Potomac Falls, Va.-based S. Patz & Associates prepared a market analysis expected to be used to attract a developer and facilitate a financing package for the four-story project at the 7.3-acre, city-owned site off Sullivan Street.
Stuart Patz, the firm’s president, suggested no attractive new apartment properties have been developed in the Tri-Cities since 2008.
“There’s enough economic growth and job growth here. ... The setting that the city and economic development board have created is very competitive for new apartments. ... You have a pent up demand locally,” Patz told board members.
Patz’s analysis noted Kingsport has 3,000 renters with annual incomes of more than $35,000 but only 700 “mature, moderate-rent” apartment units with a low combined 95 percent occupancy rate.
At the $35,000 or more income level, Patz stressed renters would be able to afford net rents of $875 per month and above.
“The lack of sufficient modern apartment properties is a compelling reason for renters to select other housing options. This has been a consistent pattern within the region,” Patz’s analysis pointed out.
The analysis also noted the Tri-Cities apartment market could support up to 600 new units through 2016. More than 400 new apartment units are in the planning stages in Kingsport and Johnson City, according to Patz.
Patz’s analysis of the Supermarket Row project supported a two-phased development of 125 units per phase, with the first building going up in 2014 and being available for occupancy by early to mid-2015.
The units, he said, could be a mix of one-bedroom, one-bedroom with a den and two-bedroom units with in-unit washer/dryer, stainless steel appliances, granite countertop and hardwood cabinets.
“The apartment building should have an on-site leasing office, a state-of-the-art fitness center, state-of-the-art security for building entrance, and TV/party room with kitchen,” Patz’s analysis said. “Outdoor amenities are not needed other than an attractively landscaped site.”
Jeff Fleming, Kingsport’s assistant city manager for development, told the board discussions have begun with a couple of developers.
“We haven’t been competitive in the apartment environment. ... It’s not a product we had,” Fleming acknowledged. “Our goal is to provide more upscale apartments in Kingsport ... (but) it may not happen in the natural economic environment.”
The type of financing to be sought, Fleming added, would be a loan package under the U.S. Housing and Urban Development (HUD) 221 program.
The HUD program allows for long-term mortgages, up to 40 years, that can be financed with government-backed securities.
“It’s a mortgage insurance program that insures lenders against loss for multi-family housing,” Fleming said of the program. “It is not to be confused with low-income housing.”