of Rent: 2%

Source: Axiometrics


1Q15 to 1Q18

Class A | Rent & Occupancy Trends

Most Recent Survey AttributesAverage Occupancy: 91.0%Average Effective Rent: $1,180Average Eff. Rent/SF: $1.14

Source: Axiometrics

Most Recent Survey AttributesTotal Properties: 18Total Units: 4,113Average Unit Size (SF): 1,032

Source: Axiometrics


Class A Concession Trends


Conclusion - Market Fundamentals

§ Best Apartment Market Fundamentals in Over 25 Years

§ Highest Sustained Occupancy Pattern – 94%+ for 3 Years Running

§ Since Records Have Been Kept (25 Years)

§ Record-Setting Effective Rent Growth

§ Sustained High Growth for Past 3 Years

§ Highest in 25 Years

§ Low Concession Usage


NEW CONSTRUCTION

New Unit Delivery History | Huntsville/Madison

Source: David Wilson, MAI

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-F 2020-F 2021-FAffordable 208 0 0 80 0 112 0 86 64 56 0 80 128 60 0 80 56 0Conventional 655 355 72 160 860 781 644 0 189 538 557 818 708 750 142 777 1,372 1,451

0

200

400

600

800

1,000

1,200

1,400

1,600

NEW UNIT DELIVERIES - HISTORY & FORECASTHuntsville/Madison, Alabama

as of Dec 15, 2019(Forecast is based only on Projects Currently Under Construction)

Conventional Affordable


Under Construction as of December 2019


Lease-Up Recently Completed | SE HuntsvilleDeveloper Sealy Realty

(Huntsville/Tuscaloosa)

Location Highway 431 (Over the Mountain)

1st Deliveries 40 units on May 6, 2019

Completion August 2019

Stabilization September 2019

Units 172

Unit Mix Studios, 1, 2 and 3 bedroom

Avg Unit Size 893 sf

Average Rent $937

Avg Rent / SF $1.05

Features

9-Foot Ceilings (Some Cathedral)Granite CountertopsStainless AppliancesVinyl Plank Flooring (Living Areas)Mountain Views

THE HEIGHTS AT MONTE SANO

Stabilized in 5 Months(Average Absorption – 32+ Units Per Month)


In Lease-Up | West HuntsvilleDeveloper Watermark Residential (Indiana)

Location Bridge Street Town Centre

1st Deliveries March 2019 (120 units; Building 1)

Completion July 2019 (124 units; Building 2)

Units 244

Unit Mix 1, 2 and 3 bedroom

Avg Unit Size 993 sf

Average Rent $1,500

Avg Rent / SF $1.50

Occupancy

Features

4-Sty Elevator (open-air corridors)Surface Parking9-Foot Ceilings (10’ Ground Floor)Granite CountertopsStainless Appliances46 Detached Garages

WATERMARK AT BRIDGE STREET TOWN CENTRE

Pace of Absorption – 20+- Units Per Month


In Lease-Up & Under Construction | West HuntsvilleDeveloper Nashville developer

Location Across Creek from Village at Providence

1st Deliveries 10+- units in February 2019

Completion To be Determined – Likely 2022

UnitsPhase 1 - 178 (60+- delivered)Phase 2 – 222 unitsTotal – 400 units

Unit Mix 1 and 2 bedroom

Unit Sizes 1 bedrooms – 700 to 800 sf2 bedrooms – 900 to 1,300 sf

Rental Rates $1,400 to $2,995 range

Rent / SF $1.90+ (“base” rent)

Occupancy Effectively 100% on delivered units

Features

Back or Side Door to Patio/PorchFront and Back YardsFenced Yards (optional)Clubhouses, Pools, FitnessOperates as Apartments

VIRTUSO LIVING (PHASE 1 - 178 UNITS)

All One-Story – “Housements”Some Fully Detached Houses; Some “Duplex” Style

Modular Construction with Class A Finishes


In Lease-Up & Under Construction | SE Huntsville

LEGACY AT JONES FARM – PHASE 2 Total Units 173 in Ph. 2 (Ph. 1 is 248 units)

Location Jones Valley

Type Suburban Elevator

Parking Surface

1st Deliveries October 2019

Final Completion November 2019

Avg “Base” Rent$1.15 to $1.55 psf (range)$995 to $1,750 per mo (range)

Cool FeaturesElevatorsAir-Conditioned CorridorsGreat Views

Developer Jones family (Huntsville)Killer Pools (2) and Clubhouse

Best-In-Class Quality/Finishes


Conclusion – Active ConstructionThree Properties in Lease-Up

§ One Finishing-up (Watermark at Bridge Street)§ One Just Getting Started (Legacy at Jones Farm II)§ One Well Underway (Virtuoso Living)

§ New Construction Deliveries Have Been at Slow Pace§ Allowing for Strong Rent Growth Setting New Limits for Achievable Rents§ Fewer Concessions Due to Healthy Conditions and Limited New Supply

§ The Active New Construction Is Diverse§ Some Fringe Locations§ Two Class B+/A- Projects (Chase Creek and Revere at River Landing)§ One Modular Project (Virtuoso Living)


Future Starts


Mixed-Use Projects

§ Towne Madison – Madison South

§ CityCentre - Downtown

§ Constellation - Downtown

§ MidCity – West Huntsville

§ Clift Farm – Madison North

§ The Villages at Oak Springs – Madison West


Multifamily in Mixed-Use – Madison

TOWNE MADISON Total Units 274

Location I-565, between Zeirdt Road and Wall Triana Hwy

Type 4-Story Elevator

Parking Surface

Start May/June 2018

1st Deliveries Early-2020

Avg Rent Confidential

Cool Features Expansive Pool Courtyard

Master Developer Louis Breland

Multifamily Developer Tynes Development (Birmingham)Part of 500-Acre Mixed-Use Site

Retail/Restaurants, Office, Hotels, Multifamily, Single-family, Baseball Stadium, Parks


Progress Photo Station at Town Madison

(Dec. 2019)

Progress Photo The Avenues at Madison

(Dec. 2019)

Multifamily in Mixed-Use – Downtown Huntsville

THE ECLIPSE Apartment Units 278

Location Williams Avenue Across From Embassy Suites


Parking Structured

Start November 2019

1st Deliveries To Be Determined

Avg Rent Confidential – Pushing $2.00/sf

Cool Features Great Views of Big Spring ParkVery Walkable to Publix

Master Developer RCP Companies (Huntsville)

Multifamily Developer Spring Bay Property Co. (FL) Part of Mixed-Use - AC Marriott Hotel Opened April 2019

Future Retail/Restaurants and Office


Part of Mixed-Use – Adjacent to Research Park

ENCORE MIDCITYApartment Units 232

Location Corporate Drive – in MidCity

Type 5 Story, Elevator

Parking Structured

Start 4Q 2019

1st Deliveries 2021


Cool FeaturesBest-in-Class FinishesOn-Site Restaurant / FitnessOn-Site Medical OfficeSuper Walkable

Multifamily Developer Compass Real Estate (Atlanta)

Age 55+ Independent Living (No Assisted or Memory Care)

Will Be Huntsville’s Premier Independent Living

Part of 140-Acre Mixed Use Project


Part of Mixed-Use – Adjacent to Research Park

MIDCITYApartment Units 298 (Phase 1)

Location University Drive / Research Park Boulevard

Type 4-5 Story, Elevator

Parking Structured

Start 1Q 2020 Expected

1st Deliveries 2021

Avg Rent Pushing $2.00/SF

Cool Features

Best-in-Class FinishesGreat ViewsSuper WalkablePartially Over Retail

Master Developer RCP Companies (Huntsville)

Multifamily Developer RCP Companies & Partners

Part of 140-Acre Mixed Use Project

Retail/Restaurants, Music Venues, Office, Hotels, Multifamily, Residential Condos, 38-Acre Park with 8,500-Seat Amphitheater


Multifamily in Mixed-Use – Downtown Huntsville

CONSTELLATION Total Units 219

Location Memorial Parkway / Clinton Ave


Parking Structured

Start Early 2020 Expected

1st Deliveries To Be Determined


Cool Features Edgy ArchitectureRooftop Pool & Amenity Area

Master Developer Scott McLain, CCIMPart of 19-Acre Site

Retail/Restaurants, Office, Hotels, Multifamily


Side Note – Severe Single-Family Housing Shortage

§ 1,028 Homes in Inventory as of Nov. 2019§ Down 34% from 12 Months Prior§ Lowest Level Since Records Have Been Kept§ 1.7-Month Inventory – 4 to 7 Months is Typical

§ Average Sale Price is at All-Time High ($258,802) – up 9.4% from 12 Months Prior§ Days on Market at Historic Lows (36 days as of Nov.) – down 20% from 12 Months Prior§ Multiple Offers Day 1, at or Above Full Asking Price Common in Desirable Areas with Under $300,000 Prices

§ 3,000 Single-Family Starts (T12 Period End Nov. 2019 for all Areas in Madison County)§ 2,500 is 5-Year Average | 2,678 in 2018


Conclusion – New Construction§ New Apartment Unit Deliveries in 2018 Were at a 6-Year Low (142 units)

§ Led to Boost in Occupancy and Very Strong Rent Growth due to Strong Demand

§ 777 Conventional Units Forecast to be Delivered for 2019 per our Research

§ 2020 Deliveries Should be at Least 1,375 Units (2,740+ Units Are Already Underway)

§ New Deliveries in 2021 Likely at 30-Year High (Possibly 2,250+ Units) - But so is Job Growth

§ Single-Family Housing Inventory is at 30-Year Low – Good for Multifamily; Very Strong Housing Demand

§ Rising Construction Costs, Rising Interest Rates and New Deliveries Will Throttle Pace of Starts

§ History Will Hold True - The Robust Pipeline Will Take Years to Come to Market, and Some Won’t


RENOVATIONS

Significant Renovations

RENOVATION EVERYWHERE

TOO MANY TO TALK ABOUT


TRANSACTIONS

Sales Summary | 2019(60+ Unit Properties)

# Property Name Area

Asset

Class Units Built

Average

Unit Size Date of Sale Sale Price Price/Unit Price/SF

1 Arch Street West A 267 2009 962 10/30/19 $42,300,000 $158,427 $164.68

2 Huntsville Place (student) West B 84 2008 1,250 02/21/19 $12,600,000 $150,000 $120.00

3 Fern Parc SE B 342 1975 967 09/10/19 $27,450,000 $80,263 $83.01

4 Stone Crossing Huntsville B- 276 1986 733 12/13/19 $18,100,000 $65,580 $89.44

5 Governors House West B- 146 1979 894 02/21/19 $9,200,000 $63,014 $70.52

6 Silver Stone SW C 104 1979 842 11/13/19 $5,535,000 $53,221 $63.18

7 Tara Garden West B- 155 1979-1993 447 07/31/19 $7,600,000 $49,032 $109.72

8 Madison Pines Madison B- 91 1990 1,245 08/13/19 $3,927,347 $43,158 $34.67

9 Park at Redstone (LIHTC) SW C 112 1955 900 04/30/19 $3,925,000 $35,045 $38.94

10 North Ridge West C- 390 1962 1,019 07/29/19 $12,500,000 $32,051 $31.46

TOTALS/AVERAGES 1,967 912 $143,137,347 $72,769 $79.81


Arch StreetOld Madison Pike & Slaughter LaneCity of Huntsville, AL 35758

Year BuiltNumber of UnitsAverage Unit SF

Sale DateSale PricePPUPPSFCAP

2009267962

10/30/2019$42,300,000

$158,427$164.68Sub 6%

RECENT SALE

CLASS A- in West Huntsville

Purchased Off-Market by Adjacent OwnerHighest Price Per Unit

Ever Achieved in Huntsville


Tara GardenOld Madison PikeHuntsville, AL 35806

Year BuiltNumber of UnitsAverage Unit SF

Sale DateSale PricePPUPPSFCAP

1979 - 1993155447

07/31/2019$7,600,000

$49,032$109.72Sub 6%

RECENT SALE

CLASS B- in West Huntsville

Mostly Studio Units - All with Thru Wall HVAC - Major Renovation Planned

Highest Price Per SF Ever For Class B ProductBerkadia Brokered Sale


Major Transformative Sale

North Ridge/Continental – University Drive

• Assemblage of Two Troubled Apartment Properties

• 390 Unit Class D Product (North Ridge) – Slated for $20,000/unit Renovation

• 50 Unit 100% Vacant Class D (Continental) – Slated for $40,000/Unit Renovation

• On 40+ Acres, Has Been Source of Major Problems Along Corridor

• Very Convenient / Central Location – Renovations Will Help Elevate Entire Immediate Area


Major Assemblage Now Complete

Hunters Ridge – Southeast Huntsville (i.e., Golf Road Area)

• Fragmented Ownership of Tax-Shelter 1980’s Properties Was Cause of Downward Spiral of

This Very Convenient Neighborhood for Decades

• Assemblage of Numerous 16 and 24-Plex Properties Built in 1980’s Now Complete

• Ownership of All Apartments in This Area (Over 1,100 Units) Now In Hands of Only 3 Owners

• Major Renovations Underway – Improving Resident Profile – Rising Rents


Conclusion – Transactions

§ Relatively Few Large-Property Transactions Over Past Year

§ Record-Setting Prices

§ Breaking the $150,000/Unit Barrier (Arch Street at $158,427/unit)

§ Previously Haven’t Had The New Product Come To Market

§ Aggressive Capital Chasing Few Deals in Economy Gaining Momentum

§ Investor Interest in Huntsville is Very Strong and Growing

§ A Great Time to Sell


THE ALABAMA TEAM

AMY LYNTONTransaction Manager

ALABAMA SUPPORT TEAM

CHRISTINA MCDONALDProject Manager

MORTGAGE BANKING

TOM GENETTIBerkadia Mortgage

DAVID OAKLEYSenior Managing Director

CALEB FRIZZELLAssociate Director

DAVID WILSON, MAISenior Director

JAY BRILEYAssociate Director

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