Income Property Organization is pleased to present Silver Pines Apartments, which consists of 72 units, and is located in Port Huron, Michigan.
The City of Port Huron, known as the Maritime Capital of the Great Lakes, is located in eastern St. Clair County, approximately 65 miles northeast of Detroit, and situated on the opposite side of the St. Clair River from Sarnia, Canada. St. Clair County is Michigan’s 13th most populated county and as of the 2016 census estimate has a population of 159,587, whereas the City of Port Huron has a total population of 29,231. The median family income in St. Clair County was most recently reported at $49,730 and the average home value is estimated at $120,800. The primary driver of the local economy in the city is the trade, transportation and utilities sectors, which account for roughly 22% of employment. These sectors are followed by manufacturing and education & health services, which both account for approximately 18% of area employment. The major employers in the area are SEMCO Energy, Port Huron Hospital, DTE Energy, Mercy Health Systems and Sarnamotive Blue Water, Inc. In total it is estimated that total employment in St. Clair County amounts to approximately 44,802 jobs and the current unemployment rate is 4.6% and falling.
The immediate area surrounding Silver Pines is a mix of single-family residential and retail. Directly across Pine Grove Avenue is a large retail center (Port Huron Town Center) that is slated for redevelopment this fall and will be an incredible economic driver in the area. Silver Pines is also located less than 1½ miles north of downtown Port Huron and just over 1-mile west of the Bluewater Bridge, which is an international crossing between the United States and Canada. Approximately 1½ miles north of Silver Pines is the retail epicenter of Port Huron where numerous big box retailers can be found, such as Home Depot, Lowes, Best Buy, Kohls, T.J. Maxx, and Harbor Freight. Additionally this area is home to the 790,000 ft.2 Birchwood Mall, which is the largest shopping destination in the entire Blue Water region.
Silver Pines is a two-story complex constructed in 1965 and possesses a very attractive interior courtyard-style construction that provides separate entrances to all units. Owing to its prime location with direct visibility along busy M-25 (approximately 35,000 vehicles/day), the property itself functions like a giant billboard – producing a steady stream of leasing traffic year-round. Over the course of the last few years Silver Pines has received numerous upgrades to the exterior, interior and major building components. Exterior upgrades included new roofing, windows, siding, parking lot, carports, fencing, signage, professional landscaping and a community park with a large multi-level deck/pavilion for outdoor entertaining. Interior upgrades have included new flooring, cabinetry, in-unit laundry, appliances and fixtures in many of the units. Perhaps the most impressive upgrade made to this property in recent years is the retro-fit of all units to separately metered gas-forced air furnaces. This conversion provides ownership with significant cost savings since the heating expense for the units is now passed onto the tenants.
In addition to numerous upgrades, Silver Pines also possesses a very attractive amenity package and unit mix that’s predominately comprised of two-bedroom units. Property amenities include an on-site office, common area laundry, ample parking and carports for one-bedroom deluxe and two-bedroom units. Unit amenities include refinished hardwood floors, ample living space, numerous updated kitchens, in-unit laundry and secure basement storage for each apartment. As previously indicated the heat at Silver Pines is supplied by separately-metered, gas-forced air furnaces and the cost of the gas is the responsibility of the tenant. In addition, the tenant is also responsible for their in-unit electricity and water usage through the use of a RUBS (Resident Utility Billing Service).
Currently Silver Pines is performing exceptionally well with an impressive physical occupancy of 100% and collections that over the trailing-12 month period have amounted to over 99% of billable rent. Notwithstanding, IPO has taken a very conservative approach to our underwriting and based our income projections on existing rental rates and a vacancy and bad debt factor higher than current and historic levels, yet mindful of traditional underwriting standards. From an expense perspective we have based all expenses on actual trailing-twelve expense levels and applied a reserve for replacement, a market-rate management fee and adjusted taxes to reflect a sale. Based on the recommendation of a local MAI Appraiser, in instances where there is a significant delta between the assessor’s value and the sales price (as is the case here), a 20% increase should be applied to the existing State Equalized Value (“SEV”), which has been accounted for within our underwriting. With this conservative underwriting approach we have estimated an NOI of approximately $363,942, which at our asking price of $4,950,000 equates to an attractive 7.35% cap rate. As it relates to the acquisition of this property, there is currently an existing non-recourse Fannie Mae loan in place that must be assumed. There is currently 11 years left on this attractive debt, which is at a fixed 4.31% interest rate with a 30-year amortization schedule. Based on this debt amount and an asking price of $4.95M, our estimated NOI would result in an attractive 9.42% ROI.
IPO has seen drastic improvement in pricing over the course of the last 36 months and it is our professional opinion that values will continue to trend upwards into 2018 as a result of historically low multifamily inventory coupled with low interest rates and an abundance of equity and debt in the marketplace. Silver Pines represents a turn-key, stabilized asset just outside downtown Port Huron that can be acquired at an attractive cap rate and provide handsome & steady returns to a multifamily investor for many years to come. To arrange a confidential tour of this asset please contact IPO immediately before this unique opportunity is gone.