Thursday, October 23, 2014

Commercial Deal Analysis

Median household income in Rainier Beach is $55,424, as compared to $63,470 in Seattle general. The median home sale price is $224,962. It is ethnically diverse and home to a number of newly arrived immigrants.

Rent comparables from Dupre and Scott seem to support a rental price of $1.75/sf for new construction 1BR units in this area. Rainier Beach saw the greatest appreciation in rental rates and in tax-assessed residential values within the city of Seattle during 2014.

Building Your Team:
Who has done similar projects in the past? What architect/builder has experience in this particular asset class or construction?
Van Gogh Studio Lofts hired SMR Architects to design the project and Andersen Construction as the builder.
SMR was the lead architects for all of the ArtSpace Projects in Washington, including the Tashiro-Kaplan Building, Hiawatha Lofts, Mt. Baker Lofts, as well as the artist live/work renovations at Youngstown Cultural Center in Seattle.
Andersen Construction has been in business since 1950 and has built over 8000 projects on the west coast. They have much expertise in wood frame and mixed use multifamily housing, and were recently hired by Paul Allen’s Vulcan development company to do the Yesler terrace renovation in Seattle.

Does the project pencil?
We are now estimating a $7million project, which will be worth $8.273million at a 6.5 cap when completed, about a 17% increase in value.
It is estimated to cash flow around $258,755 per year when stabilized. This is projected to earn investors a 15% cash-on-cash return.

Are there financial incentives available?
SE Seattle Bus Tour sponsored by REAPS
Multifamily tax exemption

Low-interest financing?
Rainier Valley Community Development Fund

Potentially much greater financial returns from ground up development
More creative transactions
Greater community impact
Team does much of the work

and Cons
Much longer timeline, typically 1-2 years or more
Market uncertainties moving forward
More complex transactions
More parties involved
More government review and regulation

Happy Investing!

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