Dirt Talk Summer 2023

TALK DIRT

SUMMER 2023

DIRT TALK The limited amount of construction is concentrated in the residential sector, where a persistent housing shortage offers some opportunity for developers and builders in spite of rising interest rates. Empire closed on the second phase of a site in Chosewood, where homes can still be deliv ered at price points considered attainable. Proving opportunities remain where others have suc ceeded in the past, Toll Brothers is building luxury single family residential in Alpharetta and Mill Creek will redevelop a prime corner on the southern edge of the West Midtown submarket. As anticipated, there was limited development through the first half of 2023. For example, through May, no major land sales occurred in several submarkets, including Midtown, Central Perimeter, and Buckhead. In the urban core, a compelling supply gap is beginning to emerge. The first half of 2023 was the quietest in over a decade, but the Land Team remembers 2009 and we certainly prefer this downturn to that one.

Situated within Buckhead’s East Village and steps from the Buckhead Business District in one of Atlanta’s premier submarkets, 470 East Paces Ferry consists of 2.92 acres of developable land that is fully entitled for dense, mixed-use development. Permitted uses include, but are not limited to, multifamily rental, retail, and office. Future residents and tenants of 470 East Paces Ferry will enjoy easy access to the surrounding restaurants and amenities of the Buckhead Village District as well as Trader Joe’s and a new Publix, all within a short stroll. COMING SOON

470 E PACES FERRY 2.92-AC Trophy Development Opportunity in Atlanta’s Buckhead Village

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BUCKHEAD EXCHANGE

470 EAST PACES FERRY

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THE BUCKHEAD VILLAGE

34,600 VPD

Peachtree Park Median Home Value: $1MM ±

Frankie Allen Park

470 EAST PACES FERRY

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BUCKHEAD

RECENT TRANSACTIONS

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In March, Toll Brothers closed on 23.1± acres on Kimball Bridge Road in Alpharetta. Plans call for 41 single family homes. The land sold for $7,080,000, or $306,494 per acre. Homes are expected to sell for over $1 million, and the builder has a land basis of approximately $172,683 per unit. A local family partnership was the seller.

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In January, Atlantic Companies acquired a 2.6±-acre site on North side Drive near its intersection with the future BeltLine trail. 926 Associates, L.P. sold the property for $11,200,000, or approximately

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$99 psf. To date, no development plans have been announced.

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In May, Empire Communities closed on the second phase of land for its mixed-use project in Chosewood called Zephyr . Metzger was the seller of the 14.8± acres, which traded for $14,200,000, or approxi mately $959,459 per acre. In total, Empire acquired 34.8± acres at the in tersection of Boulevard and Englewood Avenue. Hundreds of homes—both rental and for sale—are planned, and initial units have already delivered. The total land basis for Empire is $33,200,000, or $28,500 per unit.

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MIDTOWN

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In June, AGL sold 2.4± acres at Northside and North Avenue to Mill Creek . Modera Westside Trail will feature 373 multifamily units, the first of which should deliver by early 2025. Mill Creek purchased

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the land for $10,000,000 or $26,809 per unit (or $26/FAR).

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In April, Allen Morris purchased 1.34± acres at 680 11th Street for $10,400,000, or $177 psf, and is currently constructing a 327-unit, 21-story apartment project entitled Stella . The project should be

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completed by August 2025, and the price per unit was $31,804.

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In June, Morrison Properties sold Portman 1.3 acres of land along the BeltLine near Irwin and Krog Streets for $12,000,000, or $9,230,769 per acre ($212 psf, $50/FAR). The property will serve as the second phase of Portman's Junction Krog Project , a six-story office building currently under construction. The new building will incorporate 15,000 sf of retail and outdoor space and could include 220,500 sf of offices.

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Can Households Afford Today's Sky-High Rents? As luxury multifamily development has increasingly driven new construction across Atlanta, one of the most frequent questions we field is, "How are renters affording these expensive apart ments?" The best explanation we've found lies in the comparison to the cost of owning a home. As has been the case for decades in gateway cities like New York and San Francisco, the monthly payment for an expensive apartment unit is much more affordable than the cost of ownership. The average difference between rents and mortgage payments. $479 $66 The current average difference between the principal and interest component of a mortgage payment and rent (widest gap in history).

Continued migration to sunbelt markets caused the population to increase across Metro Atlanta, and subsequently apartment rents surged. Market rents ended Q2 2023 at $1,641 per unit, up 31.1% over the past five years . While some submarkets saw rents stabilize in recent quarters, rates continued to climb in the I-20 East suburbs and in Westside Atlanta in particular, increasing 5.2% and 4.5% since the start of 2022, respectively. Home prices have already started to decline, but for the market to return to the historical spread between rents and mortgage payments, home prices would need to fall by more than 25% . That decline would be more than that of home prices during the Great Financial Crisis (19.8%), insulating apartment demand from concerns of competition from the single-family market.

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RENT VS. MORTGAGE MONTHLY COST

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$2,400

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Sources: Cushman & Wakefield Research, FRED, Census, HUD, CoStar

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RENT TO INCOME RATIO

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LAND SALES TEAM

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Current average rent-to-income ratio for U.S. multifamily REITs

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MATT HAWKINS Managing Director matt.hawkins@cushwake.com 404.853.5204

PIERCE OWINGS Managing Director pierce.owings@cushwake.com 404.853.5350

JESSICA SHERRY Senior Marketing Specialist jessica.sherry@cushwake.com 470.480.5260