88 units construction - 615 Holiday Dr. & 402 Church St. Galveston, TX 77550 - LoopNet
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Confidential Offering Memorandum
615 Holiday Dr. & 402 Church St.
Galveston, TX 77550
88
units
1971
construction
758
avg sf
offer process & contacts
EXCLUSIVE REPRESENTATION FINANCING
Newmark Knight Frank has been exclusively retained to represent the Seller in For parties interested in receiving debt quotes, please contact our Debt &
the disposition of Palm Shore (“Property”). All inquiries about the Offering or Structured Finance team, Adam Allen, Tip Strickland, David Schwarz or Purvesh
the Property should be directed to Newmark Knight Frank. Gosalia. Newmark Knight Frank facilitates agency, life company, bank, bridge,
and mezzanine financing options for the acquisition of Palm Shore
OFFERING PROCESS
• All properties are being offered on an “All Cash” basis UNDERWRITING
• Prospective purchasers will have the opportunity to visit the Property For questions regarding the underwriting presented in this offering memorandum
through scheduled tours with Newmark Knight Frank. Please do not contact please contact John Young at 713.300.7957 or john.young@ngkf.com.
the on-site management directly.
PROPERTY TOURS
OFFER REQUIREMENTS To accommodate the Property’s ongoing operations, Newmark Knight Frank
Offers should be presented in the form of a non-binding Letter of Intent, and must requests 24-hour advance notice to schedule a tour.
include at least:
NEWMARK KNIGHT FRANK - HOUSTON
1. Asset Pricing 1700 Post Oak Blvd, 2 BLVD Place, Suite 400
2. Due Diligence and Closing Timeframe Houston, TX 77056
3. Earnest Money Deposit T 713-599-1800
4. Description of Debt/Equity Structure F 713-599-1801
5. Qualifications to Close
Purchase terms shall require cash to be paid at closing. Offers should be
delivered to the attention of Brett Benton via fax or email.
investment sales
Brett Benton Russell Jones Matt Saunders Zach Springer Carter Mizell
brett.benton@ngkf.com russell.jones@ngkf.com matt.saunders@ngkf.com zach.springer@ngkf.com carter.mizell@ngkf.com
T 713-337-5800 T 713-425-5422 T 713-554-1303 T 713-425-5428 T 713-554-0133
M 210-860-5515 M 832-541-1499 M 281-300-1468 M 713-897-9670 M 832-457-7843
debt & structured finance
Adam Allen Tip Strickland David Schwarz Purvesh Gosalia
adam.allen@ngkf.com tip.strickland@ngkf.com david.schwarz@ngkf.com purvesh.gosalia@ngkf.com
T 713-425-5433 T 713-337-5810 T 713-337-5811 T 713-300-7954
M 713-824-6066 M 832-724-4288 M 713-412-9055 M 313-570-5221
2
EXECUTIVE SUMMARY 4
PROPERTY SUMMARY..........................................5
INVESTMENT HIGHLIGHTS.................................. 6
PROXIMITY TO MAJOR EMPLOYERS......................11
AREA ENTERTAINMENT...................................... 17
EDUCATION....................................................... 19
PROPERTY DETAIL 20
TABLE OF CONTENTS
PROPERTY DETAILS............................................22
COMMUNITY AMENITIES & FEATURES................ 26
FLOOR PLANS................................................... 28
FINANCIAL ANALYSIS 30
PROFORMA....................................................... 31
UNDERWRITING ASSUMPTIONS.........................32
MARKET OVERVIEW 34
RENT COMPARABLES SUMMARY........................35
APPENDIX 36
NEWS ARTICLE..................................................37
BROKERAGE RELATIONSHIPS............................ 38
DISCLAIMER..................................................... 39
3
executive summary
GALVESTON BAY
texas a&m
3 university PELICAN ISLAND
2 PORT OF GALVESTON GALVESTON CHANNEL
1 utmb GALVESTON
eet
s t r
4th
oad
r
ry
fer
emerald by the sea
condominiums
seawall blvd sandpiper
4 stewart beach rv resort
# POINT OF INTEREST DISTANCE TO PALM SHORE EMPLOYMENT STUDENTS
1 UTMB Galveston 850 Feet 13,000 3,169
2 Port of Galveston 1.25 Miles 14,000 N/A
3 Texas A&M University 2.5 Miles 350 2,324
4
4 Stewart Beach 1,000 Feet N/A N/A
property summary
615 Holiday Drive
ADDRESS 402 Church Street
Galveston, TX 77550
TERMS All Cash
located in the heart of galveston
walkable to utmb galveston and SUBMARKET Galveston/Dickenson
stewart beach NUMBER OF UNITS 88
proven value-add opportunity with YEAR COMPLETED 1971
ample upside in rents AVERAGE UNIT SIZE 788 SF
rentable square feet 69,342 SF
ancillary income upside
MARKET RENT PER UNIT $988
significant capex invested by current MARKET RENT PER SF $1.25
owner
OCCUPANCY 93% (07/19)
strong submarket fundamentals ACREAGE & DENSITY 1.21 Acres | 72.60 Units/Acre
galveston
INDEPENDENT School of choice district
SCHOOL DISTRICT
5
Investment Highlights
Located in the Heart of GALVESTON BAY
Galveston Walkable to texas a&m
3 university
UTMB Galveston and
PELICAN ISLAND
Stewart Beach 2 PORT OF GALVESTON GALVESTON CHANNEL
• Palm Shore benefits from an excellent
location in the heart of Galveston
walkable to major employers and 1 utmb GALVESTON
neighborhood amenities including eet
tr
UTMB’s Galveston Campus and Stewart 4th s
Beach oa
d
yr
◊ UTMB Galveston (850 ft): Public ferr
hospital and medical school that is emerald by the sea
condominiums
one of Galveston’s largest employers
seawall blvd
with a staff of 13,000 people and 3,169 4 stewart beach sandpiper
rv resort
students # POINT OF INTEREST DISTANCE TO PALM SHORE EMPLOYMENT STUDENTS
◊ Stewart Beach (1,000 ft): Galveston’s 1
2
UTMB Galveston
Port of Galveston
850 Feet
1.25 Miles
13,000
14,000
3,169
N/A
premier family beach park with plenty 3 Texas A&M University 2.5 Miles 350 2,324
4 Stewart Beach 1,000 Feet N/A N/A
of amenities including lifeguards,
chair/umbrella rentals, beach
volleyball courts and more
◊ Port of Galveston (1.25 miles): The 5th
busiest cruise port in the nation which
employs approximately 14,000 people
◊ Texas A&M Galveston (2.5 miles):
A 135-acre campus specializing in
maritime studies with a faculty of 350+
people and student body of 2,324
6
Investment Highlights
Proven Value-Add Opportunity
with Ample Upside in Rents
• The current owner has partially renovated 34 units
with new appliances (27 white and 7 stainless Partially Renovated - 615 Holiday Partially Renovated - 402 Church
steel), laminate countertops, updated lighting/
fixtures, faux-wood flooring, and the installation of
ceiling fans
• Renovated units are leasing for premiums up
to $150 per month over non-renovated units
depending on the individual floorplan and if it
includes stainless steel appliances or not
• A new owner will have the ability to renovate all 88
units with high-end countertops and appliances, a
tile backsplash, modern lighting and fixtures, and
continue to install faux-wood flooring
Subject Rent Comparables
Residence at West
Property Name Palm Shore Chateau Lafitte Ebbtide Seaside Village Oceanfront Lofts
Beach
YEAR BUILT 1971 1970 1977 1963 1972 1986
EFF. RENT/UNIT $988 $1,146 $1,215 $1,236 $1,301 $1,251
EFF. RENT DELTA $158 $227 $248 $316 $263
FLOORING FAUX WOOD/TILE FAUX WOOD/TILE FAUX WOOD FAUX WOOD/TILE FAUX WOOD FAUX WOOD
APPLIANCES WHITE WHITE STAINLESS STEEL WHITE WHITE STAINLESS STEEL
COUNTERTOPS LAMINATE LAMINATE GRANITE LAMINATE LAMINATE GRANITE
CLASSIC STYLE REFINISHED FRONTS
CABINETS (HARDWARE) NEW FRONTS (YES) NEW FRONTS (YES) CLASSIC STYLE (YES) NEW FRONTS (NO)
(YES) (NO)
FIXTURES BRUSHED NICKEL CLASSIC BRUSHED NICKEL CLASSIC BRUSHED NICKEL BRUSHED NICKEL
LIGHTS YES NO YES NO NO YES
TILE BACK SPLASH NO NO YES NO NO NO
7
Investment Highlights
Ancillary Income Upside
• Under the current management structure most utilities are
provided by the community and included in market rent
• A new owner has the ability to charge residents for utilities
currently included in rent and increase RUBS income by over
$75,000 annually*
• A new owner also has the ability to implement valet trash service
and charge residents $25-30/month
615 HOLIDAY DRIVE 402 CHURCH STREET
Water/Sewer Flat Fee of $40-$55/month Provided by the Property
Electricity Provided by the Property Sub-metered
Gas Provided by the Property Provided by the Property
Trash Provided by the Property Provided by the Property
*assumes a flat fee of $75/month and 95% occupancy
Significant Capex Invested by Current
Owner
• Current ownership has invested approximately $465k of capex
into the property – the majority of which was spent on exterior
and deferred maintenance items inherited from the previous
owner
• Major items include:
◊ Exterior/Mansard Siding Repairs ($85k)
◊ Roof Repairs/Replacements ($85k)
◊ New Perimeter Fencing ($24k)
◊ Parking Lot Resurfacing ($16k)
◊ Plumbing ($13k)
8
Investment Highlights
Strong Submarket Fundamentals
Dickinson/Galveston Current Submarket Stats*
Galveston/Dickinson Submarket
Class A Class B Class C
Size (sf) 808 830 876
Price ($/mo) $1,210 $962 $791
Rental Rate ($/sf/mo) $1.50 $1.16 $0.90
Occupancy 91.6% 90.8% 95.1%
Occupancy & Rent Growth Trends*
Occupancy Rent Growth
T3 8.1% 8.3%
T6 7.9% 4.6%
T12 1.8% 1.8%
* Source: ADS
Historical Occupancy & Effective Rents
Historical Occupancy and Effective Rents
Dickinson/Galveston (Dickinson/Galveston Submarket)
930 92.5%
920 92.0%
Effective Rent Growth Projections
910 91.5%
2020
900 91.0%
3.6%
890 90.5%
880 90.0% 2021
870 89.5%
3.0%
860 89.0%
2022
850 88.5% 3.6%
840 88.0%
06/2017 09/2017 12/2017 03/2018 06/2018 09/2018 12/2018 03/2019 * No new supply is forecasted through 2021
Price ($/mo) Occupancy (%)
9
Investment Highlights
Favorable Galveston County Tax Basis
• The Galveston County Appraisal Average Year One Assessed Value % of Sales Price
District has historically been Brazoria Fort Bend Galveston Harris Montgomery
far less aggressive than
Harris County in terms of
reassessment following the sale
of multifamily properties 80%
79% 78%
• According to NKF’s Houston 71%
70% 70% 70%
69% 68%
MSA tax study, Galveston 67% 67%
66%
County reassessments following 59%
57% 57%
a sale averaged 55% of the 53%
55%
53%
52%
purchase price - the lowest 48%
reassessment rate of any county 2014 2015 2016 2017
in the Houston MSA. Sale Year
10Close proximity to Galveston’s Major employers
TEXAS
PORT OF A&M
GALVESTON
2.75 Miles
UTMB
GALVESTON
1.25 Miles
University of Texas Medical Branch (0.35 miles NW)
• Opened in 1891 as the nation’s first public medical school and
0.35 Miles
hospital
• $3.3 billion annual statewide economic impact, in terms
of business volume, personal income and durable goods
purchases
• More than 42,000 jobs in Texas are directly or indirectly
attributed to UTMB
• Currently one of Galveston’s largest employers with a staff of
over 13,000 employees and 3,169 students
• UTMB includes schools of Medicine, Nursing, Health Professions
and Graduate Biomedical Sciences; three institutes for
advanced study; a major medical library; a network of hospitals
and clinics that provide a full range of primary and specialized
medical care; and numerous research facilities.
• UTMB is a part of The University of Texas System and a member
of the Texas Medical Center. 11Close proximity to Galveston’s Major employers
American National Insurance Company (1.0 miles W)
• Headquartered in Galveston, Texas, is the city’s second
largest employer
Texas A&M University at Galveston (2.75 miles NW) • Consists of more than 1,600 employees throughout the
• A 135-acre campus established in 1962 Galveston area
• Student body of 2,324 • American National offers a broad variety of life insurance,
• Faculty/staff of over 350 employees retirement annuities, accident and health insurance, pension
• The University is an ocean-oriented branch of Texas A&M and plan products and services, credit insurance, and property/
offers undergraduate and graduate degrees in various maritime casualty insurance for personal lines, agribusiness and
studies targeted commercial exposures
12Close proximity to Galveston’s Major employers
The Port of Galveston
1.25 Miles from Palm Shore
the port of galveston:
»» The Port of Galveston consists of the Galveston Ship Channel, the south
side of Pelican Island, the north side of Galveston Island and the entrance
to Galveston Bay. The Galveston Channel has an authorized minimum
depth of 45 feet and is 1,200 feet wide at its narrowest point
5th Busiest
Cruise Port in the U.S.
»» In 2017, three Carnival ships and two Royal Caribbean ships call the port
home year-round. In 2018, over 980,000 cruise passengers departed from
the port, a 6.5 percent increase over 2017. 1,966,176 Cruise Passengers
»» Terminal 2 was expanded in 2016 to accommodate Royal Caribbean - The $2.3 Billion Impact
new 150,000 square feet facility can accommodate up to 5,000 passengers
»» In April 2016, a new vehicle distribution center for BMW Group was 4.1 Million Short Tons
opened at the port - The new 20 acre site has the capacity to import
32,500 cars per year, an inventory worth more than $1.3 billion 13,892 Jobs
13Close proximity to Galveston’s Major employers
Marathon Petroleum Company
Galveston Bay Refinery (8.7 miles NW) Texas City Refinery (8.5 miles NW)
• Began operations in 1934 and was purchased by Marathon • Built in 1931 and purchased by Marathon Petroleum in 1962
Petroleum in 2013 • Employs 290 workers
• Employs 1,750 workers and is the largest employer in Texas City • The refinery has a refining capacity of 86,000 barrels per day
• The refinery has a refining capacity of 459,000 barrels per day • Produces gasoline, chemical-grade propylene, propane,
• Its Cogeneration Facility currently has 1,055 megawatts of aromatics, dry gas and slurry
electrical production capacity and can produce 4.3 million
pounds of steam per hour
• Produces gasoline, distillates, aromatics, heavy fuel oil,
refinery-grade propylene, fuel-grade coke, dry gas and sulfur
14aerial
Moody Gardens
Schlitterbahn
Galveston Island Texas A&M University
Convention Center Port of Galveston Galveston Campus
Cruise Terminal 1
O’Connell American National
High School Insurance Co.
Pleasure Pier UNIVERSITY OF TEXAS
Austin MEDICAL BRANCH
Middle School
emerald by the sea
condominiums
sea
wa
ll blv
d
stewart beach
Homewood Suites
by Hilton
sandpiper
rv resort
Best Western Plus
15aerial
stewart beach
emerald by the sea
condominiums
blvd
seawall
UTMB Health
Eye Center
Galveston
Fire Station #2
5th
str
eet
4t
hs
tr
eet
16area entertainment
Rd
Pt
GALVESTON ISLAND
ia
gin
Vir
TIKI Tik TO HOUSTON GALVESTON 23
ISLAND
i Dr
BAY
Gaveston
Causeway
87
HWY
BOLIVAR
PENINSULA
GALVESTON
WEST BAY BAY
Dr
iew
nelv
Ferry
Chan Rd
PELICAN
tt
Prui
Lewis Crossing
Texas A&M
Ln
ISLAND
St
77th St
93rd
91st St
St
ide St
89th
Bays
Gti Blvd
Sportsman Rd
n Rd
Teichma
SEAW
71st St
OLF PA
25
W Br
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Pelic
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Coas
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Travel
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Air Rd
Bay Mea
60th St
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OFFATS 63rd Re
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62nd St
St
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29 BAYOU
T
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103rd St
HARB
Scholes
50th
ORSID
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Airport
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Syndor
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Back Bay
43rd
14 28
Pine St
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Driftwood
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Maple Wi
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Bayou
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Victory
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ay
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Homes
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Wimcre
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Hollyw
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Broome
AY
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8
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st St
ISLAND
St
St
ood Ave
Tuna
20th
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St
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Ave
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JONES hani Mac
St
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ina
49th
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STEWARD RD
45 T
48th
16th
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UTMB
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DR
Oleander Ave
St
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Campec
San Marino
Oak St
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37 T
10th
Fairway Dr
St
Cessna Dr
5th St
St
9th St
1st St do Dr
Fern
St
Range Rd
St M
Golf Crest Dr
81 ST
Apffe
St
Pine St
32nd
7th St
Aven
H
6th St
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Aven Rd
STE Terminal
2 ND
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Chur
Dr
St
Dr
St
WA
7 1/2 Mil
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Blvd
Cove Vie
RD Win
83rd St
ar St
Domin
7 Mile Rd
nie
RD
77th St
Kleinm
75th St
St
19
25 T
Central City Blvd Seal Aven
y Av ue H
W Beach Dr
21 S
e
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ique St
w Blvd
14 T
H
an Ave
Av Aven
89th St
Sher Denv Aven enue
87th St
10
ue K
85th St
M 1/
24
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SEAWALL BLVD
3
GULF OF MEXICO
ATTRACTIONS & SIGHTS MUSEUMS, LIBRARIES & THEATER PARKS & BEACHES BOATING VISITOR INFORMATION
1 Moody Gardens 12 Ocean Star Drilling Rig Museum 19 East Beach 26 Texas Cruise Ship Terminal 30 Visitors Information Center
2 Schlitterbahn Waterpark 13 Pier 21 Theater 20 East End Lagoon Nature Preserve 27 Galveston Island Ferry
3 Historic Pleasure Pier 14 Texas Seaport Museum & 1877 Tall 21 Stewart Beach 28 Harbor Tours
4 Galveston Island Convention Center Ship ELISSA 22 Moody Gardens Public Golf Course 29 The COLONEL Paddlewheeler
at the San Luis Resort 15 Galveston Railroad Museum 23 Galveston Island State Park
5 Historic Downtown Strand Seaport 16 Rosenberg Library & Museum 24 Beach Pocket Park 1
6 1892 Bishop’s Palace 17 Lone Star Flight Museum 25 Seawolf Park
7 Haunted Mayfield Manor 18 Moody Medical Library
8 The Grand 1894 Opera House
9 1895 Moody Mansion
10 University of Texas Medical Branch
17area entertainment Adventure Pointe Theme Park Moody Gardens
Adventure Pointe Theme Park (coming soon)
• A 25-acre family-friendly theme park currently under construction
• Attractions will include go-karts, miniature railroad, outdoor ice
skating rink, pirate ride, boardwalk, and an outdoor entertainment
venue with capacity for 1,200 people
Moody Gardens
• An educational tourist complex featuring three pyramid attractions,
golf course, white sand beach, and water park
• The three main pyramids include the aquarium, rainforest, and Pleasure Pier Schlitterbahn Galveston Island
discovery
• The complex employs more than 1,200 workers
Pleasure Pier
• A historic amusement park built atop a 1,130-foot pier
• Attractions include 15 rides, restaurants, and shops
Schlitterbahn Galveston Island
• A three section Water amusement park located in Galveston
• Attractions include 22 rides and attractions and 21 dining options
• Features a heated indoor park open year-round
Strand Historic District Strand Historic District Texas City Dike
• A National Historic District located in downtown Galveston
• The district is a major tourist attraction and is considered
Galveston’s premier shopping and entertainment center
• Features historical exhibits, museums, art galleries, shops,
restaurants, and night clubs
Texas City Dike
• A 5.34-mile pile dike constructed in 1935 and is locally known as
the “the world’s longest man-made fishing pier”
• The dike consists of several fishing piers, beaches, picnic areas,
and boat ramps
18Education
Texas A&M University at
Galveston (2.75 miles NW)
• A 135-acre campus
established in 1962
• Student body of 2,324
• Faculty/staff of over 350
employees
• The University is an ocean-
oriented branch of Texas A&M
Galveston College (2.7 miles SW)
and offers undergraduate and
• Opened in 1967 and serves approximately
graduate degrees in various
2,300 students each semester
maritime studies
• Offers programs and courses for academic
transfer, workforce education, continuing
education, and developmental programs
Ball High School (2.7 miles SW)
• Serves the cities of Galveston and Jamaica Beach as well as the unincorporated
communities of Port Bolivar and Crystal Beach on the Bolivar Peninsula
• Employs 129 teachers and serves around 2,000 students
• Boasts a 15:1 student to teacher ratio
19property DETAIL 20
close-up
UTMB Health
Eye Center 6th
stre
et
5th
stre
et
treet
r c h s
chu
4th
str Galveston
eet Fire Station #2
21property details - 615 Holiday drive
style Garden on slab foundation
7 two-story residential buildings, 1
buildings maintenance area and 2 laundry rooms
exterior walls Brick and wood siding
roof system Flat - 1 TPO, 3 Silicone 3 mod bit
floor coverings Tile, faux wood, carpet
WIRING Copper
Piping Galvanized Primary, some copper, some PVC
paving Asphalt
ELECTRICITY Master-metered
Master-metered (two tenants not on system)
WATER/SEWER $40 1-1 / $50 2-1 / $55 3-1
HVAC Individually climate-controlled units
HOT WATER Two boiler systems
TRASH Paid by Property
PARKING SPACES 54 total spaces, 50 covered
$50 application fee
fees/deposits $250, $275, $300, $350 deposits
pet fee $300 per pet
W/d Connections None
concessions No concessions, 5% UTMB discount
22unit mix - 615 Holiday drive
Unit Type Square Footage Unit Count Market Rent PSF
1X1 625 16 $861 $1.38
1X1 694 3 $867 $1.25
1X1 705 4 $863 $1.22
1X1 715 1 $850 $1.19
1X1 800 5 $870 $1.09
1X1 825 1 $850 $1.03
2X1 795 12 $1,071 $1.35
2X1 950 1 $1,100 $1.16
2X2 795 3 $1,212 $1.52
2X2 970 1 $1,195 $1.23
2X2 1,034 1 $1,195 $1.16
2X2 1,100 1 $1,220 $1.11
3X1 1,034 4 $1,463 $1.41
3X1 1,125 1 $1,475 $1.31
TOTAL/AVERAGE 772 54 $1,007 $1.31
23property details - 402 church
style Garden on slab foundation
1 two-story residential buildings, 1
buildings maintenance area and 1 laundry room
exterior walls Brick and wood siding
roof system Flat - Silicone
floor coverings Fux vinyl wood, vinyl tile
WIRING Copper
piping Galvanized Primary, some copper, some PVC
paving Asphalt
ELECTRICITY Sub-metered
WATER/SEWER Master-metered
HVAC Individually climate-controlled units
HOT WATER Two boiler systems
TRASH Included in rent
PARKING SPACES 24 total covered spots
$50 application fee
fees/deposits $250, $275, $300, $350 deposits
pet fee $300 per pet
W/d Connections None
concessions No concessions, 5% UTMB discount
24unit mix - 402 church
Unit Type Square Footage Unit Count Market Rent PSF
1X1 795 28 $895 $1.13
2X2 900 6 $1,250 $1.39
TOTAL/AVERAGE 814 34 $958 $1.18
25community amenities & interior features
• Swimming Pool
• On Site Laundry Facilities
• Covered Parking
• Central Mailboxes
• Tile Flooring*
• Faux Wood Flooring*
• Ceiling Fans
• White Appliances
• Stainless Steel Appliances
* In Select Units
26615 Holiday 402 Church
615 Holiday 615 Holiday
27floor plans
the
strand 1 BEDROOM 1 BATH - 700 SF seawall 1 BEDROOM 1 BATH - 625 SF
seagrass 1 BEDROOM 1 BATH - 702 SF
28floor plans
2 BEDROOM 1 BATH - 795-875 SF 2 BEDROOM 2 BATH - 900-1050 SF
3 BEDROOM 1 BATH - 1095 SF
29financial analysis 30
PRO FORMA
PRO FORMA FINANCIAL ANALYSIS
INCOME % of GSR Totals Per Unit Per SF
Gross Scheduled Rent 100.00% $1,043,400 $11,857 $15.04
Less: Vacancy 5.00% 52,170 593 0.75
Less: Non-Revenue Units 1.00% 10,434 119 0.15
Less: Collection Loss 0.10% 1,043 12 0.02
Total Rental Income 93.90% $979,753 $11,134 $14.12
% of GSR Totals Per Unit Per SF
Plus: Utility Reimbursements 7.21% 75,240 855 1.08
Plus: Other 1.27% 13,200 150 0.19
Total Other Income 8.48% 88,440 1,005 1.28
Effective Gross Income 102.38% $1,068,193 $12,139 $15.40
EXPENSES % of EGI Totals Per Unit Per SF
Repairs and Maintenance 5.77% 61,600 700 0.89
Payroll 9.06% 96,800 1,100 1.40
Administrative 1.65% 17,600 200 0.25
Marketing 1.03% 11,000 125 0.16
Utilities 12.10% 129,295 1,469 1.86
Total Variable Expenses 29.61% $316,295 $3,594 $4.56
Taxes 7.12% 76,103 865 1.10
Insurance 5.77% 61,600 700 0.89
Management Fee 4.00% 42,728 486 0.62
Total Operating Expenses 46.50% $496,726 $5,645 $7.16
Capital Reserves 2.47% 26,400 300 0.38
Total Expenses 48.97% $523,126 $5,945 $7.54
Net Operating Income $545,067 $6,194 $7.86 31UNDERWRITING ASSUMPTIONS
Income
• Gross Scheduled Rent (GSR) – Proforma Year 1 GSR is projected at $1,043,400 annually, or $86,950 per month.
• Vacancy Loss – In Proforma Year 1, the Property is expected to maintain at least a 95% occupancy rate.
• Non-Revenue Units – In Proforma Year 1, Non-Revenue Units are assumed at 1.00% of GSR.
• Collection Loss – In Proforma Year 1, Collection Loss is assumed at 0.10% of GSR.
• Utility Reimbursements – Utility Reimbursements for Proforma Year 1 is projected at $75,240 annually, or $855 per unit. This value is
based on the implementation of a $75 per month RUBS fee at 95% occupancy.
• Other – Other Income for Proforma Year 1 is projected at $13,200 annually, or $150 per unit, which is in line with surrounding
comparable properties and historical other income.
32UNDERWRITING ASSUMPTIONS
Expenses
• Repairs and Maintenance – In Proforma Year 1, Repairs and Maintenance expenses are projected at $61,600 annually, or $700 per unit,
which are in line with surrounding comparable properties and historical Repairs and Maintenance expenses.
• Payroll – In Proforma Year 1, Payroll expenses are projected at $96,800 annually, or $1,100 per unit, which are in line with surrounding
comparable properties and historical Payroll expenses.
• Administrative – In Proforma Year 1, Administrative expenses are projected at $17,600 or $200 per unit, which are consistent with
historical Administrative expenses and properties of this size.
• Marketing – In Proforma Year 1, Marketing expenses are projected at $11,000 annually, or $125 per unit, which are consistent with
historical Marketing expenses and properties of this size.
• Utilities – The property has an average Utilities cost for apartment communities of this quality and area. Utilities are based on May’19
trailing three-month actuals. They are projected at $129,295 annually, or $1,469 per unit.
• Real Estate Taxes – Palm Shore is located in Galveston County. The combined 2018 property assessment was $2,689,490 and the
combined assessment for 2019 increased to $2,805,530. The Proforma Year 1 Tax expense is calculated by growing the 2019 assessed
value by 10% and multiplying by the 2019 tax rate (2.466 per $100). The projected Proforma Year 1 taxes are $76,103 or $865 per unit.
• Insurance – In Proforma Year 1, Insurance expenses are projected at $61,600, or $700 per unit. Insurance expenses vary depending on
the coverage and deductible selected by the investor, and whether the Property is included on a single-asset or a blanket policy.
• Management Fee – Management Fee is projected to be 4.00% of Effective Gross Income, which equals $42,728 annually, or $486 per
unit in Proforma Year 1. This is in line with properties in this submarket of this size and quality.
• Capital Reserves – The Property was built in 1971. Proforma Year 1 l Reserves are projected at $26,400 annually, or $300 per unit.
33PENINSU
BOLIVA
87
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BO
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GALVESTON
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W Beach Dr
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35th St
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36th
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46th
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48th
GALVESTON
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52nd
54th St
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BAY
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4
55th
St
She
56th
St
57th
60th St St
Harris
Rear
Way
Bayou
Sh ore Dr
59th St
62nd St
63rd Re
ar St
61 ST
64th St 62nd St
63rd St
STEWARD RD
Victory Hollywo
Central City Blvd
Ave od Ave
65th St
Bayou
Homes
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BAYOU
Maple Wi Dr
Ln llow
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Oleander Ave
Fairway Dr
45
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Driftwoo 67th St
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market overview
Avenue P
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77th St 73rd St 72nd St
Chan Rd
1/2
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Pine St Oak St
Baysi
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Dominiq
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Kleinm
81 ST an Ave
5
83rd St
Cessna Dr
Dr
Dr l
ina
Lewis
Terminal
89th
St rm
Teichman
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85th St
Airport
Ln
87th St
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89th St
93rd
St
RD
RD
WA
STE
Syndor
Travel Ln
Air Rd
99th St
Causeway
Gaveston
Vir
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Bay Meado 103rd St Campech
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Cove Vie
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Tik
Broome
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WEST BAY
7 Mile Rd
ISLAND
Range Rd
TIKI
7 1/2 Mil
e Rd
Sportsman Rd
8 Mile Rd
34
8 Mile Rdrent comparables
# OF AVG. MARKET MARKET EFFECTIVE EFFECTIVE EFF. RENT
# PROPERTY YOC OCC. UNIT TYPE DELTA
UNITS SQ FT RENT RENT PSF RENT RENT PSF
(Comp vs. Subject)
1-Bed 40 750 $1,052 $1.40 $1,046 $1.39 $168
1 Chateau Lafitte 1970 96% 2-Bed 40 1,080 $1,252 $1.16 $1,246 $1.15 $98
Total/Avg. 80 915 $1,152 $1.26 $1,146 $1.25 $158
1-Bed 69 647 $1,037 $1.60 $1,033 $1.60 $154
Residence at
2 1977 99% 2-Bed 64 1,008 $1,471 $1.46 $1,411 $1.40 $263
West Beach
Total/Avg. 133 821 $1,246 $1.52 $1,215 $1.48 $227
1-Bed 49 750 $1,102 $1.47 $1,094 $1.46 $216
3 Ebbtide 1963 95% 2-Bed 49 900 $1,385 $1.54 $1,378 $1.53 $230
Total/Avg. 98 825 $1,244 $1.51 $1,236 $1.50 $248
1-Bed 49 906 $1,022 $1.13 $1,012 $1.12 $134
4 Seaside Village 1972 80% 2-Bed 90 1,178 $1,579 $1.34 $1,463 $1.24 $315
Total/Avg. 139 1,082 $1,383 $1.28 $1,304 $1.21 $316
1-Bed 32 978 $1,054 $1.08 $1,054 $1.08 $176
Oceanfront
5 1986 89% 2-Bed 60 1,081 $1,357 $1.25 $1,357 $1.25 $209
Lofts
Total/Avg. 92 1,045 $1,251 $1.20 $1,251 $1.20 $263
1-Bed 48 783 $1,052 $1.34 $1,046 $1.34 $168
TOTALS/
91% 2-Bed 61 1,065 $1,438 $1.35 $1,389 $1.30 $241
AVERAGES
Total/Avg. 108 941 $1,268 $1.35 $1,238 $1.32 $249
1-Bed 58 736 $878 $1.19 $878 $1.19
SUBJECT
2-Bed 25 855 $1,148 $1.34 $1,148 $1.34
Palm Shore 1971 93%
3-Bed 5 1,052 $1,465 $1.39 $1,465 $1.39
Total/Avg. 88 788 $988 $1.25 $988 $1.25
35appendix 36
PORT OF GALVESTON INKS LONG-TERM DEAL WITH DISNEY CRUISE LINE
news article
Houston Business Journal
By Olivia Pulsinelli
January 17, 2019
The Port of Galveston and Florida-based Disney Cruise Line have inked a deal that’s expected to include more sailings.
The agreement is for an additional 10 years, starting Nov. 1, 2018, and includes an option to renew for two additional five-year periods,
according to a Jan. 17 press release. Disney is projected to nearly double its sailings from Galveston over the first five years of the potentially
20-year agreement, per the release.
Additionally, Disney might bring new ships to Galveston, as the agreement includes accommodating ships equal to or larger than the Disney
Magic/Disney Wonder class of vessel. Disney will have three new ships setting sail in 2021, 2022 and 2023, though it’s not yet known if any
of those ships will sail from Galveston.
“September 22, 2012, marked the first time ever that a Disney Cruise Line ship set sail from the State of Texas with the maiden voyage of
Disney Wonder,” Rodger Rees, Port of Galveston’s CEO and port director, said in the release. “The Port has been seasonal homeport to both
Disney Wonder and Disney Magic ever since. We are thrilled to be able to continue to give Texas and the southwest region of the United States
the opportunity to experience Disney cruise vacations from their own backyard. We are proud to be one of the few selected homeports for
Disney Cruise Line.”
In the new agreement, Galveston remains a seasonal homeport for Disney. However, Disney eventually will start sailing from cruise terminal
2 on Sundays instead of Fridays, freeing up Fridays for potentially another cruise line, a Port of Galveston spokesperson explained.
That’s thanks to a new cruise terminal that’s expected to open in 2021. Royal Caribbean’s ships will move to the new terminal, freeing up
Sundays on terminal 2 for Disney.
The Board of Trustees of the Galveston Wharves and Miami-based Royal Caribbean Cruises Ltd. (NYSE: RCL) entered into a memorandum of
understanding regarding a new cruise terminal in December. Royal Caribbean expects to invest nearly $100 million to build the new terminal.
The 200,000-square-foot terminal will be built on 10 acres of land in the southeast section of the port known as Pier 10.
The Port of Galveston ranked as the No. 4 busiest port by cruise embarkations for 2016, according to an economic impact analysis Cruise
Lines International Association released in October 2017. The port handles more than 1.8 million cruise passenger movements annually, and
the new terminal is expected to generate an additional 1 million passengers by the contract’s halfway point. Royal Caribbean’s lease will start
with a 20-year initial term and can be extended with four 10-year options.
37information on brokerage relationships
LICENSE HOLDER CONTACT TEXAS LAW REQUIRES ALL REAL ESTATE LICENSE HOLDERS TO GIVE THE FOLLOWING INFORMATION ABOUT BROKERAGE
SERVICES TO PROSPECTIVE BUYERS, TENANTS, SELLERS AND LANDLORDS.
INFORMATION: This notice is being
provided for information purposes. It TYPES OF REAL ESTATE LICENSE HOLDERS:
does not create an obligation for you • A BROKER is responsible for all brokerage activities, including acts performed by sales agents sponsored by the
to use the broker’s services. Please broker.
acknowledge receipt of this notice • A SALES AGENT must be sponsored by a broker and works with clients on behalf of the broker.
below and retain a copy for your A BROKER’S MINIMUM DUTIES REQUIRED BY LAW (A client is the person or party that the broker represents):
records. • Put the interests of the client above all others, including the broker’s own interests;
• Inform the client of any material information about the property or transaction received by the broker;
• Answer the client’s questions and present any offer to or counter-offer from the client; and
Southwest Residential Partners, Inc. • Treat all parties to a real estate transaction honestly and fairly.
BROKER FIRM NAME A LICENSE HOLDER CAN REPRESENT A PARTY IN A REAL ESTATE TRANSACTION:
345433 AS AGENT FOR OWNER (SELLER/LANDLORD): The broker becomes the property owner’s agent through an agreement with
LICENSE NO. the owner, usually in a written listing to sell or property management agreement. An owner’s agent must perform the
broker’s minimum duties above and must inform the owner of any material information about the property or transaction
aimee.hawthorne@ngkf.com known by the agent, including information disclosed to the agent or subagent by the buyer or buyer’s agent.
EMAIL AS AGENT FOR BUYER/TENANT: The broker becomes the buyer/tenant’s agent by agreeing to represent the buyer, usually
713-425-5430 through a written representation agreement. A buyer’s agent must perform the broker’s minimum duties above and must
inform the buyer of any material information about the property or transaction known by the agent, including information
PHONE disclosed to the agent by the seller or seller’s agent.
AS AGENT FOR BOTH - INTERMEDIARY: To act as an intermediary between the parties the broker must first obtain the
written agreement of each party to the transaction. The written agreement must state who will pay the broker and, in
conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. A broker who acts as an
David Oelfke intermediary:
• Must treat all parties to the transaction impartially and fairly;
DESIGNATED BROKER’S NAME
• May, with the parties’ written consent, appoint a different license holder associated with the broker to each party
456477 (owner and buyer) to communicate with, provide opinions and advice to, and carry out the instructions of each party
to the transaction.
LICENSE NO.
• Must not, unless specifically authorized in writing to do so by the party, disclose:
david.oelfke@ngkf.com • that the owner will accept a price less than the written asking price;
• that the buyer/tenant will pay a price greater than the price submitted in a written offer; and
EMAIL
• any confidential information or any other information that a party specifically instructs the broker in writing not to
713-425-5405 disclose, unless required to do so by law.
PHONE AS SUBAGENT: A license holder acts as a subagent when aiding a buyer in a transaction without an agreement to
represent the buyer. A subagent can assist the buyer but does not represent the buyer and must place the interests of the
owner first.
TO AVOID DISPUTES, ALL AGREEMENTS BETWEEN YOU AND A BROKER SHOULD BE IN WRITING AND CLEARLY ESTABLISH:
• The broker’s duties and responsibilities to you, and your obligations under the representation agreement.
• Who will pay the broker for services provided to you, when payment will be made and how the payment will be
calculated.
38disclaimer
Prospective purchasers are hereby advised the Owner (“Owner”) of PALM SHORE APARTMENTS (“Property”) are soliciting offers through Newmark Knight Frank
(“NKF”), which may be accepted or rejected by the Owner at the Owner’s sole discretion.
Any solicitation of an offer for the Property offered hereunder will be governed by this Offering, as it may be modified or supplemented. Prospective purchasers are
advised that as part of the offer process, the Owner will be evaluating several factors including the experience and financial qualifications of the purchasing entity.
The Owner shall have no obligation to accept any offer from any prospective purchaser. The Owner reserves the right to withdraw the Property from consideration at
any time prior to final execution of a Purchase Agreement.
This Offering document is furnished to prospective purchasers for the purpose of determining whether to invest in the Property offered hereby. The information
contained herein, or any other related information provided by the Owner, may not be reproduced, redistributed or used in whole or in part without the prior written
consent of the Owner.
No person has been authorized to give any information or make any representation or warranty, either expressed or implied and, if given or made, such information or
representation must not be relied upon.
While the Owner and NKF have no reason to believe that the information provided herein or in subsequent information updates delivered to potential purchasers
hereunder contains any material inaccuracies, neither the Owner nor NKF nor any of the Owner’s or NKF’s respective subsidiaries, affiliates, companies, or the officers,
directors, employees, agents and representatives of any such entities, etc., make any representations or warranties, expressed or implied, as to the validity, accuracy
or completeness of the information provided or to be provided, and nothing herein shall be deemed to constitute a representation, warranty or promise by any such
parties as to the future performance of the Property or any other matters set forth herein.
Any obligations to prospective purchasers that the Owner may have with respect to the Property are limited to those expressly set forth in a fully executed Purchase
Agreement between the parties. Prospective purchaser’s sole and exclusive rights against the Owner, with respect to this prospective transaction, the Property, or
information provided herein or subsequently, shall be limited to those remedies expressly provided in an executed Purchase Agreement, which shall not survive the
closing. Further, in no event shall prospective purchasers have any claims against the Owner, NKF, or any of their respective affiliates for any damages, liability, or
causes of action relating to the Purchase Agreement.
Prospective purchasers are not to construe the contents of this Offering or any prior or subsequent information communications from the Owner or any of their
respective officers, employees or agents as legal, tax or other advice. Prior to purchasing, prospective purchasers should consult with their own legal counsel and
personal and tax advisors to determine the consequences of an investment in the Property and arrive at an independent evaluation of such investment.
No commission or finder’s fee shall be payable to any party by the Owner nor any affiliate or agent thereof in connection with the sale of the Property unless otherwise
agreed to by the Owner in writing.
Acquisition of properties such as this offered hereunder involves a high degree of risk and are suitable only for persons and entities of substantial financial means.
39INVESTMENT SALES Brett Benton Russell Jones Matt Saunders Zach Springer brett.benton@ngkf.com russell.jones@ngkf.com matt.saunders@ngkf.com zach.springer@ngkf.com T 713-337-5800 T 713-425-5422 T 713-554-1303 T 713-425-5428 M 210-860-5515 M 832-541-1499 M 281-300-1468 M 713-897-9670 DEBT & STRUCURED FINANCE Adam Allen Tip Strickland David Schwarz Purvesh Gosalia aallen@ngkf.com tstrickland@ngkf.com dschwarz@ngkf.com pgosalia@ngkf.com T 713-425-5433 T 713-337-5810 T 713-337-5811 T 713-300-7954 M 713-824-6066 M 832-724-4288 M 713-412-9055 M 313-570-5221
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