2018 Apartment Market Overview - Huntsville, Alabama

Multifamily Market Overview HUNTSVILLE, ALABAMA

Presented to:

The Apartment Association of North Alabama (AANA) December 6, 2018 By: David Wilson, MAI

TOPICS TO COVER ยง Market Fundamentals ยง New Construction ยง Renovations ยง Transaction Activity

TOPICS TO COVER

ALABAMA MAJOR MARKET SUMMARY AxioMetrics Data 3Q18 Effective Rent per Unit

Effective Rent per SF

Effective Rent Growth Annually

Birmingham

$931

$0.92

3.8%

94.7%

1.2%

$32

Huntsville

$817

$0.85

5.9%

96.9%

1.8%

$15

Montgomery

$803

$0.78

2.7%

93.1%

-0.2%

$27

Mobile / Baldwin County

$799

$0.82

1.1%

94.4%

.20%

$25

Market

Occupancy Change Annually Occupancy Rate Concession Value

ALABAMA MAJOR MARKET SUMMARY CoStar Data 3Q18 Total Units in Survey

12 Mo Delivered Units

12 Mo. Absorption Units

Occupancy Rate

12 Mo. Asking Rent Growth

Birmingham

55,344

329

1,020

92.5%

4.2%

Huntsville

26,286

20

510

93.9%

6.4%

Montgomery

20,044

0

81

88.8%

2.4%

Mobile / Baldwin County

26,618

126

270

92.6%

2.5%

128,292

475

1,881

Market

Total

MARKET FUNDAMENTALS

Huntsville Area Effective Rent & Occupancy Trends Since 2013 $825

99%

97%

$800

95% $775 93% $750 91% $725 89% $700

87%

Effective Rent

Occupancy Rate

Most Recent Survey Attributes Total Properties: 106 Total Units: 19,946 Average Year Build: 1992 Average Unit Size (SF): 962 Source: AxioMetrics

3Q18

2Q18

1Q18

4Q17

3Q17

2Q17

1Q17

4Q16

3Q16

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q13

85% 1Q13

$675

Huntsville Area Rent & Occupancy Trends 1Q15 to 3Q18

$840

98%

$820

97%

$800

96%

$780

95%

$760 94% $740 93% $720 92%

$700

91%

$680

90%

$660 $640

89% 1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16 Asking Rent

4Q16

1Q17 Occupancy Rate

Most Recent Survey Attributes Total Properties: 106 Total Units: 19,946 Average Year Build: 1992 Average Unit Size (SF): 962 Source: AxioMetrics

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

Huntsville Area Concession Trends Since 2013

Percent Offering Concessions

Concession Value

Most Recent Survey Attributes Total Properties: 106 Total Units: 19,946 Average Year Build: 1992 Average Unit Size (SF): 962 Source: AxioMetrics

3Q18

2Q18

1Q18

4Q17

3Q17

2Q17

1Q17

4Q16

3Q16

2Q16

1Q16

4Q15

$0 3Q15

0% 2Q15

$10

1Q15

10%

4Q14

$20

3Q14

20%

2Q14

$30

1Q14

30%

4Q13

$40

3Q13

40%

2Q13

$50

1Q13

50%

Huntsville Area Concession Trends 1Q15 to 1Q18

$50.00

100%

$45.00

90%

$40.00

80%

$35.00

70%

$30.00

60%

$25.00

50%

$20.00

40%

$15.00

30%

$10.00

20%

$5.00

10%

$0.00

0% 1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

Current Concession Value

4Q16

1Q17

2Q17

Current Period Concession Level

Most Recent Survey Attributes Total Properties: 106 Total Units: 19,946 Average Year Build: 1992 Average Unit Size (SF): 962 Source: AxioMetrics

3Q17

4Q17

1Q18

2Q18

3Q18

Huntsville Area Employment Trends 245,000

7,800 jobs added in past 12 months

240,000

235,000

230,000

225,000

220,000

215,000

210,000

205,000 3Q08

3Q09

3Q10

Source: CoStar

3Q11

3Q12

3Q13

3Q14

3Q15

3Q16

3Q17

3Q18

Huntsville Area | Year Over Year Job Growth

Source: CoStar

Huntsville Area | CoStar 3Q2018 Stats Property Class

Units

Vacancy Rate

Asking Rent

Effective Rent

4 & 5 Star

8,120

3.2%

$ 1,042

$1,035

3 Star

13,678

6.8%

$ 713

$703

1 & 2 Star

4,488

9.6%

$ 555

$545

Overall Market

26,286

6.1%

$798

$789

Huntsville Area | CoStar 3Q2018 Stats 12 Month Change Occupancy

6.1%

Net Absorption

510 Units

Net Deliveries

20 Units

Rent Growth

6.4%

Effective Rent Growth

7.6%

Huntsville Area | CoStar Submarkets

Huntsville Area | CoStar Sample Submarket Inventories (3Q2018) #

Submarket

Properties

Units

% Metro

1

Central

12

1,360

5.17%

2

Limestone County

16

1,200

4.57%

3

Madison/Airport

32

6,817

25.93%

4

Outlying Madison County

15

995

3.79%

5

South Madison County

25

4,417

16.80%

6

Southwest

57

3,226

12.27%

7

University/Research Park

37

8,271

31.47%

194

26,286

TOTALS

Huntsville Area | CoStar Stats Submarket Rents (3Q2018) Asking Rents

Effective Rents

#

Submarket

Per Unit

Annual Growth

Per Unit

Per SF

Annual Growth

Concessions

1

Central

$1,046

10.20%

$1,039

$1.09

11.9%

0.80%

2

Limestone County

$645

4.00%

$643

$0.69

4.90%

0.30%

3

Madison/Airport

$918

9.50%

$911

$0.87

10.4%

0.80%

4

Outlying Madison County

$644

3.90%

$638

$0.68

4.40%

0.80%

5

South Madison County

$760

5.70%

$752

$0.77

7.60%

1.00%

6

Southwest

$529

2.60%

$521

$0.70

3.40%

1.40%

7

University/Research Park

$811

5.00%

$800

$0.85

6.70%

1.30%

Conclusion - Market Fundamentals §

§

§

94%+ Occupancy Rate – In Each of Last 4 Quarters (Wow!!) §

Highest Sustained Occupancy Average – Since Records Have Been Kept (24 Years)

§

2007 and 2008 Each Had Occupancy Rates in 94% Range, But Only at Mid-Year

§

1997 Had Three Sustained Quarters at 93% per The David Wilson Company, LLC

Record-Setting Effective Rent Growth §

Highest I Can Remember in 24 Years

§

CoStar just ranked Huntsville #4 in the USA for annual effective rent growth (behind Reno, Las Vegas and Phoeinx)

Lowest Concession Usage – Since Records Have Been Kept (24 Years) §

Both in $$ Amount and % of Properties Offering

NEW CONSTRUCTION

New Unit Delivery History | Huntsville/Madison

Source: David Wilson, MAI

Actively Under Construction Actively Under Construction as of Dec. 6, 2018 Project Name

Submarket

Previously Delivered

Units Under Construction

432

96

Class B, 3-story

Comments

ACTIVELY UNDER CONSTRUCTION 1

Limestone Creek**

West Huntsville

2

Heights at Monte Sano

SE Huntsville - Big Cove

0

172

Class A - Phase 2 of Hampton Falls

3

Palladian at Promenade**

Madison - North

46

64

110-unit, 1 and 2-story, duplex-style with garages

4

Watermark at Bridge Street**

West Huntsville

0

244

Class A, 4-sty elevator, surface park, no retail

5

Virtuoso Living (fka Dry Creek)**

West Huntsville

0

400

1-story modular, near Village of Providence

6

The Station at Town Madison

Madison - South

0

274

Class A, 4-sty elevator, surface park, no retail

7

Legacy at Jones Farm Phase II

SE Huntsville

248

173

Class A, 4-sty elevator, surface park, no retail

8

The Avenues Madison

Madison - South

0

190

Class A, 4-sty elevator, surface park, no retail

726

1,613

TOTAL UNDER CONSTRUCTION

** Actively in Lease-up

5 Mixed-Use Projects With Multifamily Project Name

Location

Master Developer

§

Town Madison

City of Madison – South

Breland Companies

§

CityCentre

Downtown Huntsville

RCP Companies

§

Constellation

Downtown Huntsville

Scott McLain, CCIM

§

MidCity

West Huntsville

RCP Companies

§

Clift Farm

Madison – North

Breland Companies

Mixed-Use – Madison THE STATION AT TOWN MADISON

Part of 500-Acre Mixed-Use Site Retail/Restaurants, Office, Hotels, Multifamily, Singlefamily, Residential Condos, Baseball Stadium, Parks Future 600-unit “Big House” Apartments Being Planned

Apartment Units

274

Location

Near I-565, between Zeirdt Road and Wall Triana Hwy

Type

Urban Elevator

Parking

Surface

Start

May/June 2018

1st Deliveries

Late-2019

Avg Rent

Confidential

Cool Features

Expansive Pool Courtyard

Master Developer

Louis Breland

Multifamily Developer

Ingram Tynes (Birmingham)

Mixed-Use – Downtown Huntsville CITY CENTRE

AC Marriott Hotel Underway Retail/Restaurants, Office, Hotel, Multifamily

Apartment Units

280

Location

Williams Avenue Across From Embassy Suites and Big Spring Park

Type

Urban Elevator

Parking

Structured

Start

Early 2019

1st Deliveries

2020

Avg Rent

Confidential

Cool Features

Great Views of Big Spring Park Very Walkable to Publix

Master Developer

RCP Companies (Huntsville)

Multifamily Developer

Spring Bay Property Co.

Mixed-Use – Downtown Huntsville CONSTELLATION

Part of 19-Acre Site Retail/Restaurants, Office, Hotels, Multifamily

Total Units

222

Location

Memorial Parkway / Clinton Ave

Type

Urban Elevator

Parking

Structured

Start

Early 2019

1st Deliveries

2020

Avg Rent

Confidential

Cool Features

Edgy Architecture Rooftop Pool & Amenity Area

Master Developer

Scott McLain, CCIM (Huntsville)

Mixed-Use – Adjacent to Research Park MIDCITY – 140+ ACRES

Retail/Restaurants, Music Venues, Office, Hotels, Multifamily, Residential Condos, 38-Acre Park with Amphitheater, TopGolf

Apartment Units

300 (Phase 1)

Location

University Drive / Research Park Boulevard

Type

5-Story Urban Elevator

Parking

Structured

Start

Early / Mid-2019

1st Deliveries

2020

Avg Rent

Confidential

Cool Features

Best-in-Class Finishes Great Views Super Walkable Partially Over Retail

Master Developer

RCP Companies (Huntsville)

Multifamily Developer

Confidential

Under Construction & Lease-Up | Madison PALLADIAN AT PROMENADE

Developer

Allan Rappuhn (Florence, AL)

Location

Madison - North

1st Deliveries

November 2018 (46 Units)

Completion

January 2019

Total Units

110

Unit Mix

2 and 3 bedrooms

Avg Unit Size

1,894 SF $0.83/SF average rent

Average Rent 2 Bedrooms - $1,475 3 Bedrooms - $1,575 to $1,625 Occupancy

Features / Amenities

100% on 56 delivered units 1 and 2-Story Direct-Access Garages Private Driveways 17-Foot Vaulted Ceilings Stainless Appliances

Under Construction & Lease-Up | West Huntsville WATERMARK AT BRIDGE STREET TOWN CENTRE

Pre-leasing Has Just Begun Via Off-site Office

Developer

Watermark Residential (Indianapolis)

Location

Bridge Street Town Center

1st Deliveries

March 2019 – 122 units

Completion

June 2019

Total Units

244

Unit Mix

1x1, 2x2 and 3x2 floorplans

Avg Unit Size

936 SF

Average Rent

$1.50/SF range

Features / Amenities

Urban Elevator Property Surface Parking 50 Detached Garages 9-Foot Ceilings Granite Countertops Stainless Appliances

Under Construction & Preleasing | West Huntsville VIRTUOSO LIVING

Developer

JCM - Chicago

Location

Across creek east of Villages of Providence

1st Deliveries

December 2018 / January 2019

Completion

To be determined

Total Units

400

Unit Mix

1 and 2 bedrooms

Avg Unit Size

Under 950

Average Rent

Modular Prefab Structures (formerly named Dry Creek Villas) No Units Delivered Yet

1x1 / 700 SF / $1,305 1x1 / 800 SF / $1,505 2x2 / 900 SF / $1,705 2x2 / 1,000 SF / $1,805 2x2 / 1,300 SF / $2,255

Avg Rent / SF

$1.85 +-

Unique Features

Single-Level Duplex and Detached Private Yards Private Driveways

Under Construction | Big Cove Area HEIGHTS AT MONTE SANO Developer

Charlie Sealy, III (Huntsville)

Location

Southeast Huntsville “Over the Mountain�

1st Deliveries

Mid- 2019

Completion

Early 2020

Total Units

172

Comments

Adjacent to Hampton Falls Apartments, its sister property, but will have its own clubhouse, pool and amenities.

Monte Sano Elementary District

Under Construction - Southeast Huntsville LEGACY AT JONES FARM – PHASE 2

Phase 1 is 248 Units Best-In-Class Property (for entire state of AL)

Total Units

173 Units in Phase 2

Location

Jones Valley

Type

Suburban Elevator

Parking

Surface

Start

June/July 2018

1st Deliveries

Late-2019

Avg Rent

Confidential

Cool Features

Killer Pool & Amenity Area

Developer

Jones family

Conclusion – Active Construction §

Only Four Properties in Lease-Up

§

Three of Which Just Started Leasing in Nov./Dec. 2018

§

§

§

Virtuoso Living – Modular One-Story

§

Palladian at Promenade – Madison

§

Watermark at Bridge Street

New Construction Deliveries Have Been at an Unusually Slow Pace in 2018 §

Allowing for Record-Setting Rent Growth – Strong Rent Growth Should Continue Into Late-2019 at Least

§

Fewer Concessions Due to Healthy Conditions and Limited New Supply

The Active New Construction Is Diverse §

Some Fringe Locations

§

One Class B Project (Limestone Creek)

§

One Modular Project (Virtuoso)

§

One-Story | Urban-Elevator | Class A+ | Workforce | Garden

Future Starts Project Name

Submarket

Units

Comments

Developer

1

City Centre at Big Spring

Downtown Huntsville

280

Class A urban; Part of mixed use

Kevin Fitzpatrick / RCP Companies

2

Constellation

Downtown Huntsville

222

Class A urban; Part of mixed use

Master Developer is Scott McLain

3

Mid-City, Phase I

West Huntsville

300

Class A urban; Part of mixed use

RCP Companies and Confidential Developer

4

Avondale

West Huntsville

252

McCrary Road, behind Weston Ranch

Charlie Sealy, III

5

Cottages at Watercress, II

West Huntsville

42

Mostly 1-story with garages

Bo Bailey

6

Town Madison Big House, I and II

Madison - South

600

Class A, 2-story – 2 Phases 300-units each

Louis Breland

7

Old Gurley Pike (Name TBD)

East Huntsville

370

Hwy 72 East at Moores Mill (Chase Creek)

Edward Rose & Son

8

Enterprise Way (Name TBD)

West Huntsville

260

Enterprise Way at Rime Village Drive

Nicol Investment Co -Unit Count Approximate

9

Villas at Nature Walk, Phase III

West Huntsville

50

Class A, 1-story, Martin Road near Zierdt Road

Louis Breland

10

Clift Farm 1 (Name TBD)

Madison - North

270

Class A, 3-story walk-up, Balch Road, N of Hwy 72

Confidential – out-of-state

11

Clift Farm 2 (Name TBD)

Madison - North

300

Class A 3-sstory elevator, Hwy 72, W of Wall Triana

Confidential – out-of-state

12

Arbor of River Landing

West Huntsville

348

Class A, 3-story, near Huntsville airport

Gross Builders

13

Balch Road (Name TBD)

West Huntsville

258

Class A, 3-story, Balch Road, south of Hwy 72

James Bobo - Florence

14

Villas at Kelly Springs

West Huntsville

108

Off Highway 53 and RPB – 1 story

Wade Gilcrest / Allan Rapphun - Florence

15

Confidential

West Huntsville

200

Class A, part of mixed-use (size approx./fluid)

Confidential

16

Confidential

West Huntsville

180

Class A with structured parking

Confidential

TOTAL

4,040

Near-Term Start – West Huntsville BOBO FAMILY PROPERTY – BALCH ROAD

Total Units

258

Location

Balch Road, south of Hwy 72 W

Type

Garden-Style

Parking

Surface

Start

May 2019

1st Deliveries

Spring 2020

Avg Rent

Undisclosed

Cool Features

Walkable to Huntsville Hospital’s Madison Campus

Developer

Bobo Family (Florence, AL)

Conclusion – New Construction §

New Apartment Unit Deliveries in 2018 were at a 6-Year Low §

80% Lower Than Each of Past 3 Years | Job Growth has been at an Accelerating Above-Average Pace

§

Result – A Record Year of Strong Effective Rent Growth and Record Occupancy Rates

§

New Deliveries in 2020 Will Likely Be Highest Since 1980’s - But So Should Job Growth

§

Single-Family Housing Inventory is at 20-Year Low – Good for Multifamily

§

Rising Construction Costs, Rising Interest Rates and New Deliveries Will Throttle Pace of Starts

§

History Will Hold True - The Robust Pipeline Will Take Years to Come to Market §

§

Future Supply Pipeline was Higher in 2008 (16 project with 4,630 Units)

Prediction – Average Rent for a New Urban Project will Exceed $2.00/SF in 2020

RENOVATIONS

Significant Renovations

RENOVATION EVERYWHERE TOO MANY TO TALK ABOUT

TRANSACTIONS

Sales Summary | Past 12 Months Property Name

Submarket Name

Number Avg Unit Of Units Year Built Size Sale Date

The Moderne at Providence

West Huntsville

300

2017

998

Capital Park at Seventy-Two West

West Huntsville

233

2015

Madison Park

West Huntsville

308

SE Huntsville

$44,700,000 $149,000 $149.38

5.51%

1,085

10/19/17 $31,455,000 $135,000 $124.39

5.90%

2008

958

11/30/17 $37,010,000 $120,162 $107.89

5.39%

80

2014

1,350

1/31/18

$9,300,000 $116,250

$86.12

5.50%

Madison

204

1991

1,294

12/7/17

$18,400,000 $90,196

$69.70

6.07%

SE Huntsville

241

1965

769

1/10/18

$13,700,000 $56,846

$73.90

5.15%

The Park at Summerhill

West Huntsville

224

1985

839

6/17/18

$8,750,000 $39,063

$46.54

n/a

The Park at Bellingham

West Huntsville

152

1985

899

6/17/18

$5,780,000 $38,026

$42.24

n/a

SW Huntsville

104

1979

842

11/1/17

$3,900,000 $37,500

$4.52

n/a

Chaney Place Townhomes Magnolia Pointe at Madison Malibu

Silver Stone

9/12/18

Sale Price

Price Per Price Per Actual Unit SF Cap Rate

Sales Summary | Past 12 Months Property Name

Submarket Name

Number Avg Unit Of Units Year Built Size Sale Date

Sale Price

Price Per Price Per Actual Unit SF Cap Rate

Maple Tree

SW Huntsville

40

1979

650

11/30/18 $1,020,000 $25,500

$45.41

n/a

Millstream

SW Huntsville

79

1986

450

1/25/18

$59.07

n/a

Treehaven Glenn

SW Huntsville

62

1984

837

8/24/18

$560,100

$9,034

$10.79

n/a

Ascent at Jones Valley

SE Huntsville

431

1978

1,211

3/9/18

n/a

n/a

n/a

n/a

$2,100,000 $26,582

The Moderne at Providence 30 Gates Mill Street Huntsville, AL 35806

Year Built Number of Units Average Unit SF Sale Date Sale Price Per Unit Per SF CAP

2017 300 998 09/12/2018 $44,700,000 $149,000 $149.38 5.51%

CLASS A – West Huntsville * Berkadia brokered the land

RECENT SALE - HIGHEST PRICE PER UNIT

Chaney Place Townhomes 1060 Chaney Drive Huntsville, AL 35803

Year Built Number of Units Average Unit SF Sale Date Sale Price PPU PPSF CAP

2015 80 1,350 1/30/2018 $9,300,000 $116,250 $86.12 5.55%

CLASS A – Southeast Huntsville Condo-quality * Berkadia brokered sale

RECENT SALE

RECENT SALE

Malibu

8003 Benaroya Lane Huntsville, AL 35802

Year Built Number of Units Average Unit SF Sale Date Sale Price PPU PPSF CAP

1965/1971 241 769 1/11/2018 $13,700,000 $56,864 $73.90 5.15%

CLASS B – Southeast Huntsville Lowest Cap Rate for Huntsville * Berkadia brokered sale

The Park at Bellingham & The Park at Summerhill 5001 Galaxy Way NW Huntsville, AL 35816

Year Built Number of Units Average Unit SF Sale Date Sale Price Per Unit Per SF

4515 Bonnell Drive NW Huntsville, AL 35816

1986 152 842

06/2018 $5,780,000 $38,026 $45.12

CLASS C – West Huntsville (Sparkman Drive)

1985 224 838

RECENT SALE - PORTFOLIO

Major Renovation Underway

06/2018 $8750,000 $39,062 $46.59

The Park at Summerhill The Park at Bellingham

Conclusion – Transactions §

Record-Setting Prices §

Blew Away the Prior $135,000/Unit High in 2018

§

Previously Haven’t Had Much New Product Come To Market

§

Low 5% Cap for Very Stable 1960’s Vintage Deal (Malibu)

§

Aggressive Capital Chasing Few Deals in Economy Gaining Momentum

§

Investor Interest in Huntsville is Very Strong and Growing

§

A Great Time to Sell

THE TEAM

a Berkshire Hathaway and Leucadia National company ALBUQUERQUE, NM

DC METRO

MIAMI, FL

SAN DIEGO, CA

AMBLER, PA

DENVER, CO

MIDVALE, UT

SAN FRANCISCO, CA

ATLANTA, GA

DETROIT, MI

NASHVILLE, TN

SCOTTSDALE, AZ

AUSTIN, TX

EL SEGUNDO, CA

NEW YORK, NY

SEATTLE, WA

BAKERSFIELD, CA

FRESNO, CA

NEWPORT NEWS, VA

SHREWSBURY, NJ

BATON ROUGE, LA

HOUSTON, TX

OKLAHOMA CITY, OK

ST. LOUIS, MO

BIRMINGHAM, AL

IRVINE, CA

ONTARIO, CA

TACOMA, WA

BOCA RATON, FL

JACKSON, MS

ORLANDO, FL

TAMPA, FL

BOSTON, MA

JACKSONVILLE, FL

PASADENA, CA

TEMECULA, CA

CAMAS, WA

KANSAS CITY, MO

PHILADELPHIA, PA

TEMPE, AZ

CAPISTRANO BEACH, CA

LAS VEGAS, NV

PHOENIX, AZ

THE PLAINS, VA

CHARLESTON, SC

LEAWOOD, KS

PORTLAND, OR

TROY, MI

CHATTANOOGA, TN

LENOX, MA

RALEIGH, NC

TUCSON, AZ

CHICAGO, IL

LOS ANGELES, CA

RICHMOND, VA

TULSA, OK

CLEARWATER, FL

MANCHESTER, MO

SACRAMENTO, CA

WAUKESHA, WI

COLORADO SPRINGS, CO

MARBLEHEAD, MA

SALT LAKE CITY, UT

WOODLAND HILLS, CA

DALLAS, TX

MEMPHIS, TN

SAN ANTONIO, TX

HYDERABAD - INDIA