Pretty sure that’s teal not seafoam green. Go ducks!
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Ok good. I can handle teal.
For those that may have missed the reference, the Mighty Ducks’ (now Anaheim Ducks) original color scheme (1994-2006) prominently featured teal. After a couple rebrand/refresh cycles, the teal is gone, but throwback and alt road jerseys still have teal accents.
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As a Sharks fan, they should have stuck with the teal - it’s aged well!
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Ok. I am thinking this spiffs up the neighborhood. Approval granted.
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I’ve been trying to reach out to Kane to find out more about residential and commercial rents, opening date, etc but no luck so far. Rockway website was updated to say Fall 2024.
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Just a few floors left on the building near the park - these have gone up incredibly fast
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I can’t wait for both of them to be complete so we can critique here on which one we like better!
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I think the building on the right will win in a landslide (in a poll) since its design is unique and is a rarity for Raleigh.
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The residential rents have to be over $3/SF with that development cost, I feel like they are trying to do something similar to The Eastern, curious to see how it works out.
For reference - the Alexan on Glenwood is expected to be ~$63M project (lets just ignore the commercial space), that puts the per unit average basis at $339,000
Let’s say across all their units, they get an average asking rent of $2,200 (some studios/1 beds list for below $1,800 and some 2 beds are high $2/low $3K - but the property mix is heavily favoring smaller units)
Now lets add in some other income (monthly parking, pet rent, some amenity fees, the valet, trash, etc). That is another $200 per month. Combined that revenue per unit annual ends up right around $29,000, however we need to take away 6% of revenue for vacancy/credit losses - so end of day ~$27,250 is flowing down per unit annually.
Operating cost for an apartment generally run in the 30-35%, REITs run well, Greystar is a wonderful PM, yada yada - so lets say they have $8,700 for everything - that’s their common area utilities, the leasing and maintenance staff, the contract services, the insurance, property taxes, repairs, property management fee, admin cost, marketing expenses.
Now we are down to $18,560 for net operating income (NOI) which is only a 5.5% yield on cost (with no trended rent growth or expenses). A few years ago when money was cheap, that was a great metric and the deal would make sense all day for investors and banks. Let’s fast forward to today, interest rates are high, rent growth isn’t exactly occurring in Raleigh, and US treasuries bonds are paying out 5% - this deal wouldn’t go through unless the sponsor/limited partner had major conviction about a bright future and are okay with not having cash flow for the first few years until they exit a negative leverage situation.
Let’s jump over to the Weld now, that’s high rise construction (expensive life safety systems, challenging construction - heck a tower crane rental for a couple years can cost millions, beautiful glass facade, lots of concrete in the structured park component).
Basic napkin math:
Assuming they are north of $375,000 per unit for development cost. Realistically, you want to be north of a 6% yield on cost, so lets work backwards.
$375,000 x 6% = NOI equal to or greater than $22,500. Let’s estimate they their average unit size is 795 SF because they have a mix up to 3 beds. I’ll use the $8,700 again for total operating expenses, because you hit some economies of scale with payroll, marketing, admin, and insurance on concrete building is relatively low compared to stick. Things like property taxes will increase, maintenance for things like window washing is not cheap, and so on. So now we are at $31,200, only thing left is to account for the vacancy and credit loss (6% min) and I’m up to $33,200 per unit. Let’s divide that by 12 months, I’m at $2,765, now we can’t forget other income of $225/month, so base rent ends up at $2,540 and we have around $3.20/SF for rental rate.
Some clarifications - all of these are high level assumptions, not projects I have exact information on (I use Costar/Real Page for most data), investor appetite varies and some groups might be okay with sub 6% yield on cost, but institutional capital markets will tell you above 6% today min. I also excluded any revenue from commercial space, some of that could be used to help boost Net Operating Income.
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Perhaps one of the most insightful posts of the year. Love the thought and detail, @raleighdeveloper ! Thank you for your contributions lately!
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understatement of the year.
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They must use graph paper as napkins