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Page 16 — COLORADO REAL ESTATE JOURNAL — January 21-February 3, 2015
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Academy Bank
Acre Capital LLC
Bank of Colorado
Bank of the West
Berkadia Commercial
Mortgage, LLC
Capital Source
CBRE|Capital Markets
Chase Commercial Term Lending
Colorado Business Bank
Colorado Lending Source
Commerce Bank
Commercial Federal Bank
Essex Financial Group
Fairview Commercial Lending
FirstBank Holding Company
Front Range Bank
Grandbridge Real Estate Capital LLC
Heartland Bank
JCR Capital
Johnson Capital
JVSC-CBRE Capital Markets
KeyBank N.A., Key Commercial
Mortgage Inc.
Merchants Mortgage and Trust Corp.
Montegra Capital Resources,
Private Lender
Mutual of Omaha Bank
NorthMarq Capital, Inc.
RNB Lending Group
TCF Bank
Terrix Financial Corporation
Trans Lending Corporation
U.S. Bank – Commercial Real Estate
U.S. Bank SBA Division
Vectra Bank Colorado, N.A.
Wells Fargo SBA Lending
Wells Fargo N.A. – Commercial
Real Estate Group
West Charter Capital Corp.
Finance
n Point. Investors, lenders and
buyers have expressed concerns
that the number of multifamily
units being developed in metro
Denver is in excess of demand
and this will cause rents to stop
growing or recede with massive
injections of free rent.
There are 19,000-plus units
under construction and coming
on line for delivery over the next
30 months. Approximately 6,500
of newly completed units were
leased through the third quarter
of 2014. Projections are that total
new absorption in 2014 will be
7,500 units. Additionally, there are
20,000 units in various stages of
the planning process. Please note
that even with all of this con-
struction activity, rents continue
increasing and little or no free
rent has infected the marketplace.
When comparing all of these units
in the pipeline, one can under-
standably be concerned. Since
1981, the metro Denver market
has absorbed a 35-year average
of approximately 5,500 apart-
ment units. Last year all of the
new construction was absorbed,
rents are up and citywide vacancy
rates are hovering near 4 percent.
However, there are thosewhowill
tell you that we have a bubble
of new starts that just cannot be
absorbed without a cessation
of rent increases. Some suggest
that rent concessions and higher
vacancies will plague our market
for years to come.
n Counterpoint. Using historic
apartment absorption numbers is
not a valid method of forecast-
ing the balance between sup-
ply and demand for this sector
of the industry. Instead, a better
method is looking at total hous-
ing units being constructed vis-a-
vis the housing demand drivers.
Colorado has some unique factors
since the passage of the construc-
tion defects legislation. Virtually
no new condo
construction
is underway
and, certainly,
there is little or
no affordable
condo devel-
opment on the
horizon. Thus,
r e s i d e n t s
must choose
between pur-
chasing a
home, a town-
home or rent-
ing.
The demand drivers are jobs,
population increases and income
growth. In metro Denver (exclud-
ing Boulder), approximately
34,100 new jobs were created in
2014. Add to that 47,000 net in-
migration. That factor alone rep-
resents housing demand that is
in excess of 20,000 units. Income
is the third driver and this mar-
ket continues to support higher-
than-average personal income.
Employment opportunities con-
tinue to abound and barring
unforeseen event risk, we expect
this to continue well into the
decade. The CBRE research group
has prepared a study on the rela-
tionship between housing supply
and job/population growth rates.
What this suggests is that these
demand drivers are now more
robust than in past years, thus
supporting a higher level of new
housing development. It is our
opinion that the overall housing
market in Denver will absorb at
least 20,000 newhousing units per
year as long as we continue at the
same growth rates. Those factors
are at least 1.8 percent popula-
tion growth and approximately
2.6 percent job growth each year.
Now, let’s also take a look at
a couple of subjective paradigm
changes that also impact housing
and, in particular, apartments. As
long as the existing construction
defect legislation remains in effect,
we will see little or no new hous-
ing stock built in that sector. If and
when legislation is put into law
that peels back some of the more
draconian aspects of construction
defect law, we will begin seeing
apartments converted into con-
dos. Since the properties being
converted will then have a lower
basis than what it will cost to
build new in the future, we expect
that it will be some time beforewe
begin to see large amounts of new
condo development.
Secondly, there is an entire
generation of younger people
who have grown up in families
with anxiety when their house
was either under water or, worse
yet, foreclosed. It is clear that the
American dream of the 20th cen-
tury, home ownership, is no lon-
ger as influential. Instead, millen-
nials like the freedom of renting
an apartment, where it is easy to
relocate, following a job, or just the
fact that youhave nomaintenance
and no debt. Finally, as in many
markets, there is a noticeable shift
toward infill housing. Interesting-
ly enough, the submarket that has
the most new housing activity is
the central business district, which
matches this national trend.
In summary, total housing units
delivered in the past two years
equaled about 15,600 per year,
which is the 35-year average.With
demand is excess of supply, apart-
ment rents and home prices have
witnessed strong growth. CBRE
is forecasting that overall housing
permitswill peakout over thenext
five years, averaging about 20,900
units per year. With demand at
approximately the same amount,
we foresee a balanced market-
place where supply and demand
are close to equilibrium. s
Michael Cantwell
Executive vice
president, CBRE
Debt and Structured
Finance, Denver
in Denver. The five-year, fixed-
rate loan has an interest rate of
3.59 percent;
• A $1.17 million nonrecourse
loan with O’Neil Apartments
LLC for the purchase of a 15-unit
apartment complex at 1372 Mar-
ion St. in Denver. The three-year,
fixed-rate loan has an interest
rate of 3.15 percent;
• A $1.05 million nonrecourse
loan with Walijo LLC for the
refinance of a 12-unit apartment
complex at 1355 Monroe St. in
Denver. The five-year, fixed-rate
loan has an interest rate of 3.69
percent;
• A $1.05 million nonrecourse
loanwith LincolnHeightsApart-
ments LLC for the refinance of
a 33-unit apartment complex at
1000 Lincoln St. in Denver. The
five-year, fixed-rate loan has an
interest rate of 3.59 percent;
•A$1millionnonrecourse loan
with Moby LLC for the refinance
of a 12-unit apartment complex
at 2011 Goss St. in Boulder. The
five-year, fixed-rate loan has an
interest rate of 3.41 percent;
• A $1 million nonrecourse
loan with Moby LLC for the
refinance of a 12-unit apartment
complex at 1926 Canyon Blvd. in
Boulder. The five-year, fixed-rate
loan has an interest rate of 3.41
percent;
• A $925,000 recourse loan
with Cottonwood Place LLC
for the refinance of an 18-unit
apartment complex at 8210-8230
W. 16th Place in Lakewood. The
seven-year, fixed-rate loan has an
interest rate of 3.98 percent;
• A $900,000 recourse loan
with Monarch Crest LLC for
the refinance of a 17-unit apart-
ment complex at 4953 and 4961
King St. in Denver. The five-year,
fixed-rate loan has an interest
rate of 3.69 percent;
• A $900,000 nonrecourse loan
with Capitol Hill Properties IV
LLC for the refinance of a 10-unit
apartment complex at 1460 High
St. in Denver. The five-year,
fixed-rate loan is 3.8 percent; and
•A$770,000 recourse loanwith
Capital Hill Investments LLC for
the purchase of a six-unit apart-
ment complex at 1522 Fairfax St.
in Denver. The five-year, fixed-
rate loan is at 3.93 percent.
Other News
n The Denver office of North-
Marq Capital arranged a $2.48
million loan to refinance the
Main Street Apartments in Lit-
tleton.
Main Street Apartments is
part of a mixed-use develop-
ment at 2310-2396 W. Main St.
Two buildings with rental
units on the second and third
floors represented the collat-
eral for the loan.
The apartments are leased to
qualified tenants, who earn 40
percent to 50 percent of area
median incomes.
Steve Bye, an executive vice
president and managing direc-
tor at NorthMarq, and Mark
Lindgren, an investment ana-
lyst at NorthMarq, arranged
the refinancing.
The loan was made through
NorthMarq’s correspondent
relationship with a major life
insurance company.
“The property was built
under the tax credit program
in 2000 although the afford-
able rent restrictions remain
in place for approximately 15
more years,” Bye said.
“The collateral consists of a
condominium regime, which is
often a challenge for life com-
pany lenders,” Bye continued.
“We were able to achieve a
loan-to-value threshold of 78
percent, as the property has
demonstrated an occupancy
history of nearly 100 percent
over the past 15 years,” he added.
“In addition, the project is
located in downtown Littleton
with unique shops and restau-
rants and is one block from the
FasTracks light-rail station.”s