In order to determine the profitability of our Van Gogh mixed-use commercial development at the Rainier Beach light rail station, we need to look at other rent comparables. We are still collecting data, but this is what we have thus far:
The first comparison is Eagle Ridge Plaza, located at 5333 15th Ave. S. in the Beacon Hill market northwest of the subject. Units in this complex are in a single building, three stories with elevator access to all floors. It was built in 2000, and has 25 units. These include one-bedroom and two-bedrooms with one and two-baths. Units feature gas fireplaces, dishwashers, microwaves, and washers and dryers. Under-building parking is provided and is included in the rent. The interesting thing about this property is that rents have hardly changed since it was built despite an improving market. This provides a strong indication that an adjustment for age is appropriate. When surveyed, there were no vacancies and no specials offered.
The next comparison is Station at Othello Park, located south of the subject at 4219 S. Othello St. in the Rainier Valley submarket. The project was completed in March 2011 with 351 units located at the southeast corner of Othello St. & MLK Way S. -- adjacent to Othello Station Light Rail stop. The property targeted LEED Silver certification and features a variety of floor plans ranging from studio, studio plus den, one-bedroom, one-bedroom plus den and two-bedroom/ two-bath plus den unit types. Overall, the unit mix is nearly 90% studio and one- bedroom units targeting one & two person households. Unit sizes are smaller than typically existing in the market with an overall average unit size of 671 sq ft.
Unit amenities include granite countertops, stainless steel appliances, washer/dryer, dishwasher, hard floor surfaces (select units) and other high end renewable finishes. More than 50% of the units have a private deck, patio or balcony. Building amenities include a 7,500 sq ft rooftop deck with hot tub, wet bar, barbeque, fire pit and private seating areas. Built to a density of 189 units/acre, the six-story building is elevator serviced with controlled security access, fitness center, extra storage, has 20 ft wide sidewalks with cafe seating and 17,600 sq ft of ground floor retail.
The last comparison is with the Claremont apartments in the Mount Baker neighborhood to the north of the subject property. The Claremont is a mixed-use development with retail, office, and rental apartments. Located on Rainier Avenue South at Waldon Street on the former Chubby & Tubby site, it was built green by South East Effective Development to revitalize the community and local business district.
It is located four blocks to the Light Rail station that travels downtown in 15 minutes.
The main five-story building on Rainier Avenue includes 58 mixed-income rental units with 10 townhouse units located in the back at Claremont Place. The roof garden has great views of downtown Seattle and Mount Rainier.
Eagle Ridge Plaza
Year built - 2000
Size of One Bedroom - 574
2011 rent -$855
Tenant paid utilities- garbage only
W/D in unit? - yes
Othello Station
Year built - 2011
Size of Studios - 464
2011 studio rent - $1016
Size of One Bedroom - 701
2011 rent - $1289
Tenant paid utilities- all
W/D in unit? - yes
Claremont -
Year built - 2011
Size of Studios - 484
Current studio rent -
Size of One Bedroom -
Current rent -
Tenant paid utilities-
W/D in unit? -
Van Gogh Apartments
Year built - 2015 (est)
Size of Studios - 661
Current studio rent -
Size of One Bedroom - 661
Current rent -
Tenant paid utilities- all
W/D in unit? - no, common laundry room
The subject is located in the Rainier Valley market area. Except for Station at Othello Park, the Claremont, and for a few units at Seattle Housing Authority's NewHolly redevelopment, no new market rate comparisons exist in the subject's Rainier Valley market. Station at Othello Park was used in the report, however those at NewHolly are vastly different in design and the comparisons were taken from neighboring markets. Eagle Ridge Plaza is located in the south portion of the Beacon Hill market. Both are considered superior to the Rainier Valley market based on Dupre + Scott rent survey information.
The subject is proposed new construction. The comparisons range from 2000 to 2011 properties. Brand new apartments tend to rent for more than properties that have had several cycles of unit turnover. According to the survey data reported by Dupre+Scott, newer apartment product (built since 2000) in the King Central subregion generally achieve about $0.20/sq ft more in rent compared to product built between 1990 and 1999. With support from these rental differences, an upward age adjustment of $0.20/sq ft/decade or $0.02/sq ft/year is applied to the comparisons based on their age difference from the subject (if built today) applied to their respective unit size rounded to the nearest $5.
Rental comparisons in the Rainier Valley market have studio units that range in size from 409 sq ft to 648 sq ft. Base rents for this type of unit range from $850 to $1,391/month. After adjustments, indicated rent for the subject’s studio units range from $923 to $1,336/month with a median of $1,167/month. $1,085 is selected as a reasonable market rent.*
All of the comparisons selected with one-bedroom units ranged in size from 574 to 747 sq ft. Base rents for this type of unit range from $855 to $1,375/month. After adjustments, indicated rent for the subject’s one-bedroom units range from $993 to $1,145/month with a median of $1,107/month. For this analysis, most support is given to the middle portion of the adjusted range and $1,105 is selected as a reasonable market rent.*
*These were the figures in spring 2011; assuming 4% per year rent increase, the market rents in 2015 are assumed to be as follows:
Studio Market Rent -- $1,220/month
One-Bedroom Market Rent --$1,243/month
These rents seem reasonable, compared to this 2014 ad for a 427sf studio rental at the Hiawatha Lofts (an artist space project):
"Roof decks, stainless steel appliances, in-unit washer and dryers, free high speed internet and cable, storage units, amazing view of Mt Rainier and the Seattle skyline--all in a brand new apartment building, 999 Hiawatha Place, Seattle 98144. Studios through two bedrooms starting at just $1060 per month.
Apartment Amenities
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GE Stainless Steel Appliances
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Washer Dryer
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Dishwasher with Disposal
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Frost Free Refrigerator with Icemaker
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Free High Speed WAVE Internet
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Free Cable
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Self Cleaning Oven and Microwave
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Energy Saving Appliances
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Large Light-Filled Windows
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Pet-Friendly
Building Amenities
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Two Roof Decks with lush landscaping and views of Mt. Rainier and Downtown Seattle
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Interior Garden Courtyard
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Free Bicycle Storage
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Free Battery Charging for Electric Cars
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Storage Lockers
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Secure Parking
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Easy access to I-5 and I-90
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Steps to bus line
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Surrounded by 5 parks
Studios start at $1060/month
One bedrooms start at $1310/month
One bedroom + den start at $1360/month
Two bedrooms start at $1750 per month"
Assuming average market rent of $1225 per month, what kind of income can we expect from the 4354 S. Henderson project?
$1225/mo X 33 units = average monthly income of $40,425.
Annual rental income of $485,100 (we will ignore any income from laundry units for right now).
Rents from commercial units might be $1.50/sf per month, or 1900 sf X $1.50 = $2850 per month, annual revenue of $34,200.
Total annual gross revenue is estimated to be $519,300. Assuming expenses at roughly 30%, net revenue would be approximately $363,510.
Bonus question for our readers: If we build out 40,000sf, how profitable will this project be? A $25 Starbucks gift card to the winning answer.
Happy Investing!
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