market analysis - cds community development strategies · 60% 1 1 550 $650 $650 664 1,064 16 0 1.5%...

Market Analysis Fenix Estates – Houston, Texas

Prepared for: Harris County Housing Authority 8933 Interchange Houston, Texas 77054 Fenix Estates Site: 3815 Gulf Freeway Houston, Texas 77003 Report Prepared On: December 8, 2015

Prepared By:


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LETTER OF TRANSMITTAL December 11, 2015

Mr. Horace Allison, AIA Chief Development Officer Harris County Housing Authority 8933 Interchange Houston, Texas 77054

RE: MARKET ANALYSIS for the proposed Fenix Estates on a site in southeast Houston, west of Hussion Street, from Coyle Street extending down to Winchester Street (associated with the address: 3815 Gulf Freeway, Houston, Texas 77003)

Dear Mr. Allison,

The following sets forth the findings and conclusions of our analysis of the residential rental market relative to your proposed plan to build a 200-unit affordable housing development on a site in southeast Houston, west of Hussion Street, from Coyle Street extending down to Winchester Street.

Our analysis is in compliance with the requirements outlined in the Texas Department of Housing and Community Affairs (TDHCA) 2015 Real Estate Analysis Rules and Guidelines for a Market Study. These requirements have been read and understood by the market analyst completing this analysis. A property inspection conducted on 10/24/2015 by Kirby Snideman.

Based on an analysis of the subject property's primary market area, there is sufficient demand to successfully construct and absorb the proposed Fenix Estates as of October 30, 2015.

We appreciate the opportunity to provide this information.

Sincerely,

J. Kirby Snideman Sr. Analyst / Project Mgr. CDS Market Research


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TABLE OF CONTENTS Letter of Transmittal .......................................................................................................................................... 2 Market Analysis Summary .................................................................................................................................. 6

TDHCA Market Analysis Summary Exhibit .............................................................................................................. 6 Identification of the Property ............................................................................................................................. 9

Location .................................................................................................................................................................. 9 Neighborhood ........................................................................................................................................................ 9 Property Description ............................................................................................................................................ 10 Financing and Schedule ........................................................................................................................................ 11 Resident Profile .................................................................................................................................................... 12 Taxing Jurisdictions ............................................................................................................................................... 12

Statement of Ownership ................................................................................................................................... 13 Project Ownership and Development .................................................................................................................. 14

Primary Market Area ........................................................................................................................................ 15 Primary Market Area Definition ........................................................................................................................... 15

PMA Demand for Project .............................................................................................................................. 16 Demographic Analysis ................................................................................................................................... 16

Comparable Units ................................................................................................................................................. 20 Market Information .......................................................................................................................................... 25

PMA Housing Characteristics................................................................................................................................ 25 Multifamily Complexes in the PMA ............................................................................................................... 27 Summary of Multifamily Complexes in the PMA .......................................................................................... 30

Occupancy Rates .................................................................................................................................................. 31 Absorption Rates .................................................................................................................................................. 32 Demand ................................................................................................................................................................ 34

Population and Household Projections for the PMA .................................................................................... 34 Appropriate Household Size Projections for the PMA .................................................................................. 34 Income Eligible Projections for the PMA ....................................................................................................... 35 Potential Demand.......................................................................................................................................... 35 Gross Demand ............................................................................................................................................... 36

Employment ......................................................................................................................................................... 36 Conclusions ....................................................................................................................................................... 39

Unit Mix ................................................................................................................................................................ 39 Rents ..................................................................................................................................................................... 40 Effective Gross Income ......................................................................................................................................... 42 Demand and Capture Rate ................................................................................................................................... 43 Gross Capture Rate ............................................................................................................................................... 43 Absorption ............................................................................................................................................................ 44 Market Impact ...................................................................................................................................................... 44

Site Images ....................................................................................................................................................... 45 Appendix A: ...................................................................................................................................................... 46

Sources ................................................................................................................................................................. 46 Assumptions and Limiting Conditions .................................................................................................................. 46

Notable Assumptions: ................................................................................................................................... 46 Appendix B: ...................................................................................................................................................... 47

Qualifications ........................................................................................................................................................ 47 Appendix C: ...................................................................................................................................................... 49

Rent Comparables: HUD Form 92273 .................................................................................................................. 49


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Figures

Figure 1: Map of Fenix Estates Property Boundary ....................................................................................................... 9 Figure 2: Neighborhood Amenities and Landmarks near the Project Site ................................................................... 10 Figure 3: Fenix Estates Site Plan .................................................................................................................................. 11 Figure 4: Fenix Estates Parcel Identification ................................................................................................................ 13 Figure 5: Census Tracts in the PMA ............................................................................................................................. 15 Figure 6: Images of Comparable Unit #1 ..................................................................................................................... 21 Figure 7: Images of Comparable Unit #2 ..................................................................................................................... 22 Figure 8: Comparable Unit #3 ...................................................................................................................................... 23 Figure 9: Comparable Unit #4 ...................................................................................................................................... 24 Figure 10: Multifamily Complexes in the PMA ............................................................................................................. 27 Figure 11: Images of the Project Site and Neighborhood ............................................................................................ 45

Tables

Table 1: Fenix Estates Building Details ........................................................................................................................ 11 Table 2: Taxing Jurisdictions for the Fenix Estate Properties ....................................................................................... 12 Table 3: Ownership of Parcels Associated with the Fenix Estates Project from 2012 to 2015 .................................... 13 Table 4: List of Census Tracts in the PMA .................................................................................................................... 16 Table 5: Population and Households Trends in the PMA ............................................................................................. 16 Table 6: Household Size Trends in the PMA ................................................................................................................. 17 Table 7: Population by Age Trends in the PMA ............................................................................................................ 17 Table 8: Educational Attainment Trends in the PMA ................................................................................................... 18 Table 9: Household Income Trends in the PMA ........................................................................................................... 18 Table 10: Poverty Trends in the PMA ........................................................................................................................... 19 Table 11: Race & Ethnicity Trends in the PMA ............................................................................................................. 20 Table 12: Comparable #1 ............................................................................................................................................. 21 Table 13: Comparable #2 ............................................................................................................................................. 22 Table 14: Comparable #3 ............................................................................................................................................. 23 Table 15: Comparable #4 ............................................................................................................................................. 24 Table 16: Housing Type Trends in the PMA ................................................................................................................. 25 Table 17: Housing Occupancy Trends in the PMA ....................................................................................................... 25 Table 18: Age of Housing Stock in the PMA ................................................................................................................. 26 Table 19: Housing Value Trends .................................................................................................................................. 26 Table 20: Multifamily Complexes in the PMA .............................................................................................................. 27 Table 21: Images of Temenos Place Apartments II ...................................................................................................... 30 Table 22: All Complexes, Occupancy in PMA by Class and Beds .................................................................................. 31 Table 23: Affordable Housing Complexes, Occupancy in PMA by Class and Beds ....................................................... 31 Table 24: Market Rate Complexes, Occupancy in PMA by Class and Beds .................................................................. 31 Table 25: Complexes in the Multifamily Survey Built in or After 2006 ......................................................................... 33 Table 26: Population and Household Projections for the PMA .................................................................................... 34 Table 27: Household Size Projections for the PMA ...................................................................................................... 34 Table 28: Eligible Income Bands for the Fenix Estate Development ............................................................................ 35 Table 29: Renter Occupied Household Income Projections for the PMA ..................................................................... 35 Table 30: Total Employment Trends in the PMA ......................................................................................................... 36 Table 31: Employment by Classification Trends in the PMA ........................................................................................ 37 Table 32: Employment by Occupation Trends in the PMA ........................................................................................... 37 Table 33: Where Workers in the PMA Reside, Where Residents in the PMA Work ..................................................... 38


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Table 34: Fenix Estates Unit Mix .................................................................................................................................. 39 Table 35: Household Size Trends in the PMA ............................................................................................................... 39 Table 36: Fenix Estates Rent Matrix ............................................................................................................................ 40 Table 37: Rent Comparables for Studio Apartments in the PMA ................................................................................. 40 Table 38: Rent Comparables for 1 Bedroom Apartments in the PMA ......................................................................... 41 Table 39: Fenix Estates Operating Estimates ............................................................................................................... 42 Table 40: Demand and Capture Rate Calculations ...................................................................................................... 43


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MARKET ANALYSIS SUMMARY The purpose of this market analysis is to analyze the subject property’s multifamily market and determine whether sufficient potential demand exists to justify the development of the subject property. The Texas Department of Housing and Community Affairs (TDHCA) has supplied guidelines regarding how this analysis should be conducted—and these guidelines have been followed. The TDHCA has also provided a summary exhibit which has been completed and contained below. This summary exhibit outlines the essential facts of this analysis and directs the reader to the page number where more information may be found.

TDHCA MARKET ANALYSIS SUMMARY EXHIBIT

Market Analysis Summary Exhibit

Provider: CDS Market Research Date: 10.25.2015

Contact: J. Kirby Snideman Phone: 281-582-0924

Development Fenix Estates Target Population General

Site Location Hussion St and Coyle St City: Houston County: Harris

Primary Market Area (PMA) page __15-16____

X census tracts zip codes census place

48201310100 48201310500 48201310900 48201312000 48201312400 48201313000

48201310200 48201310600 48201311000 48201312100 48201312700

48201310300 48201310700 48201311100 48201312200 48201312800

48201310400 48201310800 48201311900 48201312300 48201312900

ELIGIBLE HOUSEHOLDS BY INCOME page __35___

HH 30% of AMI 40% of AMI 50% of AMI 60% of AMI

size min max min max min max min max

1 $9,477 $14,580 $15,795 $24,300 $18,954 $29,160

2 $10,823 $16,650 $18,038 $27,750 $21,450 $33,000

3

4

5

6


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MULTIFAMILY HOUSING in PMA page __27-30, 33___

# Developments Total Units Avg Occupancy

All Multifamily Housing 116 6,332 95.6%

All Placed-in-Service after 2006 8 632 98.0%

All LIHTC Developments 4 484 98.5%

Unstabilized Comparable LIHTC 0 0 N/A

Other Subsidized / Affordable 13 1,795 93.3%

AFFORDABLE HOUSING INVENTORY in PMA page __27-30___

Proposed, Under Construction, and Unstabilized Comparable Developments in PMA

TDHCA

# Development Status Type

Target

Population Comp

Units Total

Units Occupancy

Other Affordable Developments in PMA

TDHCA

# Development Status Type

Target

Population

Comp

Units Total

Units Occupancy

Canal Street Apartments Rent

Subsidized All n/a 134 98.5%

John Goldberg Apartments for Seniors Rent

Subsidized Senior n/a 65 98.5%

Amber Creek Apartments Rent


Las Villas de Magnolia Rent


Temenos Place Apartments II Rent


Dynasty Rent


North Macgregor Arms Apartments Rent


Beall Village Rent


Uknown Rent


Clayton Homes Rent


Walipp Senior Residence Rent


Cuney Homes Rent


Eastend Apartments Rent

Restricted All n/a 150 99.3%

Zion Village Senior Apartments Rent

Restricted Senior n/a 50 98.0%

Plaza De Magnolia Rent


Canal Place Rent


n/a

n/a

n/a


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PMA DEMOGRAPHIC DATA

Note: For developments targeting Seniors, fill in Population and Household data for both the General

population and the Senior population

GENERAL SENIORS

current

year

place-in-

service five year

current

year

place-in-

service five year

2015 2017 2020 - - -

Population p. 34 79,466 80,166 81,216 - - -

Households

p.

34

Total HH 27,033 27,429 28,023 - - -

Renter HH 16,576 16,791 17,113 - - -

Homeowner HH 10,457 10,590 10,790 - - -

DEMAND CALCULATION p. 35

-

44

Total Households 27,429

Subject Units 180 Potential Demand 6,503

Unstabilized Comparable Units 0 Other Demand 0

RELEVANT SUPPLY 180 GROSS DEMAND 6,503

RELEVANT SUPPLY / GROSS DEMAND = GROSS CAPTURE RATE 2.8%

SUBJECT UNIT MIX

PROPOSED

RENT

p. Apx

C

DEMAND by UNIT TYPE

p.

43

AMI

Lev

el

Bed

s

Bath

s

Size

(sqft

)

Gross Net

MARKET RENT

Demand Subject

Units

Comp

Units

Unit

Capture

Rate

30% 0 1 380 $364 $364 558 1,092 28 0 2.6%

50% 0 1 380 $450 $450 558 1,228 53 0 4.3%

60% 0 1 380 $550 $550 558 1,228 56 0 4.36%

UnR 0 1 380 $550 $550 558 N/A 16 N/A N/A

30% 1 1 550 $390 $390 664 825 12 0 1.5%

50% 1 1 550 $550 $550 664 1,064 15 0 1.4%

60% 1 1 550 $650 $650 664 1,064 16 0 1.5%

UnR 1 1 550 $650 $650 664 N/A 4 N/A N/A


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IDENTIFICATION OF THE PROPERTY LOCATION

The Fenix Estates affordable housing development will be located on a 3.95-acre site in southeast Houston, west of Hussion Street, from Coyle Street extending down to Winchester Street. This site previously contained vacant structures, including buildings associated with the Magnolia Glen Apartments located at 3815 Gulf Freeway. The site was initially purchased by the Non-Profit Housing Corporation of Greater Houston (Housing Corporation) with grant funds provided by Harris County. In March of 2015, with the approval of Harris County, the Housing Corporation announced its intent to transfer its interest in the property to the Harris County Housing Authority (HCHA).

Figure 1: Map of Fenix Estates Property Boundary

Source: HCHA, CDS Market Research

NEIGHBORHOOD

Existing development in the neighborhood consists of commercial, office, restaurants, entertainment venues, parking facilities, special use, and retail development. The University of Houston is located opposite of this project on the other side of I-45. The area around Fenix Estates has numerous amenities that provide for future residents’ transportation, shopping, educational, medical, cultural, recreation and spiritual needs. Within a half-mile of the site there is a Kroger grocery store, a Federally Qualified Health Center, fitness gym, a dialysis center, several churches and temples, a coffee shop, the Latino Learning Center, convenience stores, the University of Houston, and a SPARK


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Park and trails. Besides direct access to 1-45 with a car, residents also have the option of using light rail. Houston Metro has recently extended the Purple Line through the neighborhood, located a short walk from the project site.

Figure 2: Neighborhood Amenities and Landmarks near the Project Site

Source: Google Street View, CDS Market Research

The Fenix Estates project site is part of the larger redevelopment of the former Fingers Furniture site, to be developed by Lovett Commercial. The Harris County Housing Authority is working with Lovett in an overall plan for the development of a nearly 20-acre site to include retail/commercial space with frontage on Interstate 45 and Cullen.

PROPERTY DESCRIPTION

When completed, Fenix Estates will consist of three residential buildings ranging from 4 to 5 stories and include 144 surface parking spaces. Buildings 1 and 2 are phase 1 and will consist of two “L” shaped 4-story wood frame structures on the south side of the site with an attractive courtyard between the structures. Building 3 will be phase 2 and will consist of a 5-story wood frame structure located on the north side of the site. The following figure displays the site plan of the Fenix Estates development.


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Figure 3: Fenix Estates Site Plan

Source: HCHA, CDS Market Research

The following table provides a breakdown of the apartments (Apt), square feet (SF), and offices associated with each building. When completed, Fenix Estates will contain 200 total apartments, consisting of 153 studio apartments and 47 1 bedroom apartments. Building 2 will include 5,861 SF of supportive service space and offices on the ground floor serving the residents of the development. Building 3 will include 18,800 square feet of office space to be used by HCHA, which will be located on the 1st and 5th floors.

Table 1: Fenix Estates Building Details

Structure Studio 380 SF

1 Bed 550 SF

Total Apt #

Total Apt SF

Gross SF

Includes

Building 1 47 15 62 26,110 43,410 -

Building 2 30 18 48 27,161 43,145 Supportive Services Offices

Building 3 76 14 90 55,380 89,145 HCHA Office

Total 153 47 200 108,651 175,965 -

Source: HCHA Note: SF = Square feet, Apt = Apartments

FINANCING AND SCHEDULE

Financing for Fenix Estates will include tax-exempt bonds, equity from the sale of noncompetitive 4% Low Income Housing Tax Credits, as well as Community Development Block Grant (CDBG) and CDBG-Disaster Recover Funds and HOME funds from both Harris County and the City of Houston. The projected total development cost is $29.47 million, or about $147,334 per unit, as follows:

Acquisition/Demolition $10,000

Hard Costs $19,882,292

Soft Costs $5,654,512


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Reserves $475,000

Developer Fee $3,445,000

Total Uses $29,466,804

RESIDENT PROFILE

Fenix Estates will be a mixed-income development, targeted to households ranging from 30% to 60% of area median income, which in 2015 in Houston was $14,580 to $29,160 respectively for a single individual. Ten percent of the units (20 units) will be unrestricted, allowing the development to serve a broader income mix of working households. The rent will include 100% owner-paid utilities. The unit and income mix and projected rent is:

153 Efficiency Units (380 SF) 28 units < 30% AMI Projected rent $364 53 units < 50% AMI Projected rent $450 56 units < 60% AMI Projected rent $550 16 units Unrestricted Projected rent $550

47 1-Bedroom Units (550 SF) 12 units < 30% AMI Projected rent $390 15 units < 50% AMI Projected rent $550 16 units < 60% AMI Projected rent $650 4 units Unrestricted Projected rent $650

Of the 180 income restricted units, 70 will utilize project-based rental assistance (27 efficiency units at < 50% AMI, 28 efficiency units at < 60% AMI, 7 1-bedroom units at < 50% AMI, and 8 1-bedroom units at < 60% AMI). Offering project-based rental assistance units at Fenix Estates will allow the HCHA to more easily fill and to better serve formerly homeless households.

Fenix Estates will provide high quality and service-enriched permanent housing for formerly homeless individuals who are frequent users of public systems, including but not limited to the Harris County Jail. It will also serve as replacement housing for formerly homeless individuals currently residing at the Northline SRO development. Many of these formerly homeless households will receive rental assistance through the HUD Continuum of Care program. Fenix Estates is part of the Mayor's initiative to provide approximately 2,500 units of permanent supportive housing, and fits into the Houston/Harris County Continuum of Care regional plan to end chronic and veteran homelessness by 2016.

TAXING JURISDICTIONS

The following table provides a breakdown of the taxing jurisdictions (along with the 2015 tax rates) which apply to the Fenix Estate properties detailed in the next section.

Table 2: Taxing Jurisdictions for the Fenix Estate Properties

Districts Jurisdictions 2015 Rate (Per $100 of Taxable Value)

1 HOUSTON ISD $1.20

40 HARRIS COUNTY $0.42

41 HARRIS CO FLOOD CNTRL $0.03

42 PORT OF HOUSTON AUTHY $0.01

43 HARRIS CO HOSP DIST $0.17

44 HARRIS CO EDUC DEPT $0.01

48 HOU COMMUNITY COLLEGE $0.10

61 CITY OF HOUSTON $0.60

995 EAST DOWNTOWN MNG DST $0.13

Source: Harris County Appraisal District


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STATEMENT OF OWNERSHIP The current Fenix Estates project site was assembled from multiple parcels as displayed in the following map. Note that the Fenix Estates project site boundaries are approximate. The table below shows the history of ownership for each of the parcels associated with the site, from 2012 to 2015. The project site is currently under the ownership of the Harris County Housing Authority (HCHA).

Figure 4: Fenix Estates Parcel Identification

Source: Harris County Appraisal District, CDS Market Research

Table 3: Ownership of Parcels Associated with the Fenix Estates Project from 2012 to 2015

HCAD # 2012 2013 2014 2015

0282680090001 FINGER INTERESTS AMEGY BANK CULLEN GULF FREEWAY LLC HCHA


0410070020019 3815 GULF FREEWAY LLC MAGNOLIA GLEN INC MAGNOLIA GLEN INC HCHA






Source: Harris County Appraisal District


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PROJECT OWNERSHIP AND DEVELOPMENT

Fenix Estates will be owned by Fenix Estates I, LP, a Texas limited partnership. The 0.01% General Partner of the Owner LP will be Fenix Estates I GP, LLC, a Texas limited liability company. HCHA Redevelopment Authority, Inc., the non-profit instrumentality of the Harris County Housing Authority, will be the sole member of the GP LLC. HCHA Redevelopment Authority, Inc., or a to-be-created sole purpose entity controlled by the Authority will act as Developer.

The Harris County Housing Authority is a Section 8-only public housing authority located in Houston, TX. It currently employs 38 regular full time staff, owns and manages 1,038 affordable housing units and administers rental assistance for 4,100 privately owned rental units through the Section 8 HCV programs. The total HCHA operating and development budget for the fiscal year 2014 was approximately $4.6 million.

HCHA, in partnership with the private sector, has developed eight affordable housing developments, including Cypresswood Estates, which the HCHA self-developed using NSP and CDBG funds. It recently closed on its ninth affordable housing development, Retreat at Westlock, a 140-unit development for seniors age 62 years and older.

HCHA meets the development experience criteria under the TDHCA 2015 Uniform Multi- Family Rules. Its Executive Director, Horace Allison is an innovative and results driven leader with more than 30 years of successful experience in positions ranging from staff architect to CEO, providing fiscal, strategic and operational leadership in uniquely challenging situations in the field of housing and community development.


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PRIMARY MARKET AREA The purpose of the Primary Market Area (PMA) is to provide a clearly defined geography that can be used to examine the local market in which the project’s feasibility will be evaluated.

PRIMARY MARKET AREA DEFINITION

The PMA for the Fenix Estates was defined by using US Census tracts that are in close proximity to the project site. The PMA consists of 21 tracts contained located south of Buffalo Bayou, north of Brays Bayou, east of Texas State Highway 288, and east of US Route 59. This area encompasses part or all of the following Houston neighborhoods: EaDo, Second Ward, Eastwood, Magnolia Park, Third Ward, Lawndale/Wayside, and MacGregor.

Figure 5: Census Tracts in the PMA

Source: Census TIGER, CDS Market Research

Although this area appears relatively large, it falls below of the 100,000 maximum population limit for PMA’s as outlined by the TDHCA. The following table provides a list of the US Census tracts located in the PMA, ordered numerically by their 11-digit identification numbers.


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Table 4: List of Census Tracts in the PMA

Census Tracts in the PMA

48201310100 48201310400 48201310700 48201311000 48201312000 48201312300 48201312800

48201310200 48201310500 48201310800 48201311100 48201312100 48201312400 48201312900

48201310300 48201310600 48201310900 48201311900 48201312200 48201312700 48201313000

Source: Census TIGER, CDS Market Research

PMA Demand for Project

The Fenix Estates is expected to draw a majority of its prospective tenants from the defined PMA. As mentioned previously, this area contains multiple Houston neighborhoods—several of which are historically African American or Hispanic and have a unique identity to which many residents are attached. Due to its proximity to downtown and the University of Houston and recent market trends in the Houston area, these neighborhoods are undergoing a transition with businesses and older residences being replaced by market-rate condominium and townhome developments. The cost of housing is increasing, making it challenging for residents who wish to stay. The Fenix Estates will serve an important unmet need for new affordable housing in the area.

Demographic Analysis

Understanding the demographic trends for the area is an important element in assessing the market demand for new housing. Past, present and future demographic figures were collected and estimated by utilizing data from the following sources: US Census, American Community Survey, Nielsen/Claritas 2015 Estimates – PCensus for ArcView (hereafter referred to as “PCensus”), Bureau of Labor Statistics, Houston City Planning Department, Harris County Appraisal District, Houston—Galveston Area Council, and primary/secondary research completed CDS Market Research. To demonstrate the change that has occurred over time, many of the tables provide data from the 2000 US Census.

Population and Households

From 2000 to 2010, the PMA saw an 8.8% decline in population and a 2.3% decline in the number of households. From 2010 to 2015, the population increased by 1.1% while households increased by 3.3%.

Table 5: Population and Households Trends in the PMA

PMA 2000

Census 2010

Census 2015

Estimate Change '00-

'15 AAGR '00-

'10 AAGR '10-

'15

Population 86,179 78,577 79,466 -6,713 -0.92% 0.23%

Households 26,792 26,163 27,033 241 -0.24% 0.66%

AAGR = Annual Average Growth Rate ((FV/PV)^(1/n)) – 1) Source: US Census, American Community Survey, Nielsen/Claritas 2015 Estimates – PCensus for ArcView (hereafter referred to as PCensus)

Overall, the population in the PMA is down 6,713 from the year 2000 while the number of households has increased by 241. This trend is part of a larger US demographic pattern of shrinking households and fewer children, but is also particularly influenced by two other factors:

While all other age groups have seen a population decline from 2000 to 2015, the age ranges from 55 to 74 and 85 and over have seen increases. This represents more households that are aging in place, with children leaving and spouses dying.


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The age ranges from 18 to 34 have seen some of the smallest declines in the PMA, related to the growing popularity of the area for college students in off-campus (non-group quarters) housing, and young professionals working in nearby job centers.

Table 6: Household Size Trends in the PMA

Category 2000 2015 % Change

Total Households 26,792 27,033 0.9%

1-person household 6,921 8,858 28.0%


3-person household 4,417 3,961 -10.3%




7+ household 1,535 964 -37.2%

Average 3.02 2.67 -11.6%

Source: US Census, American Community Survey, PCensus

Table 7: Population by Age Trends in the PMA


Total Population 86,179 79,466 -7.8%

Age 0 to 4 7,559 5,679 -24.9%

Age 5 to 9 7,312 5,404 -26.1%

Age 10 to 14 6,546 4,968 -24.1%

Age 15 to 17 4,116 3,075 -25.3%

Age 18 to 20 6,354 6,169 -2.9%

Age 21 to 24 6,709 6,273 -6.5%

Age 25 to 34 13,518 13,053 -3.4%

Age 35 to 44 11,774 9,900 -15.9%

Age 45 to 54 9,133 8,837 -3.2%

Age 55 to 64 5,488 8,202 49.5%

Age 65 to 74 4,312 4,608 6.9%

Age 75 to 84 2,450 2,334 -4.7%

Age 85 and over 908 964 6.2%

Median Age 28.3 31.3 10.4%


Educational Attainment

The following table displays the educational attainment of the population over age 25. Over the last fifteen years, the share of the population with less than a high school diploma has decreased while the share with higher education has increased substantially.


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Table 8: Educational Attainment Trends in the PMA

Educational Attainment 2000 2015 % Change by

Number '00 - '15 Number Share % Number Share %

Population 25 Years and Older 47,583 100.0% 47,898 100.0% 0.7%

Less than 9th Grade 15,556 32.7% 11,701 24.4% -24.8%

Some High School, No Diploma 10,953 23.0% 7,601 15.9% -30.6%

High School Graduate (or GED) 9,648 20.3% 10,789 22.5% 11.8%

Some College, No Degree 5,541 11.6% 7,933 16.6% 43.2%

Associate Degree 815 1.7% 1,480 3.1% 81.6%

Bachelor's Degree 3,012 6.3% 4,791 10.0% 59.1%

Graduate or Professional Degree 2,058 4.3% 3,603 7.5% 75.1%

High School Graduate or Higher 21,074 44.3% 28,596 59.7% 35.7%

Bachelor's Degree or Higher 5,070 10.7% 8,394 17.5% 65.6%


Household Income

The following table provides a breakdown of all households in the PMA according to their self-reported annual income group. Incomes appear to be generally increasing in the PMA from 2000 to 2015 as more households move into higher income groups. However, when adjusted for inflation (see last four rows of the table) the median household income has actually decreased by a couple percentage points. At the same time, the average household income has increased by roughly 12%. This corroborates the reports of redevelopment in the area—particularly in EaDo (East Downtown)—which has introduced new higher income households to the area, pushing up the average.

Table 9: Household Income Trends in the PMA



Less than $15,000 34.6% 25.3% -9.3%

$15,000 to $24,999 18.4% 16.6% -1.8%

$25,000 to $34,999 14.8% 12.3% -2.6%

$35,000 to $49,999 13.3% 13.6% 0.3%

$50,000 to $74,999 10.4% 13.0% 2.6%

$75,000 to $99,999 4.6% 6.8% 2.3%

$100,000 to $124,999 1.8% 4.5% 2.7%

$125,000 to $149,999 0.8% 2.7% 1.9%

$150,000 to $199,999 0.7% 2.5% 1.9%

$200,000 to $249,999 0.3% 1.0% 0.7%

$250,000 to $499,999 0.2% 1.2% 1.0%

$500,000 or more 0.1% 0.5% 0.4%


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Average HH Income $32,791 $50,575 54.2%

Inflation Adjusted Average $45,310 $50,575 11.6%

Median HH Income $23,378 $31,608 35.2%

Inflation Adjusted Median $32,304 $31,608 -2.2%


* Note: Inflation adjustment is based on Bureau of Labor Statistics CPI Inflation Calculator ($100 in 2000 = $136.31 in 2015)

Poverty Status

Due to lower incomes in the study area, the poverty status of families is examined in order to ascertain the level of economic challenge. The data presented comes from the Census Bureau, which uses a set of money income thresholds that vary by family size and composition to determine who is in poverty. If a family's total income is less than the family's threshold, then that family and every individual in it is considered in poverty. The official poverty thresholds do not vary geographically, but they are updated for inflation using the Consumer Price Index. The official poverty definition uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).

Table 10: Poverty Trends in the PMA


Families at or Above Poverty 13,023 11,361 -12.8%

Families at or Above Poverty w/ Children 7,736 4,898 -36.7%

Families Below Poverty 5,020 4,491 -10.5%

Families Below Poverty w/ Children 4,135 3,311 -19.9%


Out of 27,033 households in the PMA in 2015, there are an estimated 15,852 family households. Of those, 4,491 in 2015 are estimated to be below the poverty line. In 2015, families in poverty account for 28% of all family households, and 17% of all households. By comparison, in the Houston MSA families in poverty account for 13% of all family households, and 9% of all households. While the poverty status in the PMA is roughly double the observed rate in the Houston MSA, the situation has been improving. From 2000 to 2015, the number of families below the poverty level has decreased by 10.5%.


20

Race and Ethnicity

The racial and ethnic makeup of the PMA has remained largely unchanged from 2000 to 2015. The most significant change has been the doubling of the white non-Hispanic population, from 6.6% to 12%. This change is assumed to be related to the redevelopment taking place in the PMA, particularly in areas closer to Downtown.

Table 11: Race & Ethnicity Trends in the PMA

Classification 2000 2015 % Change

Estimated Total Population 86,179 79,466 -7.8%

White Non-Hispanic 6.6% 12.0% 5.3%

Black or African American Non-Hispanic 25.1% 24.2% -0.9%

American Indian and Alaska Native Non-Hispanic 0.1% 0.2% 0.1%

Asian Non-Hispanic 1.5% 2.5% 1.0%

Pacific Islander Non-Hispanic 0.0% 0.0% 0.0%

Some Other Race Non-Hispanic 0.1% 0.2% 0.1%

Two or More Races Non-Hispanic 0.6% 0.9% 0.3%

Hispanic or Latino 65.9% 60.0% -6.0%


COMPARABLE UNITS Within the PMA, three complexes were selected out of 116 as comparable to the Fenix Estates project. One complex—Pleasant Hill Village—was added from outside the PMA to amend the list of comparable class B studio and one bedroom units.

The following pages provide details on the comparable properties. These complexes were selected as comparable because they were among the most similar in regards to: size, price, class, unit mix, property type, and other categories.

The comparable multifamily complexes utilized are as follows:

Comparable 1: Canal Street Apartments

Comparable 2: Fair Oaks Apartments

Comparable 3: Jefferson Square Apartments

Comparable 4: Pleasant Hill Village

HUD Form 92273

As recommended by the TDHCA guidelines, HUD Form 92273 uses these comparable complexes to compare characteristics of each property and make line by line comparisons to the subject property (the Fenix Estates). The result is a correlated or comparable suggested rent for each unit type in the subject property. This information is contained in Appendix C of this report.


21

Table 12: Comparable #1

Comparable #1

Development Name: Canal Street Apartments

Address: 2821 Canal St Houston, TX 77003

Year Built: 2005

Year Renovated: N/A

Property Class: B

Property Type: Affordable Housing

Utility Arrangement: Included in the rent

Occupancy: 98.5%

Concessions: None

Amenities: Air Conditioning, Business Center, Cable Ready, Dishwasher, Fitness Center, Furnished Units Available, Game room, Gated, Grill, Kitchen, Microwave, Planned Social Activities, Range, Refrigerator

Type Units Avg. Size (SF) Monthly Rent Rent/SF Total SF Potential Rent

Studio 134 206 $465 $2.26 27,604 $62,310

1 Bedroom 0 - - - - -

2 Bedroom 0 - - - - -

3 Bedroom 0 - - - - -

4 Bedroom 0 - - - - -

Total / Average 134 206 $465 $2.26 27,604 $62,310

Source: CoStar Group, CDS Market Research

Figure 6: Images of Comparable Unit #1

Source: Google Earth, http://www.newhopehousing.com/


22


Comparable #2

Development Name: Fair Oaks Apartments

Address: 910 Fair Oaks Rd Houston, TX 77023

Year Built: 1978

Year Renovated: 2013

Property Class: B

Property Type: Market Rate Housing

Utility Arrangement: Electricity is not included; water, sewer, and trash is included

Occupancy: 92.6%

Concessions: 6.8% average

Amenities: Air Conditioning, Cable Ready, Dishwasher, Fireplace, High Speed Internet Access, Laundry Facilities, Playground, Property Manager on Site


Studio 0 - - - - -

1 Bedroom 114 736 $629 $0.85 83,904 $71,706

2 Bedroom 8 1,164 $859 $0.74 9,312 $6,872

3 Bedroom 0 - - - - -

4 Bedroom 0 - - - - -

Total / Average 122 764 $641 $0.84 93,216 $78,578


Figure 7: Images of Comparable Unit #2

Source: Google Earth, http://www.f-oaks.com/


23


Comparable #3

Development Name: Jefferson Square Apartments

Address: 5000 Pease St Houston, TX 77023

Year Built: 1954

Year Renovated: 2000

Property Class: B

Property Type: Market Rate Housing

Utility Arrangement: Electricity is not included; water, sewer, and trash is included

Occupancy: 95.8%

Concessions: None

Amenities: Air Conditioning, Laundry Facilities on site, Oven, Refrigerator, Tile Floors, Wheelchair Accessible (Rooms)


Studio 28 350 $400 $1.14 9,800 $11,200

1 Bedroom 44 550 $550 $1.00 24,200 $24,200

2 Bedroom 0 - - - - -

3 Bedroom 0 - - - - -

4 Bedroom 0 - - - - -

Total / Average 72 472 $492 $1.04 34,000 $35,400


Figure 8: Comparable Unit #3

Source: Google Earth, Google Street View


24


Comparable # 4

Development Name: Pleasant Hill Village

Address: 3814 Lyons Ave

Year Built: 1997

Year Renovated: N/A

Property Class: B

Property Type: Affordable Housing

Utility Arrangement: Included in the Rent

Occupancy: 95.1%

Avg. Concessions: None

Amenities: Air Conditioning, Laundry Facilities on site, Oven, Refrigerator, Wheelchair Accessible (Rooms), Fitness Center

Type Units Avg. Size (SF) Monthly Rent Rent PSF Total SF Potential Rent

Studio 35 362 $510 $1.41 12,670 $17,850

1 Bedroom 80 556 $600 $1.08 44,480 $48,000

2 Bedroom 50 774 $743 $0.96 38,700 $37,150

3 Bedroom 0 0 $0 $0.00 0 $0

4 Bedroom 0 0 $0 $0.00 0 $0

Total / Average 165 581 $624 $1.07 95,850 $103,000


Figure 9: Comparable Unit #4

Source: Google Earth, Google Street View


25

MARKET INFORMATION This section provides housing market information on the PMA.

PMA HOUSING CHARACTERISTICS

According to census based estimates, the PMA currently has 32,754 total housing units. Of these, 19,451 are considered single family (1 unit attached & detached, mobile homes, RVs, etc). This accounts for 59.4% of the housing supply. Multifamily housing units number 13,303, which represents 40.6% of the total housing supply. This is up from 37.0% in 2000.

Table 16: Housing Type Trends in the PMA


by Number

Total Housing Units 30,125 32,754 8.7%

1 Unit Attached 2,207 7.3% 2,097 6.4% -5.0%

1 Unit Detached 16,623 55.2% 17,263 52.7% 3.9%

2 Units 2,741 9.1% 2,736 8.4% -0.2%

3 to 19 Units 5,881 19.5% 6,584 20.1% 12.0%

20 to 49 Units 639 2.1% 1,005 3.1% 57.3%

50 or More Units 1,897 6.3% 2,978 9.1% 57.0%

Mobile Home or Trailer 115 0.4% 90 0.3% -21.7%

Boat, RV, Van, etc. 22 0.1% 1 0.0% -95.5%


According to census based estimates, renter occupied units numbered 16,576 in 2015. This is an estimated 3,273 more units than the total multifamily supply. This suggests that a number of single family units in the PMA are being rented (roughly 17%, or 1 in 6 units). One important note to make is the number of vacant housing units have increased. This is primarily related to the age and condition of much of the housing stock in the PMA, and not necessarily a reflection of housing demand in the area.

Table 17: Housing Occupancy Trends in the PMA

Category 2000 2015

Total Housing Units 30,125 32,754

Occupied Housing Units 26,792 88.9% 27,033 82.5%

Owner Occupied 9,985 33.1% 10,457 31.9%

Renter Occupied 16,807 55.8% 16,576 50.6%

Vacant Housing Units 3,333 11.1% 5,721 17.5%



26

Although the decade from 2000 to 2010 saw the construction of a significant number of new housing units in the PMA, much of the housing stock is older. According to census based estimates, a majority of the housing stock in the PMA was built before 1960 (55.6%).

Table 18: Age of Housing Stock in the PMA

2015 Estimate PMA

Total Housing Units 32,754

Built 2010 or later 1,287 3.9%

Built 2000 to 2009 4,163 12.7%

Built 1990 to 1999 1,712 5.2%

Built 1980 to 1989 1,331 4.1%

Built 1970 to 1979 2,875 8.8%

Built 1960 to 1969 3,184 9.7%

Built 1950 to 1959 5,258 16.1%

Built 1940 to 1949 5,851 17.9%

Built 1939 or Earlier 7,093 21.7%


Despite the age of the existing housing stock in the PMA, owner occupied housing values have risen steadily since 2000, with the inflation adjusted median home value increasing by 57.8%. This compares to the stagnation in median incomes in the PMA, which has declined 2.2% when adjusted for inflation (as presented previously).

Table 19: Housing Value Trends


Owner-Occupied Housing 9,985 10,457 4.7%

Less than $60K 59.0% 10.0% -49.0%

$60K to $80K 14.6% 12.8% -1.9%

$80K to $100K 10.1% 20.0% 9.9%

$100K to $150K 9.7% 20.8% 11.1%

$150K to $200K 3.9% 10.8% 6.9%

$200K to $300K 2.0% 16.6% 14.6%

$300K to $400K 0.3% 5.8% 5.5%

$400K to $500K 0.0% 2.3% 2.3%

$500K to $750K 0.1% 0.5% 0.5%

$750K to $1,000K 0.1% 0.3% 0.2%

$1,000K or more 0.2% 0.2% 0.0%

Median Value $53,926 $117,592 118.1%

Inflation Adjusted* $74,515 $117,592 57.8%


* Note: Inflation adjustment is based on Bureau of Labor Statistics CPI Inflation Calculator ($100 in 2000 = $138.18 in 2015)


27

Multifamily Complexes in the PMA

Of the estimated 13,303 multifamily housing units in the PMA, 6,332 have been identified in 116 managed multifamily complexes. In addition, there are 1,343 units on the way in 7 complexes under construction or planned. The following map, table, and information provide a survey of these managed complexes; covering the vast majority of all managed complexes existing or planned for the PMA. This information is collected by the CoStar Group, and has been assembled and organized by CDS.

Figure 10: Multifamily Complexes in the PMA


Table 20: Multifamily Complexes in the PMA

Map # Complex Address Built Occ Units Class Avg $/SF Avg SF/Unit

Market Rate Housing

1 The Marquis Downtown Houston Lofts 2115 Runnels 1920 91% 244 A $1.42 1,094

2 Lofts at the Ballpark 610 Saint Emanuel St 2001 100% 375 A $1.71 925

3 Tuam Terrace Apartments 2309 Tuam St 1940 - 24 A - -

4 The Suites at Alabama 3238 Alabama St 2004 - 16 B - -

5 Fair Oaks Apartments 910 Fair Oaks Rd 1978 93% 122 B $0.84 764


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6 Bayou View Garden 3200 N Macgregor Way 1955 85% 52 B $1.41 700

7 - 4704 Park Dr 1936 83% 6 B - -

8 Jefferson Square Apartments 5000 Pease St 1954 96% 72 B $1.05 472

9 - 15 Sidney St 1936 100% 6 B $1.11 623

10 Southmore Place 3710 Southmore Blvd 1965 95% 83 B $0.92 834

11 - 3463 Elgin St 2006 - 6 B - -

12 - 5609 Leeland St 1950 100% 8 B $0.93 681

13 - 2711 Harrisburg Blvd 1957 - 13 B - -

14 - 2605 Alabama St 1930 - 6 C - 648

15 - 3514 Attucks St 1955 100% 6 C $1.24 600

16 Bastrop Plaza Apartments 2407-2419 Bastrop St 1952 95% 21 C $1.06 700

17 - 5101 Bell St 1930 - 11 C - -

18 Eastlawn Apartments 5102 Bell St 1950 100% 18 C - -

19 Eastlawn Apartments 5110 Bell St 1950 100% 18 C $0.98 681

20 - 5327-5331 Bell St 1946 - 9 C - -

21 - 2522 Binz St 1963 - 4 C - -

22 - 3016 Blodgett St 1965 100% 6 C $0.68 596

23 - 7530 Canal St 1960 95% 44 C $0.89 700

24 Twelve Canfield Place 3800 Canfield St 1958 99% 72 C $0.94 798

25 La Villa 7019 Capitol St 1948 - 34 C - -

26 - 7301 Capitol St 1941 - 8 C - -

27 - 3000 Carrolton St 1970 100% 6 C $1.01 625

28 Oakland Plaza Apartments 209-221 Caylor St 1935 97% 35 C $1.31 420

29 - 2501 Delano St 1950 94% 16 C $0.72 624

30 - 2907 Delano St 1960 100% 6 C - -

31 Dismuke Apartment Homes 1907 Dismuke St 1960 85% 48 C $1.39 566

32 - 1502 Dumble St 1950 - 9 C - -

33 Dumble Apartments 1813 Dumble St 1963 100% 20 C $0.85 825

34 - 3308 Elgin Ct 1980 - 12 C - -

35 - 1711 Fourcade St 1960 - 10 C - -

36 Villa Fauna Apartments 1556-1558 Godwin 1940 100% 6 C $1.09 805

37 Brookdale Village 6113 Gulf Fwy 1970 97% 337 C $0.94 720

38 - 3229 Holman St 1938 - 8 C - -

39 Marilyn Apartments 1511 Hughes St 1960 - 18 C - -

40 Multi- family 4123 Lamar St 1935 - 5 C - -

41 Idylwood Apartments 6706 Lawndale St 1948 80% 20 C $1.01 750

42 Villa Frederick Apartments 2434 Lidstone St 1960 94% 32 C $1.05 614

43 Greenview Apartments 3318 N MacGregor Way 1960 96% 24 C $2.31 648

44 MacGregor Gardens 3629 N MacGregor Way 1957 91% 84 C $1.19 661

45 - 203 N Milby St 1935 - 14 C - -

46 - 7420 Navigation Blvd 1930 - 5 C - -

47 - 5020 Paige St 1960 - 12 C - -

48 - 4023 Polk St 1925 - 14 C - -

49 Polk Apartments 5304 Polk St 1940 100% 18 C - -

50 - 3009 Rosalie 1935 - 6 C - -

51 - 1 Sidney St 1935 - 8 C - -

52 Riveria Apartments 2403 Southmore Blvd 1960 97% 30 C $0.91 667

53 Southmore Gardens 2408-2412 Southmore Blvd 1960 - 32 C - -

54 Southmore Apartments 3620 Southmore Blvd 1960 84% 38 C $1.30 733

55 Nubia Square Apartments 3711 Southmore Blvd 1972 100% 192 C $0.94 665

56 - 6634 Sylvan Rd 1954 - 16 C - -

57 - 6638 Sylvan Rd 1954 - 12 C - -

58 - 2501 Truxillo St 1930 - 6 C - -

59 - 3008-3014 Truxillo St 1948 93% 27 C $1.15 650

60 Country Club Place 950 Villa De Matel Rd 1972 98% 241 C $0.93 780


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61 Royal Wayside Apartments 1010 S Wayside Dr 1962 99% 102 C $1.33 704

62 Victory Court 4414 Woodside St 1930 100% 12 C - -

63 - 3521 Attucks St 1955 - 6 C - -

64 - 2308 Auburndale St 1935 100% 5 C - -

65 - 7714 Avenue B 1938 100% 6 C - -

66 - 7720 Avenue B 1938 - 5 C - -

67 - 7724 Avenue B 2012 83% 6 C - -

68 - 7728 Avenue B 1952 - 5 C - -

69 - 7016 Avenue F 1930 - 13 C - -

70 - 2820 Blodgett St 1945 - 6 C - -

71 - 5422 Canal St 1935 100% 6 C - -

72 Bayou View Apartments 2800 Carrolton St 1955 - 12 C - -

73 - 2909-2915 Engelke St 1980 88% 8 C - -

74 - 5010 Ennis St 1950 100% 8 C - -

75 - 5532 Eskridge St 1960 100% 10 C $0.94 690

76 - 2706 Francis St 1940 - 6 C - -

77 - 3523-3611 Hadley 1937 - 8 C - -

78 Oakland Apartments 4811 Oakland 1962 93% 15 C $0.78 737

79 Eastlawn Apartments 4916 Pease St 1929 100% 16 C $0.55 874

80 - 3435 Rosedale St 1945 - 5 C - 792

81 - 2602 Southmore Blvd 1945 - 5 C - -

82 - 3721 Tuam St 1952 - 12 C - -

83 - 4602 Walker St 1965 - 8 C - -

84 - 2840 Winbern St 1940 - 6 C - -

85 - 2524 Binz St 1963 - 4 C - -

86 - 3901 Canal St 1950 - 10 C - -

87 - 3807 Delano St 1980 100% 6 C $1.06 670

88 - 2411 Southmore Blvd 1935 - 2 C - -

89 - 2919 Wentworth St 1955 - 2 C - -

90 - 2506 Wheeler St 1940 - 7 C - -

91 - 2603 Live Oak St 1930 - 6 F - -

92 - 4916-4948 Polk St 1950 - 31 F - -

93 Monteleon Apartments 2708-2712 Oakcliff St 1956 - 14 F - -

Student Housing

94 Savoy 5500 Sampson St 2001 100% 180 A $1.03 794

95 Bayou Oaks 5019 Calhoun St 2003 93% 189 B $2.97 942

96 Cambridge Oaks 4444 Cullen Blvd 1990 99% 210 B $1.46 646

97 Cullen Oaks 4600 Cullen Blvd 2000 87% 411 B $0.93 684

98 - 2508 Southmore Blvd 1940 - 16 B - 675

All or Partially Affordable Housing (Income Restricted = * / Rent Subsidized = ^)

99 Canal Place* 2104 Canal St 2006 98% 200 A $1.54 973

100 Canal Street Apartments^ 2821 Canal St 2005 99% 134 B $2.27 206

101 Temenos Place Apartments II ^ 2200 Jefferson St 2015 - 80 B $1.48 365

102 Walipp Senior Residence^ 5220 Scott St 2004 98% 50 B $1.03 894

103 Zion Gardens^ 2502 Webster St 2013 100% 70 B $0.82 1,121

104 Dynasty^ 3501 N Macgregor Way 1970 100% 96 B $1.06 613

105 Beall Village^ 4463 N Macgregor Way 1959 96% 78 B $1.22 463

106 John Goldberg Apartments for Seniors^ 114 Eastwood St 2000 99% 65 B $0.92 535

107 Zion Village Senior Apartments* 3154 Gray St 2008 98% 50 B $0.45 765

108 Las Villas de Magnolia^ 7123 Harrisburg Blvd 2007 99% 75 B $0.71 540

109 Amber Creek Apartments^ 810 Fair Oaks Rd 1977 94% 237 C $0.80 956

110 - ^ 3315 Reeves St 1930 100% 6 C - -

111 Eastend Apartments* 222 66th St 1997 99% 150 C $0.89 848

112 North Macgregor Arms Apartments^ 3533 N Macgregor Way 1965 92% 64 C $2.01 913

113 Clayton Homes^ 1919 Runnels St 1952 - 296 C - -


30


114 Plaza De Magnolia* 7310-7320 Sherman St 1996 100% 84 C $0.82 924

115 Cuney Homes^ 3260 Truxillo St 1938 98% 544 C $0.81 963

116 - ^ 5612 Harriet St 1960 - 23 C - -

Under Construction or Proposed Complexes

117 EaDo 2424 Capitol St 2016 - 311 A - -

118 The Oaks At Wayside 6502 Jamail Dr 2016 - 60 B - 916

119 Campus Vue Student Housing 4459 N Macgregor Way 2015 - 145 A - 1,086

120 Viewpoint Square 2020 McGowen St 2017 - 100 A - -

121 City View Terrace 2616 Clay St 2018 - 336 A - -

122 Gateway on Cullen Student Housing 1901 Cullen Blvd 2016 - 191 A - -

123 Fenix Estates* 2100-2121 Hussion St 2017 - 200 B - -

Notes: Not all complexes reported occupancy and rental data; * = rent restricted, ^ = rent subsidized

Source: CoStar Group

Summary of Multifamily Complexes in the PMA

The following information provides a summary of the existing complexes surveyed in PMA:

116 Existing complexes; 4 rent restricted, 13 rent subsidized

Predominately class C properties; 3 class A, 10 class B complexes, and 3 class F

Average occupancy of complexes reporting = 95.6%

Average dollar per square foot price ($/SF) of complexes reporting = $1.18

The latest multifamily addition to the PMA will be the Temenos Place Apartments II, which is reportedly finished with construction and is scheduled to be opening in November of 2015. While this will be rent subsidized affordable housing, the tenants will be filled through a special administrative process—according to the property manager. Therefore, these units are not considered directly comparable to the subject property.

Table 21: Images of Temenos Place Apartments II

Source: Google Street View, www.houstonarchitecture.com


31

OCCUPANCY RATES

Of the 6,332 existing units in managed complexes identified in the PMA, occupancy rates have been reported for over 5,506 units (not all complexes were willing to share occupancy information, or able to be contacted). Of those that reported, the average occupancy rate for all units is currently 95.6%. This is consistent with most areas in the Houston MSA, currently experiencing high demand for rental housing. The following tables provide a breakdown of occupancy rates based on the number of bedrooms, the quality of the complex (class), and the target population (all complexes in the first table, affordable housing in the second table, and market rate housing in the third table).

Table 22: All Complexes, Occupancy in PMA by Class and Beds

Class Occupancy Rates

Studio 1 Bed 2 Beds 3 Beds 4 Beds

A 100.0% 96.9% 97.5% 100.0% -

B 93.4% 94.6% 96.6% 95.2% 93.4%

C 93.9% 96.5% 97.5% 94.7% 99.2%

F - - - - -

Total 94.3% 95.9% 97.3% 95.7% 95.7%

Source: CoStar Group; Notes: Data was not available for all complexes

Table 23: Affordable Housing Complexes, Occupancy in PMA by Class and Beds



A - - - - -

B 98.5% 94.8% 98.8% 100.0% 100.0%

C - 97.0% 97.2% 96.9% 99.2%

F - - - - -

Total 98.5% 95.7% 97.8% 97.5% 99.5%


Table 24: Market Rate Complexes, Occupancy in PMA by Class and Beds



A 100.0% 96.9% 97.5% 100.0% -

B 91.6% 94.4% 95.4% 92.9% 90.1%

C 93.9% 96.4% 97.6% 91.7% -

F - - - - -

Total 93.8% 96.0% 97.2% 94.4% 90.1%



32

ABSORPTION RATES

Historical Absorption

Absorption can be defined as the change in the number of occupied units within a given time frame and can be used as a proxy for market demand. Thus, positive absorption indicates strong demand, while negative absorption implies decline in demand. As discussed earlier in this report, the total population in the PMA shrank from 86,179 in 2000 to 78,577 in 2010. In 2015 the total population was estimated at 79,466, which—although an increase from 2010—is still 6,713 less than in 2000. Despite this overall loss in total population (and even an overall loss in renter occupied households) there has been a net gain of 2,145 multifamily units. The following census figures and census based estimates illustrate this point:

2000 Renter Occupied Units 16,807

2015 Renter Occupied Units 16,576

Difference -231

Average Annual Change -15

2000 Multifamily Units 11,158

2015 Multifamily Units 13,303

Difference 2,145

Average Annual Change 143

While total renter occupied households have decreased by 15 annually from 2000 to 2015, multifamily units have increased by an annual average of 143 over the same period. Given an overall multifamily occupancy rate of 95.6% in the PMA, it is reasonable to assume a long term historical average absorption rate of roughly 136 multifamily rental units annually.

Long Term Historical Average Annual Absorption Rate 136

The cause for a long term decline in renter occupied units but an increase in multifamily units is related to the role of single family rentals. While single family units have increased by 484 from 2000 to 2015, single family rentals have declined by 2,376.

2000 Single Family Units 18,967

2015 Single Family Units 19,451

Difference -484 2000 Single Family Rentals 5,649

2015 Single Family Rentals 3,273

Difference 2,376

This decline in single family rentals is related to several factors including the age and condition of the existing housing stock, the shrinking persons per household figure, renewed ownership interest in areas close to downtown, and renter preferences. Regardless of the reasons, this decline in available single family rentals in the PMA has served as a source of demand for multifamily rentals. It is anticipated that this trend will continue as more redevelopment occurs in the PMA and as more single family rentals are purchased and converted back into owner occupied dwellings.


33

Current Absorption Rate

Based on current multifamily market data for the PMA, the CoStar Group provides an overall absorption rate estimate that will be utilized in the demand section of this market analysis. This absorption rate is displayed as follows:

The CoStar Group estimated Annual PMA Absorption Rate 116 units

It should be noted that this current estimate is based on the historical absorption rate of the area within the PMA, which has seen relatively few new units added (based on the overall number of units in the PMA and strong growth in the multifamily market in other parts of the Houston area). This is important to note because the existing multifamily supply contains many class C and even F properties, with tenants who have the ability to move into newer and higher quality housing if the location and price were agreeable. Given the size of the existing population base in the PMA as well as the demand from outside the PMA (that will increase as the PMA continues to redevelop), well placed multifamily housing near major roads and mass transit are likely to experience higher absorption rates than what has been historically experienced.

Complexes in the Multifamily Survey Built in or After 2006

Of the 2,145 multifamily units that are estimated to have been added in the PMA from 2000 to 2015, the survey presented previously has identified 8 complexes and 632 that have been built since 2006. These complexes have an average occupancy of 98.0%, based on those which are reporting (and excluding the Temenos Place Apartments II which is scheduled to open soon in November of 2015).

Table 25: Complexes in the Multifamily Survey Built in or After 2006


Market Rate Housing

11 - 3463 Elgin St 2006 - 6 B - -

99 Canal Place 2104 Canal St 2006 98% 200 A $1.54 973

108 Las Villas de Magnolia 7123 Harrisburg Blvd 2007 99% 75 B $0.71 540

107 Zion Village Senior Apartments 3154 Gray St 2008 98% 50 B $0.45 765

67 - 7724 Avenue B 2012 83% 6 C - -

103 Zion Gardens 2502 Webster St 2013 100% 70 B $0.82 1,121

101 Temenos Place Apartments II 2200 Jefferson St 2015 - 80 B $1.48 365

119 Campus Vue 4459 N Macgregor Way 2015 - 145 A - 1,086

Notes: Data was not available for all complexes; Notes: Occ = occupancy, SF = square feet



34

DEMAND

As outlined by the TDHCA, the first step in calculating demand for the subject property is determining total population and households as well as projected population and households. As Fenix Estates is projected to be completed in 2017, it is important to have an estimate for that year for each of the following categories.

Population and Household Projections for the PMA

The following table contains population and household projections for 2015 to 2020. All of the 2015 numbers, and the 2020 population and household projections are provided by PCensus. The 2020 owner occupied and renter occupied projections were calculated by CDS and based on the trends from 2010 to 2015. All of the numbers from 2016 to 2019 are based on straight-line delineations from 2015 to 2020.

Table 26: Population and Household Projections for the PMA

Category 2015 2016 2017 2018 2019 2020

Population 79,466 79,816 80,166 80,516 80,866 81,216

Households 27,033 27,231 27,429 27,627 27,825 28,023

Owner Occupied 10,457 10,524 10,590 10,657 10,723 10,790

Renter Occupied 16,576 16,683 16,791 16,898 17,006 17,113

Source: US Census, American Community Survey, PCensus, CDS Market Research

Appropriate Household Size Projections for the PMA

The next step in calculating demand for the subject property is determining the number of households in the PMA that would be size appropriate for the units being constructed. As with the population and household projections, these projections were determined using a mix of PCensus data and trends/delineations produced by CDS.

Table 27: Household Size Projections for the PMA

Category 2015 2016 2017 2018 2019 2020

Total Households 27,033 27,231 27,429 27,627 27,825 28,023

1-person household 8,858 8,983 9,109 9,234 9,359 9,484






7 or more person household 964 940 916 891 867 843


As stated previously, Fenix estates will have 153 studios and 47 1 bedroom apartments. Thus, the demographic from which demand can be drawn will be 1-person and 2-person households.


35

Income Eligible Projections for the PMA

As prescribed by the TDHCA, the next step is determining the income eligible population in the PMA. The income eligible population is determined by calculating the income eligibility based on the unit and income mix of the project. Fenix Estates is planning for 153 Efficiency Units (380 SF): 28 units < 30% AMI, 53 units < 50% AMI, 56 units < 60% AMI, 16 units Unrestricted; and 47 1-Bedroom Units (550 SF): 12 units < 30% AMI, 15 units < 50% AMI, 16 units < 60% AMI, 4 units Unrestricted. Based on the THDHCA Rent and Income Limits (as of 3/1/2015), the maximum qualifying incomes for the applicable household sizes were determined for the Fenix Estates project with a calculated area median income (AMI) of 69,300. The minimum of each income band was calculated based on the max AMI, divided by 35%--as outlined by the TDHCA.

Table 28: Eligible Income Bands for the Fenix Estate Development

Household Size 30% of AMI 50% of AMI 60% of AMI

min max min max min max

1 Person Households $9,477 $14,580 $15,795 $24,300 $18,954 $29,160

2 Person Households $10,823 $16,650 $18,038 $27,750 $21,450 $33,000


Table 29: Renter Occupied Household Income Projections for the PMA

Category 2015 2017 2020

Total Households 27,033 27,429 28,023

Renter Occupied Households 16,576 16,791 17,113

Less than $5,000 1,704 1,726 1,759

$5,000 to $9,999 1,876 1,900 1,937

$10,000 to $14,999 1,988 2,014 2,052

$15,000 to $19,999 1,977 2,003 2,041

$20,000 to $24,999 1,400 1,418 1,445

$25,000 to $34,999 2,186 2,215 2,257

$35,000 to $49,999 2,067 2,094 2,134

> $50,000 3,378 3,422 3,487

Source: US Census, ACS 2009-2013, PCensus, CDS Market Research

Utilizing PCenus projections on total households and American Community Census (ACS) data on the income breakdowns of renter occupied, we can project the number of renter occupied households by income for the year 2017, when the Fenix Estates project is due for completion. This will allow for an estimate of income qualifying households for each unit type, as calculated in the next section.

Potential Demand

Potential Demand is defined as the number of income-eligible, age-, size-, and tenure-appropriate target households in the designated market area at the proposed placed in service date. As the Fenix Estates is open to all ages, the potential demand will be based on the number of 1 and 2 person households projected for the PMA in 2017 multiplied by the percentage of renter occupied households that fall within the designated income bands.


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Year 2017 1-Person Unit (Studio) Potential Demand Calculations for the PMA

1-person households = 9,109

Approximate % of renter occupied households within eligible income groups = 39.0%

Approximate 1-person households within eligible income groups = 3,549

Year 2017 2-Person Unit (1 Bedroom) Potential Demand Calculations for the PMA




Gross Demand

Gross Demand is defined as the sum of Potential Demand from the PMA, Demand from Other Sources, and Potential Demand from a Secondary Market Area (SMA). This analysis did not consider demand from other sources or an SMA, as the PMA was drawn to include several tracts covering a large area of southeast Houston. Thus the gross demand is the sum of potential demand for both 1 and 2-person households within eligible income groups. This is the population within the PMA that would potentially be interested in the Fenix Estates, and from which the capture rate can be determined.

Year 2017 Gross Demand Calculations for the PMA

Approximate 1 and 2-person households within eligible income groups = 6,503

It should be noted that Gross Demand in 2017 for 1 and 2-person households within eligible income groups is projected to be 143 households higher than in 2015. This essentially means that according to the estimates and projections provided here, 143 additional 1 and 2-person households within eligible income groups will be added to PMA over the next two years, when the Fenix Estates is scheduled for competition.

EMPLOYMENT

According to the guidelines provided by the TDHCA, an overview of the employment situation in the PMA should be considered in this section. The PMA has a total population in 2015 of 79,466, with 62,416 that are aged 16 or older. Of that amount, just over 36,700, or 58.9%, are in the labor force—which means they are either employed or unemployed but actively seeking employment. According to estimates, the PMA currently has an unemployment rate of 6.8%, which is only slightly higher than the estimated 5.7% unemployment rate experienced in the overall Houston MSA.

Table 30: Total Employment Trends in the PMA


Total Population Age 16+ 63,439 62,416 -1.6%

Employed 43.4% 52.1% 8.7%

Not in Labor Force 47.1% 41.1% -6.0%

Unemployed 9.5% 6.8% -2.8%


Of those employed residents currently living in the PMA, 45.7% are classified as white collar workers, up from 41.7% in 2000. White collar workers are not necessarily better paid, rather the term refers to those who work in office or


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other professional environments. Conversely, blue collar workers refer to jobs with a manual labor component, particularly in industrial companies. Service and farm jobs also involve manual labor, but specifically refer to those jobs related to the agriculture and service sector.

Table 31: Employment by Classification Trends in the PMA


Blue Collar 36.9% 31.6% -5.3%

White Collar 41.7% 45.7% 4.0%

Service and Farm 21.5% 22.8% 1.3%


The following table breaks out total employment in the PMA by occupation, comparing the years 2000 and 2015. As can be seen, the number of employed residents in many occupations has increased, with numerically small but still significant increases in several typically high paying fields such as architect/engineer and healthcare practitioner/technician. As with other parts of the Houston area, job increases in these fields has led to a significant rise in the cost of housing, especially inside Loop 610.

Table 32: Employment by Occupation Trends in the PMA

Occupation 2000 2015 % Change

Architect/Engineer 220 692 214.5%

Arts/Entertainment/Sports 371 498 34.2%

Building Grounds Maintenance 2,096 2,532 20.8%

Business/Financial Operations 502 1,091 117.3%

Community/Social Services 397 362 -8.8%

Computer/Mathematical 290 381 31.4%

Construction/Extraction 3,605 3,426 -5.0%

Education/Training/Library 1,476 1,631 10.5%

Farming/Fishing/Forestry 82 96 17.1%

Food Prep/Serving 1,772 2,154 21.6%

Healthcare Practitioner/Technician 499 928 86.0%

Healthcare Support 648 964 48.8%

Maintenance Repair 991 1,215 22.6%

Legal 232 341 47.0%

Life/Physical/Social Science 112 258 130.4%

Management 1,040 2,086 100.6%

Office/Admin. Support 4,179 3,806 -8.9%

Production 2,656 2,702 1.7%

Protective Service 518 704 35.9%

Sales/Related 2,146 3,082 43.6%

Personal Care/Service 800 1,106 38.3%

Transportation/Moving 2,895 3,132 8.2%

TOTAL 27,527 33,187 20.6%



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The Longitudinal Employer-Household Dynamic (LEHD), which is part of the US Census Bureau, produces data on the local area labor force. The following figure displays LEHD data for the PMA, depicting locational employment patterns. Although the scale of each map is different, they offer a graphical illustration of where workers in the PMA reside and where residents in the PMA work.

Table 33: Where Workers in the PMA Reside, Where Residents in the PMA Work

Source: US Census, LEHD 2013, CDS Market Research

Workers in the PMA appear to be coming from all over Houston, but are particularly concentrated in inner Loop south Houston, with a fair share of workers living inside the PMA. For residents, the highest concentrations of employment are focused near Downtown, the University of Houston, the Medical Center, and Greenway Plaza.


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CONCLUSIONS Based on the data presented in this study for the PMA, there is sufficient demand to successfully construct and absorb the proposed Fenix Estates. The following information provides details regarding this demand as how the market could potentially respond to the proposed unit mix and rents.

UNIT MIX

Fenix Estates will be a mixed-income development, targeted to households ranging from 30% to 60% of area median income, which in 2015 in Houston was $14,580 to $29,160 respectively for a single individual. Ten percent of the units (20 units) will be unrestricted, allowing the development to serve a broader income mix of working households. The unit and income mix is as follows:

Table 34: Fenix Estates Unit Mix

Category Studio 380 SF 1 Bed 550 SF Total

< 30 % AMI 28 12 40

< 50% AMI 53 15 68

< 60 % AMI 56 16 72

Unrestricted 16 4 20

Total 153 47 200

Source: Praxis Consulting Group, LLC.

The arrangement of smaller studio and 1 bedroom spaces as the unit mix for the Fenix Estates was a decision by the Harris County Housing Authority in order to serve a specific subset of the population. Although this may be the case, the selection of smaller studio and 1 bedroom spaces fits conveniently into the market trends of both the area and the larger region. Studio and 1 bedroom spaces will serve 1 and 2-person households—which according to the data, have grown significantly in the PMA while all others household sizes have begun to shrink.

Table 35: Household Size Trends in the PMA









7 or more person household 1,535 964 -37.2%

Average 3.02 2.67 -11.6%


The demand and capture rate analysis to follow will provide more justification that the proposed unit mix for the Fenix Estates is viable.


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RENTS

Overview of Rent

Information on the unit types, number of units, unit rent, rent per square foot (SF), and potential revenue for the Fenix Estates is contained in the following table. As can be seen, there will be two unit types: a 380 SF studio and a 550 SF 1-bedroom apartment. Depending on the income eligibility of the tenant, the rent per SF will range from $0.96 to $1.45 for the studio and $0.71 to $1.18 for the one bedroom.

Table 36: Fenix Estates Rent Matrix

Unit Type Units Unit Square

Feet Tenant Share Monthly Rent

Rent/SF Total Potential

Monthly Revenue

Total Potential Annual

Revenue

Studio

< 30 % AMI 28 380 $364 $0.96 $10,192 $122,304

< 50% AMI 53 380 $450 $1.18 $23,850 $286,200

< 60 % AMI 56 380 $550 $1.45 $30,800 $369,600

Unrestricted 16 380 $550 $1.45 $8,800 $105,600

1 Bedroom

< 30 % AMI 12 550 $390 $0.71 $4,680 $56,160

< 50% AMI 15 550 $550 $1.00 $8,250 $99,000

< 60 % AMI 16 550 $650 $1.18 $10,400 $124,800

Unrestricted 4 550 $650 $1.18 $2,600 $31,200

Total 200 $1,194,864


Rent Comparables for Studio Apartments

The following table provides a list of multifamily complexes in the PMA which have studio apartments available for rent. There is one class A complex, four class B complexes, and two class C. These are mostly market rate complexes.

Table 37: Rent Comparables for Studio Apartments in the PMA

Name Class Market Type Total Units Studio Units Studio SF Rent/Studio Rent/SF Studio Occ

Canal Street Apts B All Affordable 134 134 206 $468 $2.27 98.5%

Cambridge Oaks B Student Market 210 78 484 $1,000 $2.07 98.7%

Cullen Oaks B Student Market 411 6 300 $720 $2.40 83.3%

Brookdale Village C All Market 337 28 500 $535 $1.07 82.1%

Jefferson Square B All Market 72 28 350 $400 $1.14 92.9%

The Marquis A All Market 244 1 1,142 $1,419 $1.24 100.0%

Riveria Apts C All Market 30 10 600 $587 $1.01 100.0%

Total / Average - - - 1,438 285 344 626 $1.82 96.1%

Source: CoStar Group, CDS Market Research; Notes: SF= square feet, Occ = Occupancy, Rent/SF refers to rent for Studios

The rent per square foot for studios in the PMA ranges from $1.01 to $2.40 with an average of $1.82. The square foot size ranges from 206 to 600 per studio space with an average of 344 SF. Occupancy rates for studio apartments


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are high, this sample is reflecting an average of 96.1% for all studio apartments surveyed, which is higher than the overall average for all units of 95.6% presented earlier. Because there is a base price for renting an apartment regardless of the size, there is a general correlation between the size offered and the rice per square foot—with the smaller units tending to get a higher rent per square foot. The Fenix Estates offers a 380 SF studio at a range of $0.96 to $1.45. This proposed size and rent range is competitive with other studios being offered in the PMA. Occupancy rates at this proposed size and rent range would be expected to be at or above this average, once they reach stabilization.

Rent Comparables for 1 Bedroom Apartments

The following table provides a list of multifamily complexes in the PMA which have a large number of 1 bedroom apartments available for rent. In this sample there are three class A complexes, two class B complexes, with the remainder class C. These are mostly market rate complexes. According to this sample, the rent per SF for 1 bedroom apartments in the PMA ranges from $0.80 to $1.79 with an average of $1.22. The SF range for 1 bedroom apartments ranges from 538 to 982, with an average of 733 SF. Occupancy rates for 1 bedroom apartments in this sample are estimated at 96.7% which, like studios, is also higher than the average for all units in the PMA.

Table 38: Rent Comparables for 1 Bedroom Apartments in the PMA

Name Class Market Type Total Units 1Beds 1Beds SF Rent/1Bed Rent/SF 1Bed Occ

Eastend C All Affordable 150 48 625 $624 $1.00 100.0%

Canal Place A All Market 200 65 742 $1,144 $1.54 96.9%

Dismuke C All Market 48 36 538 $750 $1.39 86.1%

Amber Creek C All Affordable 237 79 639 $613 $0.96 93.7%

Fair Oaks B All Market 122 114 736 $626 $0.85 92.1%

Brookdale Village C All Market 337 213 646 $640 $0.99 98.1%

MacGregor Gdns C All Market 84 50 600 $720 $1.20 90.0%

Jefferson Square B All Market 72 44 550 $560 $1.02 97.7%

The Marquis A All Market 244 173 982 $1,499 $1.53 90.7%

Lofts Ballpark A All Market 375 293 837 $1,497 $1.79 100.0%

Nubia Square C All Market 192 170 640 $610 $0.95 100.0%

Cuney Homes C All Affordable 544 172 750 $603 $0.80 97.7%

Country Club Place C All Market 241 205 725 $681 $0.94 98.0%

Royal Wayside C All Market 102 68 619 $825 $1.33 98.5%

Total / Average - - - 2,948 1,730 733 895 $1.22 96.7%


The Fenix Estates offers a 550 SF 1 bedroom apartment at a range of $0.71 to $1.18. The size of the 1 bedroom is towards the smaller end of 1 bedroom apartments being offered in the PMA, but the rent range is especially competitive, with the high end of proposed rent near the average for this sample—which includes many class C structures (of lower quality). Occupancy rates at this proposed size and rent range for 1 bedroom apartments at Fenix Estates would be expected to be at or above this average, once they reach stabilization.

HUD Form 92273

As recommended by the TDHCA guidelines, HUD Form 92273 uses the comparable complexes (detailed previously) to compare characteristics of each property and make line by line comparisons to the subject property (the Fenix Estates). The result is a correlated or comparable suggested rent for each unit type in the subject property. This information is contained in Appendix C of this report.


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EFFECTIVE GROSS INCOME

The following is a 17-year projection of rental income, secondary income, and vacancy and collection loss projections for Fenix Estates. The third column from the left titled “Rental Revenue” reflects the total potential annual revenue as presented in the previous section plus an ancillary base year rental revenue as presented below. This rental revenue is discounted (shown in red) by the fourth column, which is a calculation of rental income loss due to a 7.5% vacancy rate (a 92.5% occupancy rate). Although under current metrics the Fenix Estates would be expected to do the same or better than current sampled averages for complexes in the PMA containing studio and 1 bedroom apartments, a 92.5% occupancy rate was utilized as a conservative estimate given the possibility change in market conditions from 2015 to 2017.

Table 39: Fenix Estates Operating Estimates

GIC Rental Ancillary Expenses Mgmt. Reserve Net Oper Cash Cumul.

Year Income Revenue Vacancy Revenue less fee Fee Funding Income Flow Cash Flow

2016 $92,496 $92,496 $92,496 $92,496

2017 $26,203 $1,330,012 ($99,751) $33,815 ($912,431) ($61,513) ($61,200) $255,135 $255,135 $347,631

2018 $1,370,044 ($102,753) $34,833 ($924,812) ($63,365) ($63,654) $250,294 $250,294 $597,925

2019 $1,397,445 ($104,808) $35,529 ($952,556) ($64,632) ($65,564) $245,415 $245,415 $843,340

2020 $1,425,394 ($106,905) $36,240 ($981,133) ($65,924) ($67,531) $240,142 $240,142 $1,083,481

2021 $1,453,902 ($109,043) $36,965 ($1,010,567) ($67,243) ($69,556) $234,458 $234,458 $1,317,940

2022 $1,482,980 ($111,224) $37,704 ($1,040,884) ($68,588) ($71,643) $228,346 $228,346 $1,546,286

2023 $1,512,640 ($113,448) $38,458 ($1,072,110) ($69,960) ($73,792) $221,788 $221,788 $1,768,073

2024 $1,542,893 ($115,717) $39,227 ($1,104,273) ($71,359) ($76,006) $214,764 $214,764 $1,982,838

2025 $1,573,750 ($118,031) $40,012 ($1,137,402) ($72,786) ($78,286) $207,257 $207,257 $2,190,095

2026 $1,605,225 ($120,392) $40,812 ($1,171,524) ($74,242) ($80,635) $199,245 $199,245 $2,389,340

2027 $1,637,330 ($122,800) $41,628 ($1,206,669) ($75,727) ($83,054) $190,709 $190,709 $2,580,049

2028 $1,670,077 ($125,256) $42,461 ($1,242,869) ($77,241) ($85,546) $181,625 $181,625 $2,761,674

2029 $1,703,478 ($127,761) $43,310 ($1,280,155) ($78,786) ($88,112) $171,974 $171,974 $2,933,648

2030 $1,737,548 ($130,316) $44,176 ($1,318,560) ($80,362) ($90,755) $161,731 $161,731 $3,095,379

2031 $1,772,299 ($132,922) $45,060 ($1,358,117) ($81,969) ($93,478) $150,872 $150,872 $3,246,251

2032 $1,807,745 ($135,581) $45,961 ($1,398,860) ($83,608) ($96,282) $139,374 $139,374 $3,385,624

2033 $1,843,900 ($138,292) $46,880 ($1,440,826) ($85,280) ($99,171) $127,210 $127,210 $3,512,834


These projections are based on the following parameters:

Closing: 3/1/16

Construction Start: 4/1/16

100% Completion / Placed in Service Date: 6/1/17

Full Lease Up 2/1/18

Base Year Rental Revenue: $1,316,844

Ancillary Base Year Rental Revenue: $33,480

Base Year Expenses (less fee): $888,900

Management Fee: $56,677

First Mortgage Debt Service $0

Income Trending (Yrs 1-5) 2.00%

Income Trending (Yrs 6-17) 2.00%

Expense Trending 3.00%

LIHTC Occupancy Rate 92.5%


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DEMAND AND CAPTURE RATE

As presented previously, the Fenix Estates has an estimated 1-person unit demand potential of 3,459 households and an estimated 2-person unit demand potential of 2,954 households. This creates a gross demand potential for the Fenix Estates of 6,503 households.

Year 2017 1-Person Unit (Studio) Potential Demand Calculations for the PMA




Year 2017 2-Person Unit (1 Bedroom) Potential Demand Calculations for the PMA




Year 2017 Gross Demand Calculations for the PMA

Approximate 1 and 2-person households within eligible income groups = 6,503

As requested by the guidelines of the TDHCA, the gross demand has been divided among each unit type by rent restriction category. Because there is an overlapping of eligible ranges for income and household size, the gross demand was adjusted to avoid including households more than once—as per the TDHCA guidelines.

GROSS CAPTURE RATE

The gross capture rate is defined as the relevant supply divided by the gross demand. Simply put, it is the percentage of age, size, and income qualified renter households in the PMA that Fenix Estates must capture in order to achieve full occupancy.

The relevant supply in this calculation are the subject units and the comparable units. The subject units are made up of the income restricted units in the Fenix Estates. The unrestricted units are not considered in this calculation. The comparable units are zero because there are no complexes which are un-stabilized, under construction, or planned for the PMA as rent restricted Affordable Housing complexes. As was mentioned previously, the Temenos Place Apartments II will open in November, but it will be rent subsidized affordable housing filled through an administrative process, and as such is not directly comparable to the Fenix Estates.

The following table presents the subject units, comparable units, demand of households, and capture rate for each unit type by rent restriction category. The gross capture rate is calculated on the last line as 2.8%. This means that to reach full occupancy, the Fenix Estates would need to attract 2.8% of size and income qualified renter households in the PMA (there is no age restriction planned for the project).

Table 40: Demand and Capture Rate Calculations

Unit Type Subject Units Comparable Units Demand Capture

Studio

< 30 % AMI 28 0 1,092 2.6%

< 50% AMI 53 0 1,228 4.3%

< 60 % AMI 56 0 1,228 4.6%


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Unit Type Subject Units Comparable Units Demand Capture

Unrestricted 16 N/A N/A N/A

1 Bedroom

< 30 % AMI 12 0 825 1.5%

< 50% AMI 15 0 1,064 1.4%

< 60 % AMI 16 0 1,064 1.5%

Unrestricted 4 N/A N/A N/A

Total 180 0 6,503 2.8%

Source: CDS Market Research

ABSORPTION

The operating estimates presented previously are calculated based on the assumption that the Fenix Estates will open on 6/1/2017 and be at 92.5% occupancy by 2/1/18. This means that 185 units are projected to lease up over an eight-month period. This equals 23.13 units per month and equates to an annual absorption rate of 277.5 units.

According to the numbers presented previously, the CoStar Group estimates the PMA’s absorption rate at 116 units annually. Using this estimate, it would take Fenix Estates just over 1 year and 7 months to reach a stabilized occupancy rate of 92.5%. As noted previously, the CoStar Group estimate is likely a conservative estimate of absorption given the size of the PMA, the relatively low level of new construction in this area compared to the region, and the demand for well-located multifamily housing with easy access to major roads, mass transit, and located near important job centers.

MARKET IMPACT

Based on the high occupancy levels of existing multifamily complexes properties in the PMA, along with the low level of recent construction, it is projected that the Fenix Estates will have minimal sustained negative impact upon the existing apartment market. Managers interviewed indicated a need for additional affordable housing.


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SITE IMAGES The following images depict the project site and the neighborhood—showing I-45 and Cullen Blvd, and the intersection of Hussion St and Coyle St.

Figure 11: Images of the Project Site and Neighborhood

Source: Google Street View, CDS Market Research


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APPENDIX A: SOURCES

PCensus for Map Info. Subscription Data Service. Tetrad Computer Applications, Inc. 2015

2015 Real Estate Analysis Rules. Reference Guide. Texas Department of Housing and Community Affairs. 2015

CoStar Commercial Real Estate Market Data. Subscription Data Service. CoStar Group, Inc. 2015

Phone Interviews with Primary Market Area Apartment Managers. Primary Research. CDS Market Research. 2015

Field Visits to Primary Market Area Apartment Complexes and Neighborhoods. Primary Research. CDS Market Research. 2015

Property Tax Record – Subject Site. Government Records. Harris County Appraisal District. 2015

PCensus for ArcView. Census Based Demographic Data. Nielsen/Claritas. 2015

American Community Survey. Government Demographics. US Census. Survey of Data Years 2009-2013

ASSUMPTIONS AND LIMITING CONDITIONS

In order to draw meaningful conclusions, it was necessary to make certain assumptions.

Notable Assumptions:

The following contingencies and limiting conditions are noted as fundamental, in the way they might affect the validity of the analysis and, thus, the conclusions reached in this report:

All information contained in the report, while based upon information obtained from the client and other sources deemed to be reliable, is in no way warranted by CDS Market Research;

The Metropolitan Area, the State, and the Nation as a whole will not suffer any major economic disruption during the time period under consideration;

Population will continue to increase at or above the rate forecast;

The basic sources of statistical data and estimates used in this analysis are sufficiently accurate to be useful for planning purposes;

The development will continue to be promoted and managed in a manner that will have adequate impact on the regional and local markets;

All references to dollar amounts are stated in terms of the 2015 value of the U.S. dollar unless otherwise stated. Projections are not adjusted for possible changes in these values due to inflation or deflation.

Radical changes in factors affecting the major assumptions noted above could alter the conclusions reached in this analysis or necessitate the re-evaluation of portions of this report.


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APPENDIX B: QUALIFICATIONS

Resume: J. Kirby Snideman, AICP MUP - Senior Market Analyst / Project Manager

Kirby Snideman is a planning professional with a focus in economic development and currently serves as a senior market analyst and project manager at CDS Market Research. Originally from Houston, Mr. Snideman has studied and worked in several places including Utah, New York, California, Iowa, Illinois, Oregon and London, England.

Mr. Snideman holds a bachelor’s degree from Brigham Young University where he studied business and biology. Mr. Snideman also studied at the University of Utah where he graduated with a master’s degree in urban planning. Mr. Snideman’s graduate work at the University of Utah focused on how effective, participatory planning can encourage long term, sustainable growth in the local economy.

With CDS, Mr. Snideman manages various projects for both private and public clients related to real estate development, economic development, and municipal planning.

Mr. Snideman’s recent professional work includes:

Real estate market analyses

Transit oriented development plans

Housing studies

Economic strategic plans

Business recruitment, expansion, and retention projects

Incorporation feasibility studies

City/County general plans

Redevelopment blight studies

Impact fee recommendations

Public transportation analyses

Economic / fiscal impact studies

Business license fee studies

Infrastructure master plans

Land use analyses

Demographic inventories

Population forecasts

NEPA environmental justice assessments

Public safety planning

Mr. Snideman is a member of the Houston chapters of the Urban Land Institute, the Congress for New Urbanism, and the American Planning Association. Mr. Snideman is also a member of the American Institute of Certified Planners.

Years of Experience: 8

Education:

Master of Urban Planning

University of Utah

Salt Lake City, Utah

Bachelor of Science

Brigham Young University

Provo, Utah

Professional Certification:

American Institute of

Certified Planners, #027511

Contact:

[email protected]

(832) 680-1006


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CDS Market Research was formed in 1971 for the purpose of providing professional market and economic research and consulting services. Specialties include market feasibility and market planning for real estate and economic development. We assist our clients in identifying opportunities and evaluating the conditions and trends that influence project feasibility, site location, design criteria, and financing. Our Mission is to provide objective recommendations for optimal positioning of each development relative to market area demographics, economic trends/conditions, site considerations, competitive market activity and urban growth patterns. Staff members have completed over 3,500 research and planning studies addressing all types of residential, commercial, industrial and recreational real estate development.

Professional Services

Real estate development planning and feasibility

Strategic market planning for communities

Urban redevelopment / revitalization

Public investment impact analysis

Suburban, urban and exurban housing studies

Demographic, economic and competitive analyses

Commercial and industrial development opportunities

Market support for special districts

Commercial and industrial development opportunities

Economic development and land utilization

Semi-annual Subdivision and Lot Price Survey

Professional Staff

Steven R. Spillette President

Brenda G. Persons Vice President

Kirby Snideman Senior Market Analyst

Ty Jacobsen Market and GIS Analyst

Kent Dussair Managing Director

Charles R. Savino Principal Associate

Scott Reineking Senior Associate

Dennis Reilly Senior Associate

William McWhorter Senior Associate

Jillian Anderson Senior Associate


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APPENDIX C: RENT COMPARABLES: HUD FORM 92273

As recommended by the TDHCA guidelines, HUD Form 92273 uses the comparable complexes (detailed previously) to compare characteristics of each property and make line by line comparisons to the subject property (the Fenix Estates). The result is a correlated or comparable suggested rent for each unit type in the subject property. This information is contained in the two pages following this page (the first page is the studio unit rent comparison, the second page is the one bedroom unit rent comparison).

As per TDHCA guidelines, a minimum of three properties were used as comparables for each unit type examined. In addition, comparable complexes were selected so that total adjustments would not exceed 25%--with more than that amount suggesting incomparability. The only exception to this was the Jefferson Square Apartments, related to the fact that this complex does not include the electric bill while the subject property does. Given that this is a fairly simple calculation which prospective tenants can make, the Jefferson Square Apartments were still included, the reasoning being that the other characteristics still provide a viable comparison for the subject property.

As per TDHCA guidelines, where explanations would be necessary or helpful in explaining the adjustments, they have been included below. For a full explanation of all terms used in HUD Form 92273, see the HUD website1 for details.

Year Built: When comparing the age difference between rent comparables and the subject property, a value of $3 dollars per year was utilized. This reflects the premium associated with a newer property, particularly among Class B and C properties which generally tend to age “faster” and provide a starker contrast to newer properties in the eyes of prospective renters.

Sq. Ft. Area: When comparing the square foot difference between rent comparables and the subject property, a value of $0.50 cents per square foot was utilized. This reflects the fact that while size is an important consideration, it is not the only consideration.

Equipment: Differences in equipment provided were considered at $5 dollars per option.

Services: It was estimated that a conservative to average monthly electric bill would amount to $75 dollars. This is the adjustment amount that was used where comparable complexes did not include this in the rent (as the subject property does). In some cases, the $75 was split $65-$10 where heating hot water was called out.

Project Location: There are four recommended adjectives for this line, “Excellent”, “Good”, “Fair”, or “Poor”. These are broad categories but should be indicative of the properties distance to neighborhood amenities, employment centers, and the neighborhood’s overall desirability. The Fenix Estates was determined to be a “Good” location given its proximity to I-45 and downtown, and light rail (among other neighborhood amenities). Consideration was also given to the fact that the area around Fenix Estates is redeveloping, with adjacent properties seeking retail uses such as a grocery store. All other properties were given a “Fair” rating based on their location. A conservative estimate of $10 dollars was used to represent the difference in this characteristic to the prospective renter.

1 http://portal.hud.gov/hudportal/documents/huddoc?id=92273.pdf

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