Glendale, AZ – May 08 2019 – The Sponsor purchased the circa 1986 Orange Creek apartment complex in Phoenix for $13,150,000 ($92,606/unit). Sponsorship will spend $2,215,000 ($15,600/unit) to upgrade unit interiors, and rehab the exterior, landscaping, pool area and clubhouse. Total project cost is projected to be $16,342,331 ($115,087/unit).
- Investors are projected to receive a 1.72x multiple, and a 20.5% IRR over 36 months.
- Current rents are approximately 20% below market, according to CoStar. Renovated properties are currently achieving $1.40/SF in rent, 40% above current property rents.
- Rents have increased 9.6% YoY, fastest in the country. Rent growth has been averaging 7% annually since 2015. Effective rent is projected to grow by 6.2% next year by Marcus and Millichap. This will be the sixth consecutive year of over 6% growth.
- Sales price per unit and per foot in Phoenix have increased 26% YoY for 100+ unit multifamily sales – from $128k ($128.00/SF) to $153k ($183.83/SF).
- The project consists of $92k/unit purchase price, and $15.6k/unit in renovation expense – with total budget of $115k/unit. Projected sale of renovated property at $150k/unit at a 5.5% cap rate. Exit comps range as high as $187k/unit and average $150k/unit.
- Phoenix population growth is twice the national average, and has ranked inside the top 12 out of 50 for MSAs over 1mm people in six of the last seven years.
- There has been $5 billion in public and private investment over the past decade, including construction of 20 Metro light-rail stops, development of the CityScape Phoenix office and shopping center, and expansion of the Phoenix Convention Center.
- Phoenix is the third largest labor pool in the west. Job growth has been at least 1% over the national average since 2016. In 2017, it was 4.4%, which was 2.7% more than the national average. Phoenix absorbed 1.05mm SF of office space in Q1 2019, with 900k SF coming from new leases.
- Phoenix is the fourth highest concentration of Aerospace jobs in the country, top five nationally for Tech job growth, and is expected to add over 43k healthcare jobs in the next decade.
- Sponsorship has acquired seven projects in the market, with this being CCC’s third investment with them. IRRs to investors on the previous two deals were 48% (actual) and 35% (under contract). The Sponsor has sold a third asset, with investors realizing a 32% IRR.
- The Phoenix market was recently rated as the #1 market for job growth by WalletHub, an online financial education and news resource. Phoenix averaged a 1.7% population growth from 2010 to 2017, double the national. Job growth in the city was 4.4% in 2018, more than double the national average. Job growth has been at least 1% over the national average since 2016.
- Phoenix market occupancy is currently 95.2%, up from 94.9% last year, despite over 8,000 apartment unit deliveries. Phoenix multifamily market absorption continues to substantially outpace supply.
- 6,901 units have been delivered over the past 12 months vs an absorption of 8,425 units on a base of 317,000 units.
- The West Valley Submarket had only 500 units total delivered between 2010 and 2017, 1,400 in 2018, and a similar number expected for 2019 on a base of 46,000 units, with almost all being absorbed (1,291).
- The projection of in-migration and employment growth in Phoenix remain strong, as people are priced out of more expensive metro areas, driving absorption, decreased vacancy and rent growth.
- Phoenix is home to Grand Canyon University, a school of over 90,000 (20,000 on campus, 70,000 online) students, Arizona State University (70,000 students), as well as major employers including Banner Health, the State of Arizona, Walmart, Maricopa County, Frys Food Stores, Wells Fargo, Arizona State University, Intel Corporation, the City of Phoenix and Honeywell.
- Fortune 500 companies in Phoenix include Avnet, Freeport-McMoRan, Republic Services, PetSmart, Apollo Group and Insight Enterprises.
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About Bear Holdings Group LLC
Bear Holdings Group, based in Scottsdale, AZ, provides project sponsorship, joint venture and investment opportunities for multifamily construction, acquisition, conversion and rehabilitation. With expertise that includes fund creation, project sponsorship, and asset management tailored to partnership objectives, Bear Holdings Group currently has interests in dozens of multifamily properties through five states. Contact Bear Holdings Group today at email@example.com.