PEACHTREE MARKET REPORT 8 2016 .pdf

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Satilla Capital Partners
Buckhead Park North Townhome Community
Buckhead Submarket (Fulton County) – Atlanta MSA
August 2016
Market Feasibility Study

www.realestateconsulting.com

12600 Deerfield Parkway, Suite 100 | Alpharetta, GA 30004 | 770.286.3493

Table of Contents

www.realestateconsulting.com

BACKGROUND AND OBJECTIVES

3

EXECUTIVE SUMMARY

5

LOCATION ANALYSIS

11

COMPETITIVE NEW HOME ANALYSIS

19

AREA NEW & RESALE HOME ANALYSIS

29

GEOGRAPHIC AND DEMOGRAPHIC TRENDS

33

ECONOMIC AND HOUSING MARKET TRENDS – MSA

41

MARKET RISK INFORMATION

54

APPENDIX

58

2

Background and Objectives

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3

Background, Objective, and Key Assumptions
BACKGROUND:
John Burns Real Estate Consulting, LLC (“JBREC”) was retained by Satilla Capital Partners (“Client”) to provide an
independent assessment of the opportunity to acquire developed townhome lots at Buckhead Park North (“Subject”). The
Subject will include 17 fully developed townhome lots at 24’ wide by 48’ deep pads within a gated community in the heart of
Atlanta’s toney Buckhead submarket. Buckhead is widely recognized as the most upscale submarket within the Atlanta MSA
and this location on Peachtree Road is in the heart of Buckhead’s employment hub, within walking distance of the popular
Phipps and Lenox Malls and numerous shopping, restaurants, and entertainment venues that make this area so popular.
OBJECTIVE:
The objective of this assignment is to provide an independent third-party analysis of housing market, economic, and
demographic conditions in the Atlanta MSA and to assess the opportunity to acquire 17 fully developed townhome lots within
the Buckhead Park North TH community. To achieve the objective of this assignment, the subject site was visited, new
townhome home projects in the competitive market area were visited and surveyed, information was compiled and evaluated
on new and resale activity (townhomes and condos) in the local market, and information was analyzed on overall economic
and housing market conditions. Please see the Executive Summary for study results and recommendations.
The pricing and absorption recommendations in this report assume that the Builder of the Subject Property will provide
excellent execution of the following: 1) offer floor plan sizes, types, and amenity levels as proposed and recommended, 2) the
development will be completed in a quality “market appropriate” manner with a community entrance, monumentation,
landscaping, amenities, spec levels, and unit finishes in-line with market expectations, 3) provide sufficient advertising and
marketing efforts to generate shopper traffic commensurate with market comps achieving comparable home sales rates and
prices, 4) have an on-site sales office open at least six days per week, 5) have a fully decorated model home, and 6) have
experienced, professionally trained sales agents familiar with the local market.
CONTACT INFORMATION:
This analysis was prepared by John Burns Real Estate Consulting, LLC. David Kalosis, Senior Vice President, served as Project
Manager and managed the day-to-day operations of the analysis. Dan Fulton, Senior Vice President, provided the internal peer
review. Follow-up questions should be directed to us at:
12600 Deerfield Parkway, Suite 100
Alpharetta, GA 30004
770.286.3493
www.realestateconsulting.com

4

Executive Summary

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5

Executive Summary – Market Overview
JBREC rates the Buckhead Park North Townhome community in the Buckhead Submarket (Fulton County), GA an “A”
opportunity based on the location, area desirability, accessibility, product appeal and current housing demand.
The Atlanta housing market fundamentals continue to support growth. Population and household growth, coupled with
economic and income growth, will continue to support housing demand over the next few years. Strong demand, with low supply
and record affordability, will increase demand (and prices) particularly among first-time and first move-up family buyers.
Buckhead is the most desirable address in Atlanta. The toney Inside-The-Perimeter (ITP) location is a live-work-play
destination for Millennials and Empty Nesters/Retirees who can afford to “pay to play” to live there. Buckhead is home to the
highest household incomes, concentration of college grads and home values. Its also home to a major employment hub within
Buckhead, as well as upscale and boutique shopping, fine dining and entertainment.
Empty Nesters/Retirees make up the fastest growth segments. Those over the age of 55 represent the sharpest household
growth within Buckhead over the next five years. They also represent the household incomes and personal wealth that can most
afford to rent or own within this expensive real estate pocket.
Upscale urban townhomes have shown appeal among Empty Nesters. Within Buckhead, there have been a handful of
successful upscale townhome communities that have sold out recently at higher average price points offering similar 4-story
upscale townhome products with highlighted features including elevators and rooftop terraces. Well branded upscale townhome
communities designed with the upscale Empty Nester in mind have sold the fastest and at the highest prices. JBREC
recommends that the builder include elevators and finished terrace with 4 th bedroom/bath in the model and conservatively
estimates that these options will be selected by more than half of the home purchasers at the Subject.
JBREC’s pricing recommendations strategically position the Subject in the sweet spot for this market. While Millennial
buyers dominate the more affordable townhome price points below $750K and the high-end condo market targets $1.25 Mill and
higher, there is a significant opportunity to deliver a desirable upscale townhome product with base pricing “from the high $800s”
and all-in sales prices in the mid-$900s that matches both product and pricing expectations among these buyers in this market.
The greatest challenge for the Subject will be sales pace. There are few buyers who can afford a nearly $1 Mill townhome
product or in this location. For those in this price range, they have an increased number of options throughout Atlanta. The more
successful upscale townhome communities in Buckhead have or are about to sell out, with fewer direct competitors. Branded
communities and builders have performed the best at up to 1.0/month in sales, while most others have sold at < 0.5/month. The
strength of this location can overcome the lack of brand recognition with excellent product execution.
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6

Executive Summary – Pricing and Absorption Recommendations
JBREC conducted an analysis of the Subject and the competitive market in order to make the following recommendations on
base and sales prices, as well as estimated monthly absorption rates over the lifecycle of the community.
Product:
Base Prices:

Incentives:
Options:

Lot Premiums:
Total Price:

Sales Pace:

We included the Builder’s base plan at 2,900sqft, as well as ran a second assumption with a finished bedroom
and full bath on the terrace level at an addition 400sqft.
We estimate the base prices for each of the product plans at $889,900 and $939,900, which will base price
position the Subject below its top townhome competitors from branded builders in the market and more
consistent with other new in-fill townhome communities targeting Empty Nesters within the Buckhead area.
We assumed a $20,000 incentive, which includes a combination of closing costs and options discounts.
Given the standard features planned for this community and the options selection at competitive communities,
JBREC estimates additional options upgrades of $30,000 on the base plan. However, on the larger plan (3,300
sqft) with the finished bedroom and full bath on the terrace level, we assumed $50,000 in additional options,
which include $20,000 in additional terrace level finishes (awnings, outdoor kitchens, etc.). For both plans, we
assumed 50% of buyers would select elevator options at $30,000 each ($15,000 average).
We assumed average lot premiums on the 6 end units at $30,000 per unit, which, when blended across all 17
units, comes to $10,588 per unit.
The average sales price represents the base prices, less incentives, plus options and lot premiums, which we
estimate at $925,488 for the base plan and $995,488 for the finished terrace (which we believe will be the most
popular selection). The blended average sales price is $960,488.
At our recommended pricing, JBREC supports an average absorption rate of 0.5 sales per month, which is
below the Builder’s current assumption. The top branded builders (John Wieland and Monte Hewett) have sold
at an average sales pace of 1.0 per month, while less recognized builders have sold at 0.5 per month or less.
MIX

PRODUCT
Unit Size

TAX & HOA

Plan Configuration

Tax

(Sq. Ft.)

Bed

Bath

Level

Pkg

Rate

1
1

2,900
3,300

3
4

3.5
4.5

3
3

2
2

1.50%
1.50%

2

3,100

1.50%

HOA

Base

Net Base
Price (All

Net Base
Price/

Average

Average

Total
Net

Total Net
Price/

80%
3.80%

31%
Income

Price

Incentives

Incentives)

Sq. Ft.

Options

Premiums

Price

Sq. Ft.

Ttl Net Pmt. to Qualify*

$200
$200

$889,900
$939,900

($20,000)
($20,000)

$869,900
$919,900

$300
$279

$45,000
$65,000

$10,588
$10,588

$925,488
$995,488

$319
$302

$4,807
$5,155

$186,000
$200,000

$200

$914,900

($20,000)

$894,900

$289

$55,000

$10,588

$960,488

$310

$4,981

$193,000

BUCKHEAD PARK NORTH THS- TPG
Buckhead Park North THs
Product:
Configuration:
Lot Dimensions:
% Remaining:
Sales Open Date:
Status:

Townhomes
1,152
24' x 48'
100%
Mar-17
VDL

JBREC Recommend
Total Units:
Units Sold:
3 Mon. Sold:
Units Remaining:

17
0
0
17

Target Sales Rate:

0.50

Totals/Averages:

www.realestateconsulting.com

7

Executive Summary – Appreciation and Potential Buildout
The table below summarizes our product and sales price recommendations for the Buckhead Park North TH community.
 JBREC assumes that the community will begin sales with a model grand opening in March 2017, and there will be 17
townhome units, with each unit being 24’ wide by 48’ deep.
 Price appreciation in the Atlanta market is assumed to range from a high of 2.1% in 2017, with slowing appreciation
thereafter. Note that we used 0.9% price appreciation for the remainder of 2016 (actual full year appreciation is estimated
at 1.8%) given the mid-year timing of this report.
 We assume that any market increases in demand (absorption appreciation) would be met by equally increasing new home
competition and therefore have not included any demand appreciation in our model.
 Based on the number of townhome units and an assumed absorption rate of 0.5 per month, the townhome sales are
projected to be sold out by year-end 2019 assuming a model grand opening in March 2017.
 Given our sales price and absorption recommendations, coupled with the project cycle and annual price appreciation
projections, JBREC estimates an average sales price of $982,100 over the lifecycle of the community.

Price Appreciation
Community
Buckhead Park North THs

Product
Townhomes

Dimensions Units JBREC ASP
24' x 48'

17

$960,488

Absorption Appreciation
Community
Buckhead Park North THs

Product
Townhomes

Dimensions Units JBREC Abs.
24' x 48'

17

0.50

1%

2.1%

1.6%

1.0%

Dec-16

Dec-17

Dec-18

Dec-19

$969,132

$980,658

$984,639

$990,465

0%

0%

0%

100%

Dec-16

Dec-17

Dec-18

Dec-19

0.50

0.50

0.50

0.50

Potential Buildout
Community
Buckhead Park North THs

www.realestateconsulting.com

Annual Sales Per Year

Product

Dimensions

Units

2016

2017

2018

2019

Townhomes

24' x 48'

17

0

5

6

6

8

Executive Summary – Opportunities and Challenges

Challenges

www.realestateconsulting.com

Opportunities

9


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