Real estate review assignment due tomorrow

Andrea Azpiazo

–

Review One. Little Havana: Multifamily Development Project

This report states that Little Havana is considered a low to moderate income market. However,

the report also informs that demand for the proposed apartments will come from the mid to

upper

-

income population of the Little Havana

area,

but it does not provide demographic data to

support that demand. Who are they? What age groups? Is it primarily family households,

retirees, millennials, or a mix? These are essential questions that need to be answered for an

investor to have some in

dication of where the potential growth in rental rates will come.

No Operating Expenses are listed other than Management Fee, which is on the low end of the

industry scale and likely since this is a new building. What are the projections for electrici

ty,

building and grounds maintenance, water? Although this is new construction, there will be

operating expenses required throughout the holding period. Will there be a washer and dryer in

the units? What about laundry or vending machines as a source o

f Other Income.

Based on data provided in the report, the CAP Rate for this proposed Multifamily development is

significantly higher than the averages for the area, at 5.3

-

5.7%. Considering this is new Class A

development which is not expected to carr

y high CAPEX reserves for a typical investment

holding period of 5

-

7 years, the Going

-

In and Going

-

Out CAP Rates should be lower.

A

dditionally,

70% LTV at 9% is indicative of higher risk. Is there an issue with the developer

which has not been disclosed

and precludes them from obtaining better terms?

The asking rent for this proposed multifamily development is 21.42% over the average rents for

comparable apartments in the area. An additional bathroom in the units and one parking space

per unit does not

support the $1,400 asking rent, particularly when considering that there are no

amenities in this building to attract a demographic that is willing to pay $300, or 21.42%, more

in rent for the subject area.

Being new construction, why weren’t hurricane

impact windows or shutters included, which are

more in line with current building codes and municipal planning, such as Miami21? This

reduces property insurance costs. The new owner may have to invest in these as part of capital

expenditures.

The propo

sed development does not appear to fit the current target market and relies on

expectations for future growth and demand in the area. Further examination, with more due

diligence from sites such as STDB, US Census data, NREI, CBRE is warranted to determin

e the

viability of this project for the proposed holding period.

Andrea Azpiazo – Review One. Little Havana: Multifamily Development Project

This report states that Little Havana is considered a low to moderate income market. However,

the report also informs that demand for the proposed apartments will come from the mid to

upper-income population of the Little Havana area, but it does not provide demographic data to

support that demand. Who are they? What age groups? Is it primarily family households,

retirees, millennials, or a mix? These are essential questions that need to be answered for an

investor to have some indication of where the potential growth in rental rates will come.

No Operating Expenses are listed other than Management Fee, which is on the low end of the

industry scale and likely since this is a new building. What are the projections for electricity,

building and grounds maintenance, water? Although this is new construction, there will be

operating expenses required throughout the holding period. Will there be a washer and dryer in

the units? What about laundry or vending machines as a source of Other Income.

Based on data provided in the report, the CAP Rate for this proposed Multifamily development is

significantly higher than the averages for the area, at 5.3-5.7%. Considering this is new Class A

development which is not expected to carry high CAPEX reserves for a typical investment

holding period of 5-7 years, the Going-In and Going-Out CAP Rates should be lower.

Additionally, 70% LTV at 9% is indicative of higher risk. Is there an issue with the developer

which has not been disclosed and precludes them from obtaining better terms?

The asking rent for this proposed multifamily development is 21.42% over the average rents for

comparable apartments in the area. An additional bathroom in the units and one parking space

per unit does not support the $1,400 asking rent, particularly when considering that there are no

amenities in this building to attract a demographic that is willing to pay $300, or 21.42%, more

in rent for the subject area.

Being new construction, why weren’t hurricane impact windows or shutters included, which are

more in line with current building codes and municipal planning, such as Miami21? This

reduces property insurance costs. The new owner may have to invest in these as part of capital

expenditures.

The proposed development does not appear to fit the current target market and relies on

expectations for future growth and demand in the area. Further examination, with more due

diligence from sites such as STDB, US Census data, NREI, CBRE is warranted to determine the

viability of this project for the proposed holding period.