1226 N Hemlock Rd
Hemlock, MI 48626
Northgate Apartments · Multifamily Property For Sale · 22 Units

EXECUTIVE SUMMARY: Northgate Apartments was established in 1981 and built by Bavarian Builders of Frankenmuth, Michigan. Northgate is situated on approximately 3.7 acres just north of Downtown Hemlock and consists of three buildings with a total of 22 units, a common laundry room, and a maintenance/storage shed. The buildings are set on footings with crawl spaces, with a lower brick façade, vinyl uppers, aluminum soffits, gutters, down spouts and asphalt shingled roofs. The property offers a competitive unit mix of 2 three-bedroom townhome units with approximately 1,064 ft.2, 4 two-bedroom townhome units with approximately 812 ft.2, 7 two-bedroom units approximately 718 ft.2, 8 one-bedroom units approximately 584 ft.2 and 1 studio unit approximately 538 ft.2. All units are separately metered for gas and electric with gas-forced air furnaces, air conditioning, individual hot-water heaters, refrigerators, stoves, and dish washers. Tenants are responsible for gas and electric, and the landlord is responsible for city water and sewer. Northgate is a stabilized asset with current physical occupancy at 81.8%, which is much lower than historical occupancy levels. The property was pulled from the USDA Rural Development Section 515 program in July 2019 via the pre-payment program. Ownership is currently transitioning the property from RD tenants to market rate tenants, thus explaining the lower than normal occupancy and higher turn-over costs. There have been many recent improvements to Northgate Apartments: parking lots were repaired, sealed and striped in 2016; a concrete handicap ramp was installed in 2016 to replace a wooden ramp for building "B"; all building exteriors were painted in 2012; roofs were replaced in 2008; entry doors were replaced in Building "C" in 2008; all appliances, carpet, vinyl, A/C, water heaters, furnaces, and plumbing fixtures have been replaced on a "as needed" basis. MARKET OVERVIEW: Hemlock is located in the Great Lakes Bay Region - 15 miles west of Saginaw, and 15 miles south of Midland in Saginaw County, MI. This region provides many outdoor activities including freshwater adventures, hiking trails, sailing, eco-tours, river cruises, wine tasting, and fishing. The population of Hemlock is about 1,550 with a median household income of $53,214. Hemlock is conveniently located along M-46 which leads directly into the city of Saginaw. The local library is next door, and Northgate is less than one block from all of the Hemlock Public Schools and the Hemlock Police and Fire Departments. The local economy in Saginaw County is well-diversified with economic anchors such as Industry-Dow Chemical (6,000 employees), Nexteer Automotive (4,200 employees), Dow Corning (2,750 employees), General Motors (2 plants), SC Johnson and Big Chief Sugar. Higher Education includes Saginaw Valley State, Northwood University and Delta College. Healthcare includes Mid-Michigan Health System (4,300 employees), Covenant Healthcare (4,130 employees) and St. Mary's of Michigan (2,200 employees). The current unemployment rate in Saginaw County is approximately 5%. This represents a significant decline from Saginaw County's previous high of 13.7% in 2010, demonstrating the resurgence of the local economy. FINANCIAL: As it pertains to market rents, our carefully conducted rent comparable study has revealed that Northgate rents are below market on both a price per square foot and Street Rent metric. From an underwriting perspective, IPO has conservatively forecasted a year-one Pro Forma NOI of $80,399 based on average rental rates and applied a vacancy, bad debt and loss-to-lease factor that is consistent with the current trend. When accounting for additional increases up to market rents, the NOI rises considerably to $87,627 , creating a significant amount of value-add potential without significant additional financial investment. For example, a modest $25 increase in average rents would increase the value of the asset by over $90,000.