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COLORADO REAL ESTATE JOURNAL
— February 4-February 17, 2015
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Greater Denver
by John Rebchook
The Laramar Group, a Chi-
cago-based firm that is bullish
on Denver and has been on a
buying spree of central Denver
apartment buildings, has made
another record-setting acquisi-
tion in the Denver market.
In its first record-breaking
deal, last year it paid $7.15 mil-
lion for the Alta Vera building
near Cheesman Park.
The sale of the building, ini-
tially developed as “for sale”
condos, was $357,500 per unit,
besting the previous record
of $332,456 per unit, which
equated to $357,500 per unit
for the Verve apartment tower
in downtown Denver.
Last month, Laramar paid
$5.45 million, which equates
to $160,294 per unit, for the
34-unit Sierra Park Apartments
at 23 and 33
Pearl St. in
D e n v e r ’ s
West Wash-
ington Park
n e i g h b o r -
hood.
It was the
most
ever
paid per unit
for an out-
side “walk-
up” apartment building in
Denver, said Greg Johnson.
Johnson and Kyle Malnati
of Madison Commercial Prop-
erties represented the seller,
a limited liability company
headed by Norris Scott.
Scott lives in Summit County,
but has bought and renovated
a number of apartments in cen-
tral Denver.
“This crushed the previous
high-water mark of $140,400
per unit set in September
2013,” Johnson said.
Actually, Johnson and Malna-
ti sold another walk-up apart-
ment building in early 2015 for
more than $150,000 per unit,
so that record was going by
the wayside, even without the
Laramar purchase.
Walk-up units were a short-
lived, but popular, construc-
tion style from the mid- to late
1960s, Johnson said.
Walk-up apartments aren’t
served by elevators.
Individual units open to the
exterior and they don’t have
long hallways.
“Some people disparagingly
refer to them as Motel 6 apart-
ments,” Johnson said.
He said more than 100 of
them were built in central Den-
ver from about 1964 to 1969.
“They were the most modern
buildings of their time,” John-
son said.
Developers liked them
because they could build 17
units on a typical Denver dou-
ble lot, compared with build-
ing 12 apartments with long
hallways, he said.
“I always liked them,” John-
son said.
“When I was at Cornerstone,
we had a lot of walk-up units
that we managed in our port-
folio. They have very efficient
layouts and they always had
the lowest maintenance costs,”
he said.
He believes renters like them,
too.
“You can open your door and
be outside, which is great in a
place like Denver, where we
have so many nice days and
you want to let fresh air in,”
he said.
“In most apartments, you
open the door and you are
looking at a long hallway,” he
said.
However, the higher density
means that they have more, but
smaller, units in buildings.
Most walk-up units are one-
bedrooms and most of them
are 500 square feet or smaller,
he said.
“Since they are smaller units,
you get less in rent per unit,
which means they sell for less
per unit,” he said.
During the downturn, he
said he and Malnati sold many
of these walk-up style build-
ings for $60,000 or $70,000 per
unit.
However, that doesn’t mean
the price has doubled and they
have appreciated the most of
any product type since the
Great Recession ended.
“I don’t have any data to
back that up,” Johnson said.
“Plus, it’s not really making
same-store comparisons,” he
said.
That is because the walk-up
buildings they sold during the
carnage of the real estate crisis
were being sold without hav-
ing been renovated, while all of
the buildings, including Sierra
Park, have been upgraded.
“Really, we were selling
buildings in 2009, 2010 and
even 2011 that hadn’t been ren-
ovated for 50 years,” Johnson
said.
“The seller, Pearl Street Den-
ver Partners LLC, did a com-
plete renovation of the prop-
erty in 2013. They selected all
the right finishes, and were
able to achieve excellent rent
amounts,” he said.
The renovation of the prop-
erty included new kitchens,
bathrooms, flooring and light-
ing within each apartment.
The building also received
new boilers, windows, land-
scaping and a new roof.
This was the third extensive
renovation project that the sell-
er had completed in the neigh-
borhood in recent years.
“The building was in pret-
ty average condition in 2012
when we brokered it to the
current seller,” Malnati said.
“It’s terrific to see the work
they did, and the high price we
were able to secure for them. It
was very profitable.”
Apartment owners, he said,
have been receiving far better
returns from the dollars spent
on renovations than from pur-
chasing the buildings, he said.
“During the real estate down-
turn, someone might have pur-
chased an apartment at a 6.5
percent cap with the idea of
getting a 9 percent return,” he
said.
“If they spent money reno-
vating it, they were looking at a
20 percent or 25 percent return
on those dollars,” he said.
Johnson said Scott, the seller,
chose Laramar from a number
of bidders, not only because
it met the asking price, but
also because of its reputation in
being able to close deals.
“And the seller’s reputation
also was a selling point for
Laramar,” Johnson said.
“He does a very nice job and
Laramar could see how every-
thing he does is first-class,”
Johnson said.
“This was really a case of the
perfect buyer and the perfect
seller,” he said.
One of the lessons from the
sale is that it pays to renovate,
Johnson said.
During the downturn, John-
son and Malnati fielded doz-
ens of inquiries from building
owners looking to buy proper-
ties at bargain prices.
“They might say, ‘We own
four buildings in central Den-
ver and we want to buy a fifth
building. What do you think?’
“We would tell them, ‘Go
ahead and buy that fifth build-
ing, but if you really want a
bigger bang for your bucks,
renovate those other four
buildings,’” Johnson said.
“Kyle and I had a ton of those
conversations five years ago
and we’re still having them
today,” he said.
s
Sierra Park was purchased by the Laramar Group.
Greg Johnson
ʻThe seller, Pearl
Street Denver
Partners LLC,
did a complete
renovation of the
property in 2013.
They selected all
the right finishes,
and were able to
achieve excellent
rent amounts.ʼ
– Greg Johnson, Madison
Commercial Properties
