offering memorandum - loopnet · san marco is a historical 24 unit apartment asset located in the...

SAN MARCOPortland, OR

Offering Memorandum

SAN MARCO

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EXECUTIVE SUMMARY

OFFERING SUMMARY

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

Hyster and Yale 7,800

Portland Adventist Medical Center 6,545

VA Portland Health Care System 6,000

OHSU 5,915

School District 1 Multnomah County 5,385

Hertz 4,319

Daimler Trucks North Amer LLC 4,277

Providence Medical Center 3,600

Portland State University 3,434

KC Distance Learning Inc 2,887

Coho Distributing LLC 2,600

Portland VAMC 2,500

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2016 Estimate Pop 23,086 210,784 424,241

2010 Census Pop 20,639 193,536 393,973

2016 Estimate HH 13,196 106,010 194,895

2010 Census HH 11,693 96,493 179,831

Median HH Income $36,045 $54,403 $56,827

Per Capita Income $34,568 $42,143 $38,112

Average HH Income $57,398 $82,669 $81,854

UNIT MIX

NUMBER OF UNITS UNIT TYPE APPROX. SQUARE FEET

12 Double Studio / One Bathroom 460

12 One Bedroom / One Bathroom 460

24 Total 11,040

VITAL DATA

Price $4,400,000 CURRENT YEAR 1

Down Payment 45% / $1,980,000 CAP Rate 4.49% 5.52%

Loan Amount $2,420,000 GRM 15.08 12.78

Loan Type Proposed New Net Operating Income $197,494 $242,919

Interest Rate / Amortization

4.60% / 30 YearsNet Cash Flow After Debt Service

2.46% / $48,622 4.75% / $94,047

Price/Unit $183,333 Total Return 4.40% / $87,123 6.79% / $134,357

Price/SF $398.55

Number of Units 24

Rentable Square Feet 11,040

Number of Buildings 1

Number of StoriesThree Above Ground One Story Basement

Year Built 1909

Lot Size 0.11 acre(s)

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OFFERING SUMMARY

▪ Twenty-four Units Built in 1909

▪ Sought After Brick Construction

▪ Desirable Kerns Neighborhood of Portland, Oregon's Eastside

▪ Walkscore of 88 "Very Walkable"

▪ Close Proximity to Significant Infill Development

INVESTMENT HIGHLIGHTS

San Marco is a historical 24 unit apartment asset located in the close-in, east-side, Kerns neighborhood of Portland. The Kerns neighborhood is one of

Portland's most popular due to it’s central location and proximity to downtown Portland. It is convenient to Interstates 5, 405, 84, and 26, and offers easy access

to Portland's extensive public transit system via both multiple bus lines and the Max light rail, just blocks away. The property itself achieved a Walkscore of 88,

deeming the location to be a 'Very Walkable‘ as it is surrounded by many restaurants, bars, shops, coffee houses, and grocery stores. There is plenty of

greenspace to enjoy at Buckman Field Park which offers a playground and sports fields. The planned development of the area (including additional residential

and retail projects) will continue to build and establish the Kerns community. San Marco is poised to attract and retain a variety of tenant profiles, from urban

professionals to young families seeking a close-in, convenient residential neighborhood setting.

Portland's apartment market ended the year at approximately three percent vacancy (a decrease of sixty basis points from last year) making it one of the lowest

in the country. The immediate area surrounding the subject property has exhibited extremely high historical occupancy. Rents will show an increase year-over-

year of almost seven percent. This property is ideal for an investor seeking steady income, low-vacancy, and predictable cashflow growth as the Portland

market continues support these rent increases.

INVESTMENT OVERVIEW

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SAN MARCO

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OFFERING SUMMARY

PROPERTY OVERVIEW

Constructed in 1909, the San Marco apartments are comprised of 12 one-bedroom/one-bathroom apartments

and 12 double studio apartments. This three story building sits on a 0.11 acre lot, includes 11,040 square feet of

rentable space and is zoned EX which allows for a variety of uses. Each unit is approximately 460 square feet

and includes beautiful hardwood floors and checker board tile in the kitchens. Each kitchen is spacious enough

to allow for a small dining table and many have updated cabinetry. The two floorplans offer a central living area

attached to a second room that is separated by glass-front French doors. The second room in the one-bedroom

floorplans includes a window where in the double studios this is not included. Aside from this, the layouts are very

similar in their spacious nature. There is also a large full basement with ample storage space and potential for

future development.

Three of the floors have identical layouts with eight units on each. The individual entries to the apartments are

dispersed so as to minimize congestion. The one-bedrooms are corner units and enjoy substantial natural light

via upgraded windows in the kitchen, living area, and bedroom. The double studio units are interior (with only

one exterior wall) but have surprisingly large kitchens with ample areas for storage or dining.

San Marco is a well maintained building with upgraded plumbing, electrical, and windows. Tenants enjoy access

to a laundry facility in the basement and bicycle storage. A secured access entry solidifies the safe and

comfortable environment afforded to the tenants of San Marco.

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▪ On-Site Laundry Facility

Common Area Amenities

▪ Basement Bicycle Storage

▪ Secured Entry Access

▪ Uncrowded - Only 8 Units Per Floor

▪ Hardwood and Checkerboard Tile Flooring

Unit Amenities

▪ Large Upgraded Windows

▪ Eat-In Kitchens

▪ Ceiling Fans in Select Units

▪ Clawfoot Tubs in Select Units

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KITCHEN PHOTOS

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▪ Eat-In Kitchens



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LIVING ROOM PHOTOS

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▪ Eat-In Kitchens



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HALLWAY PHOTOS

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▪ Eat-In Kitchens



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BATHROOM PHOTOS

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BASEMENT PHOTOS

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PROPERTY SUMMARY

OFFERING SUMMARY

PROPOSED FINANCING

First Trust Deed

Loan Amount $2,420,000

Loan Type Proposed New

Interest Rate 4.60%

Amortization 30 Years

Loan Term 7 Years

Loan to Value 55%

Debt Coverage Ratio 1.33

THE OFFERING

Property San Marco

Price $4,400,000

Property Address 810 NE Couch St,Portland,OR

Assessors Parcel Number

1N1E35CB 06800

Zoning EX - Central Employment

SITE DESCRIPTION

Number of Units 24

Number of Buildings 1

Number of Stories 3 Above Ground, One Story Basement

Year Built/Renovated 1909

Rentable Square Feet 11,040

Lot Size 0.11 acre(s)

Type of Ownership Fee Simple

Density Medium

Parking On-Street Only

Landscaping Minimal

Topography Level

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REGIONAL MAP

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LOCAL MAP

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AERIAL PHOTO

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AERIAL PHOTO

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NEW CONSTRUCTION

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NEW CONSTRUCTION KEY

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FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS

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RENT ROLL SUMMARY

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As of 6/1/2017

FINANCIAL ANALYSIS

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RENT ROLL DETAIL

As of 6/1/2017

FINANCIAL ANALYSIS

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OPERATING STATEMENT

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FINANCIAL ANALYSIS

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NOTES

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FINANCIAL ANALYSIS

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PRICING DETAIL

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ACQUISITION FINANCING

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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

FINANCIAL ANALYSIS

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GROWTH RATE PROJECTIONS

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FINANCIAL ANALYSIS

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CASH FLOW

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MARKET

OVERVIEW

MARKET OVERVIEW

SAN MARCO

Portland-Vancouver-Hillsboro Metro

Market Highlights

High population growth

▪ The Portland-Vancouver metro has recorded more than 20 years of positive net migration.

Expanding alternative energy industry

▪ Alternative-energy companies 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.

PORTLAND-VANCOUVER

The Portland-Vancouver metro is located near the confluence of the Columbia and Willamette

rivers, and stretches across the Oregon border into Washington state. Mount Hood and the

Cascade Range stand to the east, and the Oregon Coast Mountain Range lies to the west.

The metro is situated at the northern end of the Willamette Valley. A long growing season and

mild temperatures foster a diverse field of agricultural products.

Geography

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MARKET OVERVIEW

The region’s highway system includes Interstate 5, which runs north to south, and Interstate 84, which runs

east to west. Both freeways intersect Interstate 205 and Interstate 405 to form a beltway around the metro

that allows for easy automobile access to most areas.

The metro has one of the best mass-transit systems in the country. In addition to buses and streetcars, the

TriMet MAX Light Rail extends from Portland International Airport in the east to the high-tech corridor in

Hillsboro to the west. The streetcar line has stops throughout downtown and northwestern Portland. The

Westside Express Service is a 15-mile commuter rail connecting Wilsonville with Beaverton. Air service is

provided by Portland International Airport and general aviation airports in Hillsboro, Troutdale and Mulino.

The ports of Portland and Vancouver have marine terminals on the Willamette and Columbia rivers with

connections to barge, rail and interstate transport. Rail service to these facilities is provided by Union Pacific

and BNSF.

Infrastructure

The Portland-Vancouver Metro is:

▪ 60 miles from the Pacific Ocean

▪ 140 miles from Seattle

▪ 350 miles from Boise

▪ 500 miles from San Francisco

Airports

▪ Portland International Airport

▪ Smaller airports in Hillsboro, Troutdale and Mulino

Major Roadways

▪ Interstates 5, 84, 205 and 405

▪ Highways 26, 30 and 217

Rail

▪ Freight – Union Pacific and BNSF

▪ Passenger – Amtrak

▪ Commuter – MAX and WES

Ports

▪ Port of Portland and Port of Vancouver

The Portland-Vancouver metro contains more than 2.3 million residents and is composed of Multnomah,

Clackamas, Columbia, Washington and Yamhill counties in Oregon, and Clark and Skamania counties in

Washington. The area is projected to grow at an annual rate of 1.1 percent over the next five years. Portland

is the largest city with a population of 614,400 persons.

Metro

Largest Cities in Metro by Population

Portland 614,400

Vancouver 169,000

Gresham 111,800

Hillsboro 97,500

Beaverton 94,200

Aloha 51,700

* Forecast

Sources: Marcus & Millichap Research Services; U.S. Census

Bureau; Experian

PORTLAND-VANCOUVER

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MARKET OVERVIEW

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

outdoor activities, clean tech, advanced manufacturing and software. Lower land

costs, 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, lure businesses to the metro.

Near-term growth in clean technology and alternative energy companies such as

Vestas Wind, SolarWorld and Iberdrola Renewables will continue to draw

employees from outside the region, as well as help retain workers. Nike is a leader

in the growing athletic and outdoor industry. The company continues to expand its

footprint and hiring in the metro. The metro supports more than 700 athletic and

outdoor industry firms. Advanced manufacturing firms employ tens of thousands of

workers in the region at companies such as Oregon Iron Works, Daimler and PCC

Structurals. Intel and IBM are significant employers in the software industry, which

comprises nearly 1,400 companies.

Medical research is also expanding in the metro, headed by Oregon Health and

Sciences University (OHSU). OHSU is a world-renowned leader in biomedical

research, studying a number of disorders, including neurodegenerative diseases,

stress, genetic disorders and clinical nutrition.

Economy

* Forecast

Sources: Marcus & Millichap Research Services; BEA; Moody's Analytics;

U.S. Census Bureau; Experian

PORTLAND-VANCOUVER

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MARKET OVERVIEW

The metro's employed workforce at nearly 1.1 million people and its large concentration of high-tech companies

will help boost employment growth by 1.6 percent annually over the next five years, above the U.S. average of a

1.3 percent gain. While many metros have been affected by “brain drain,” or the relocation of highly educated

workers to elsewhere, the area continues to maintain and attract productive, skilled workers from all over the

world, propelling a high level of educational attainment. This bodes well for growth in a region that relies heavily

on knowledge-based industries, such as technology and the medical and services sectors. The need for

educated workers will remain a driver of in-migration as the renewable energy, software, athletic and advanced

manufacturing industries expand.

The diverse local economy is anchored by the trade, transportation and utilities sector, which accounts for 19

percent of the workforce, or 203,000 jobs. Many positions are in retail trade or stem from activity at the Ports of

Portland and Vancouver. Other major sectors are professional and business services, education and health

services, and the government sector, each of which employ more than 14 percent of the workforce.

In the coming five years, all employment sectors will expand, with 2.8 percent growth expected in education and

health services. The professional and business services and leisure and hospitality segments will each post

gains of more than 2 percent annually through 2019.

Labor

* Forecast

Sources: Marcus & Millichap Research Services; BLS; Moody’s

Analytics

PORTLAND-VANCOUVER

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MARKET OVERVIEW

Top employers in the Portland-Vancouver metro fall within a wide range of industries, from universities and healthcare to financial institutions. The high-tech and alternative

energy sectors continue to expand with the help of many smaller and startup firms.

Intel employs more workers in the region than in any other market in the world. The company has six campuses in the area and more than 17,000 employees in Oregon. Its

recent capital investment includes a new multibillion-dollar fabrication plant for research and development. Intel’s largest site is in Hillsboro, home to its most advanced

research and production fabrication facilities, which it is expanding.

Boeing continues to grow its massive Gresham manufacturing site, which now employs more than 1,800 residents. Further expansions are planned and underway to enlarge

the facility, which will bring new jobs to the metro. Elsewhere, expansions at the Oregon Health and Sciences University have increased research funds and employment at

that institution.

Area hospitals also are growing in anticipation of greater demand from an increasing population base and aging baby boomers. PeaceHealth Southwest Washington Medical

Center, Providence Health & Services, Legacy Health System and Adventist Health all have built, or are in process of constructing, new buildings. Additionally, Vancouver

Clinic, one of the leading healthcare providers in Clark County, has enlarged its facilities.

Employers

Major Employers

Intel Corp.

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

* Forecast

Sources: Marcus & Millichap Research Services; BLS; Moody's

Analytics; Experian

PORTLAND-VANCOUVER

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MARKET OVERVIEW

The pace of population growth in the Portland-Vancouver metro will slow to 1.1 percent annually through the next five years, slightly lower than the average pace since

2000. Net migration accounted for most of the gain in recent years. The region’s population is forecast to surpass 2.4 million inhabitants in five years.

Among the working-age population, 20- to 24-year-olds account for about 146,300 of metro residents. Growth in this cohort will provide companies with a young and

diverse labor pool. Portland-Vancouver workers are more educated than the U.S. average, with 33.6 percent possessing a bachelor’s degree, compared with just 28.6

percent nationally.

Higher education levels correlate with increased incomes. The median household income in the metro has risen drastically since 2000 to $62,200 per year. This high

income level reflects the growing high-tech industry and improving education level.

Higher incomes have allowed more than 60 percent of residents to own homes. The median home price in Portland, at $286,400, is more affordable than many other

Western U.S. cities. Over the next five years, household income is expected to outpace rising home prices, making homeownership attainable for more residents.

Demographics

PORTLAND-VANCOUVER

* Forecast

Sources: Marcus & Millichap Research Services; AGS; Experian;

Moody's Analytics; U.S. Census Bureau

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MARKET OVERVIEW

The Portland-Vancouver region is renowned for its scenic beauty, set within a temperate climate and offering a multitude of activities. The metro contains more than 37,000

acres of parks and provides numerous opportunities for outdoor enthusiasts, including hiking and biking trails, skiing on Mount Hood and wind surfing on the Hood River. The

metro also lies just 60 miles east of the Pacific Ocean, where visitors and residents alike can surf, watch migrating whales or enjoy 330 miles of beaches along the Oregon

coast. Professional sports teams include the NBA Trailblazers, MLS Timbers and the WHL Winterhawks.

For those who enjoy cultural activities, Portland-Vancouver has a plethora of museums, including the Portland Art Museum, Portland Children’s Museum, the World Forestry

Center Discovery Museum and the Maryhill Museum of Art in Goldendale. Plays are staged by the many theater companies, notably the Portland Center for the Performing

Arts and the Northwest Children’s Theater. Other facilities of interest are the Japanese Gardens, the Oregon Zoo and many microbreweries.

There are dozens of universities and colleges in the metro, including Pacific University, the University of Portland and Portland State University, which is the largest university

in Oregon, with an enrollment of more than 30,000 students.

* Forecast

Sources: Marcus & Millichap Research Services; National

Association of Realtors®; Moody's Analytics; U.S. Census Bureau

Quality of Life

PORTLAND-VANCOUVER

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MARKET OVERVIEW

2016 Multifamily Forecast

Construction: After finalizing 3,700

units last year, builders will boost

construction in 2016 with approximately

6,500 units forecast for delivery. The

majority of this construction will be

completed during the second half of the

year.

Vacancy: A jump in construction willincrease the vacancy rate 30 basispoints this year to 3.4 percent as newapartments enter a period of lease-up.In the prior annual period, vacancyrose 50 basis points on net absorptionof more than 2,500 units.

Rents: Tight vacancy amid increaseddemand will boost the average effectiverent 10.1 percent in 2016 to $1,281 permonth. During the previous year, rentsurged 13.2 percent, with the CentralPortland submarket registering thehighest rent at $1,513 per month after an11.8 percent rise.

Employment: Employers will increase

payrolls by 2.5 percent in 2016 with

28,000 workers. In 2015, employers

added 36,900 jobs with hiring led by the

professional and business services

sector.

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Tight Conditions Support Surge in Rental Values Metrowide

2.5%

increase

in total

employment

units

will be

completed

6,500

basis point

increase in

vacancy

30

10.1%

increase

in effective

rents

PORTLAND METRO AREA

High tenant demand drives multifamily rent growth, boosts construction. A relatively lower cost of

operating a business compared with other West Coast metros has driven a hiring spree in Portland.

As establishments including Time Warner and UPS expand payrolls, household formation has

increased notably, fueling the need for housing. In particular, apartment demand remains healthy,

keeping vacancy tight, as the high cost of a mortgage payment makes homeownership out of reach

for many individuals. Construction has increased considerably over the last four quarters and is

expected to persist through year-end as vacancy remains far below the long-term equilibrium of 5

percent. While deliveries are widespread, larger developments are popping up within central and

eastern Portland. Many of these projects are garden and mid-rise complexes with a variety of

amenities appealing to those who seek an urban lifestyle. As the number of units coming online this

year far outpaces the previous five-year average, vacancy will tick up slightly while deliveries enter a

period of lease-up. Effective rent will register a double-digit percent increase in 2016 as conditions

remain tight across the metro.

Limited listings heat up bidding in the metro. Strengthening demographics and tight market conditions

draw investors to Portland’s apartment assets. Additionally, returns up to 160 basis points higher than

California markets draw out-of-state buyers to the area. Many investors are searching for the limited

number of value-add properties available in secondary markets, such as Vancouver and Gresham,

where the potential for rent gains exists. These areas have grown in popularity as many tenants seek

out more affordable rents compared with Central Portland. The average first-year return for well-

located Class B/C assets in these neighborhoods typically ranges between the low-5 to high-6

percent range. Class A complexes in popular neighborhoods can yield as low as 3 percent. Overall,

multifamily assets across the metro changed hands with cap rates in the mid-5 percent span.

MARKET OVERVIEW

Economy

Housing and Demographics

** Trailing 12 months through 3Q

Sources: Marcus & Millichap Research Services; Economy.com; NAR

* Forecast

Sources: Marcus & Millichap Research Services; Bureau of Labor

Statistics; Economy.com

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PORTLAND METRO AREA

▪ Strong job creation has produced a steady population increase over the year ending in September, inching up

1.2 percent with nearly 27,700 new individuals. During this same time period, household formation climbed 1.6

percent, or by 14,600 households.

▪ The median household income lifted 3.2 percent to approximately $64,600 annually over the last 12-month

period. During this same time, the median price for a single-family home rose 12.3 percent to $352,600,

making homeownership less attainable for some.

▪ The monthly mortgage payment, assuming 10 percent down plus payments for taxes and insurance, is around

$601 more than the average monthly rent for an apartment in Portland. The payment is also about $270 more

than the average rent for a Class A unit.

▪ Outlook: The growing population and the relatively higher cost of homeownership will drive demand for

multifamily housing in the metro. As a result, builders will heighten multifamily construction as vacancy remains

significantly tight.

▪ During the year ending in September, employers increased hiring by 2.8 percent with 31,700 new jobs. In the

prior annual period, approximately 34,900 positions were created.

▪ Growth was registered across most employment sectors in the metro during this time, with the construction

sector showing the largest percentage gain. Here, job creation rose 7.1 percent with more nearly 4,000

workers as builders increased the supply of retail and apartment space. The information sector followed,

climbing 6.6 percent or 1,600 jobs.

▪ Steady job growth and the tight labor market decreased the unemployment rate 10 basis points during the

previous 12 months to 5.2 percent in September. In the prior year, the rate fell 70 basis points.

▪ Outlook: Hiring will continue above the national pace this year, rising by 2.5 percent with 28,000 positions. In

2015, nearly 36,900 jobs were added.

MARKET OVERVIEW

Construction

Vacancy

* Forecast

Sources: Marcus & Millichap Research Services; MPF Research

* Forecast


SAN MARCO

PORTLAND METRO AREA

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▪ The increased number of apartment completions during the last 12 months drove the vacancy rate up 50 basis

points to 2.9 percent as new deliveries entered a period of lease-up. During the prior annual period, vacancy

registered a 20-basis-point reduction.

▪ Despite a rise in average rates, vacancy in Portland remains tight across the metro with the majority of areas

maintaining a rate below 4 percent. Vancouver registered one of the lowest vacancy rates metrowide at 2.1

percent in September. Class C properties within the city were popular among tenants as vacancy remained

below 1 percent year over year.

▪ Across vintages, older properties posted the lowest vacancy as many renters sought out more affordable

apartments. Units built before the 1970s maintained the tightest vacancy at 1.5 percent in the third quarter.

Rental rates for these apartments was near $1,115 per month during this time.

▪ Outlook: After a 50-basis-point jump in 2015, the vacancy rate will post a 30-basis-point hike in 2016 to 3.4

percent, keeping inventory tight.

▪ Builders completed more than 5,700 apartments during the last 12 months, surpassing the five-year average

by more than 3,000 units. In the prior annual period, nearly 3,400 rentals were delivered.

▪ The high demand for apartments has increased development activity. Approximately 8,700 units are under

construction with completion dates through 2018. Nearly half of these deliveries will be market-rate units in

central Portland and just east of downtown across the Willamette River.

▪ The largest project completed in the metro so far this year is Ella. The 400-unit mid-rise complex is located

directly south of downtown near the waterfront. The area’s proximity to restaurants, shops and entertainment

benefits apartment operators as tenants seek a live-play-work lifestyle. Additionally, the central Portland area

has the highest average rent metrowide at $1,575 per month.

▪ Outlook: After completing more than 3,700 apartments in 2015, builders are expected to deliver 6,500 rentals

this year. More than half of the development was brought into service during the third quarter of 2016.

MARKET OVERVIEW

Rents

Sales Trends

** Trailing 12 months through 3Q

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

Real Capital Analytics

* Forecast


SAN MARCO

PORTLAND METRO AREA

37

▪ During the last four quarters ending in September, transaction velocity has remained relatively stable year over

year with buyers seeking Class B/C properties. Assets in Gresham, along with those southeast of central

Portland, were a popular target among investors.

▪ The average price climbed 9 percent during the year ending in September to $143,000 per unit. Assets in the

northeastern and northwestern portions of the metro averaged around $200,000 per apartment, while

properties in Vancouver priced near $113,000 per rental.

▪ Increased demand compressed the average first-year return 20 basis points during the last 12 months to the

mid-5 percent range. Well-located apartments changed hands with cap rates in the low-4 to low-5 percent

range. Assets in Vancouver traded between the low-5 to low-6 percent span.

▪ Outlook: Healthy demographics and relatively higher returns than are available in California will attract buyers

to Portland. While institutional investors will target assets in the CBD, private investors will seek properties in

secondary areas.

▪ Low vacancy and healthy tenant demand over the last four quarters increased the average rent 9.3 percent to

$1,259 per month, setting the highest average rental rate yet. During the prior annual period, average monthly rent

soared 12.9 percent.

▪ Beaverton registered the greatest rise in average rent metrowide. Here, effective rent surged 13.4 percent to more

than $1,200 per month. The area is home to Nike’s world headquarters, which is currently expanding its office

footprint. The new space has the potential to hold thousands of new workers, boding well for Beaverton’s apartment

fundamentals.

▪ Effective rents were lowest in properties built during the 1970s at $1,059 per month in the third quarter. Apartments in

this vintage had one of the highest rent increases over the year at 12.5 percent. Only units built after 2010 exceeded

this pace at 16 percent.

▪ Outlook: As vacancy remains below the 5.0 percent replacement threshold, average rent will grow 10.1 percent this

year to $1,281 per month. In 2015, monthly rent soared 12.7 percent.

MARKET OVERVIEW

Capital Markets

Local Highlights

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▪ The initial reading of third quarter GDP of 2.9 percent and consistent growth in employment are fanning expectations that the Federal Reserve will raise its benchmark short-

term lending rate at its December meeting. Other economic data showing steady improvement in the housing market and the stabilization of oil prices around $50 per barrel

offer signals that the U.S. economy is growing at a sustainable pace.

▪ Increasing rental housing demand underpinned a decline in the U.S. apartment vacancy rate of 60 basis points to 3.5 percent year to date through the third quarter, the lowest

level this cycle. Apartment builders have responded to growing demand and favorable demographic trends by ramping up construction. Completions will rise to 320,000 units

this year and peak in 2017.

▪ Capital markets remain highly competitive, offering an assortment of fixed-rate products available through commercial banks, life-insurance companies, CMBS and agency

lenders. Fannie Mae and Freddie Mac are underwriting loans of 10 years at maximum leverage of 80 percent. Rates will typically reside in the high-3 to low-4 percent range,

depending on underwriting criteria. Portfolio lenders will also price in this vicinity but will typically require loan-to-value ratios in the 65 to 75 percent band. Floating-rate bridge

loans and financing for asset repositioning are typically underwritten with LTVs 70 to 75 percent of stabilized value (80 to 85 percent of cost) and price 300 basis points above

Libor for recourse deals and extending to 450 basis points above Libor for non-recourse transactions.

▪ The online banking company Simple Finance Technology Corp. opened a new headquarters early this year in southeastern Portland. The company now has plans to construct

an additional 50,000-square-foot building across the street that could house up to 400 new workers. This expansion should be completed in 2018 and will benefit apartment

operations in the area.

▪ Construction has begun on a large mixed-use project on the waterfront of the Columbia River in Vancouver. The 32-acre development will include 3,300 apartments, 1.25

million square feet of office space, a luxury hotel and retail space. The city is also planning to build a public park on 7 acres near the project. The Vancouver area has been

experiencing a recent resurgence with numerous restaurants and entertainment venues opening. This waterfront development is expected to be the largest in the

city’s history.

▪ DiscoverOrg, a company that provides data to IT, marketing and finance professionals, continues to expand its workforce in the Vancouver headquarters. After hiring 150

individuals over the last year, DiscoverOrg plans to hire an additional 200 workers by the end of 2017. These jobs would be in higher-paying roles such as research, software

development and sales.

PORTLAND METRO AREA

PROPERTY NAME

MARKETING TEAM

SAN MARCO

DEMOGRAPHICS

Source: © 2016 Experian

Created on January 2017

POPULATION 1 Miles 3 Miles 5 Miles

▪ 2020 Projection

Total Population 23,682 216,141 433,092

▪ 2015 Estimate


▪ 2010 Census


▪ 2000 Census


▪ Daytime Population

2015 Estimate 71,903 405,913 588,756

HOUSEHOLDS 1 Miles 3 Miles 5 Miles

▪ 2020 Projection

Total Households 13,701 110,032 201,473

▪ 2015 Estimate


Average (Mean) Household Size 1.58 1.92 2.11

▪ 2010 Census


▪ 2000 Census


Growth 2015-2020 4.67% 4.49% 3.84%

HOUSING UNITS 1 Miles 3 Miles 5 Miles

▪ Occupied Units

2020 Projection 13,701 110,032 201,473

2015 Estimate 13,455 109,498 199,409

Owner Occupied 2,374 43,193 97,745

Renter Occupied 10,716 62,106 96,282

Vacant 365 4,200 5,382

▪ Persons In Units

2015 Estimate Total Occupied Units 13,090 105,299 194,027

1 Person Units 59.05% 44.54% 38.02%

2 Person Units 29.85% 33.82% 34.69%

3 Person Units 6.72% 11.31% 13.43%

4 Person Units 3.13% 7.38% 9.03%

5 Person Units 0.80% 2.02% 3.03%

6+ Person Units 0.45% 0.93% 1.80%

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles

▪ 2015 Estimate

$200,000 or More 2.73% 5.97% 5.38%

$150,000 - $199,000 3.16% 5.04% 4.69%

$100,000 - $149,000 8.43% 13.01% 13.64%

$75,000 - $99,999 9.50% 12.14% 13.12%

$50,000 - $74,999 13.40% 16.56% 18.11%

$35,000 - $49,999 13.61% 11.41% 12.39%

$25,000 - $34,999 12.24% 9.25% 9.32%

$15,000 - $24,999 13.98% 9.78% 9.34%

Under $15,000 22.95% 16.85% 14.01%

Average Household Income $56,643 $80,791 $80,285

Median Household Income $35,755 $54,000 $56,585

Per Capita Income $34,176 $41,238 $37,464

POPULATION PROFILE 1 Miles 3 Miles 5 Miles

▪ Population By Age

2015 Estimate Total Population 22,881 209,183 421,545

Under 20 6.67% 14.44% 17.73%

20 to 34 Years 42.43% 32.84% 28.35%

35 to 39 Years 10.48% 9.77% 9.45%

40 to 49 Years 14.98% 15.02% 15.02%

50 to 64 Years 16.53% 17.56% 18.34%

Age 65+ 8.90% 10.38% 11.12%

Median Age 35.35 36.29 36.99

▪ Population 25+ by Education Level

2015 Estimate Population Age 25+ 19,410 163,613 318,554

Elementary (0-8) 1.94% 1.86% 2.45%

Some High School (9-11) 5.62% 3.27% 4.43%

High School Graduate (12) 12.86% 11.42% 14.32%

Some College (13-15) 22.18% 20.19% 21.25%

Associate Degree Only 5.91% 5.32% 6.11%

Bachelors Degree Only 33.17% 34.03% 30.54%

Graduate Degree 17.98% 23.39% 20.05%

▪ Population by Gender

2015 Estimate Total Population 22,881 209,183 421,545

Male Population 53.85% 50.29% 49.69%

Female Population 46.15% 49.71% 50.31%

39

Income

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

$35,755, compare this to the US average which is currently . The

median household income for your area has changed by 29.63% since

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

will be $41,652 five years from now, which represents a change of

16.49% from the current year.

The current year per capita income in your area is $34,176, compare

this to the US average, which is . The current year average household

income in your area is $56,643, compare this to the US average which

is .

Population

In 2016, the population in your selected geography is 22,881. The

population has changed by 27.51% since 2000. It is estimated that the

population in your area will be 23,682.00 five years from now, which

represents a change of 3.50% from the current year. The current

population is 53.85% male and 46.15% female. The median age of the

population in your area is 35.35, compare this to the US average

which is . The population density in your area is 7,263.04 people per

square mile.

Households

There are currently 13,090 households in your selected geography.

The number of households has changed by 30.69% since 2000. It is

estimated that the number of households in your area will be 13,701

five years from now, which represents a change of 4.67% from the

current year. The average household size in your area is 1.58

persons.

Employment

In 2016, there are 57,734 employees in your selected area, this is also

known as the daytime population. The 2000 Census revealed that

67.90% of employees are employed in white-collar occupations in this

geography, and 31.89% are employed in blue-collar occupations. In

2016, unemployment in this area is 9.20%. 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:

83.88% White, 5.11% Black, 0.17% Native American and 3.23%

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

White, Black, Native American and Asian/Pacific Islander. People

of Hispanic origin are counted independently of race.

People of Hispanic origin make up 6.17% of the current year

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

PROPERTY NAME

MARKETING TEAM

SAN MARCO

Housing

The median housing value in your area was $399,848 in 2016,

compare this to the US average of . In 2000, there were 1,754 owner

occupied housing units in your area and there were 8,262 renter

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

$525.

Source: © 2016 Experian

DEMOGRAPHICS

40

offering memorandum - loopnet · san marco is a historical 24 unit apartment asset located in the...

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