April 6-April 19, 2016 —
COLORADO REAL ESTATE JOURNAL
— Page 45
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take a while,” Arsenault said.
His best estimate is that
the recession will hit in 2019,
although it could be a bit earlier
or a bit later, he said.
However, the later the reces-
sion comes, the more severe it
will be, he warned.
Zoellner said that the markets
have mispriced risk.
Because interest rates have
been artificially low for so many
years, institutional lenders and
investors have seen apartments
as an alternative to bonds,
according to Zoellner.
Those in the apartment mar-
ket, however, have never con-
sidered the multifamily indus-
try as a low-risk enterprise, he
pointed out.
He said he thinks the Denver-
area apartment market is at the
bottom of the 9th inning, with a
lot of headwinds.
Miller said there is a huge
need for affordable housing in
the Denver area. However, he
said that won’t happen until
construction defect reform takes
place at the state level.
With rising labor and land
costs, it is increasingly expensive
to build apartments in the metro
area, which means developers
need higher rents to justify con-
struction.
Miller, who noted he has
weathered multiple recessions
over the years, said Denver
apartment prices are so expen-
sive that he isn’t competing with
others to buy them.
Jeff Hawks, a vice chairman
at ARA Newmark, who moder-
ated the panel, said that ultimate
Frisbee is a better metaphor of
the apartment market than base-
ball.
That’s because while most
baby boomers know nothing
of the sport, many millennials
understand the rules and how
you score ultimate Frisbee.
“The millennials will tell us”
when the current apartment
boom ends and what will hap-
pen next, according to Hawks.
Macro-millennial trends, how-
ever, provide for a bullish long-
term for the apartment industry,
he argued.
He said there are 300,000 mil-
lennials who are still living at
home and that dwarfs the apart-
ments available by a huge factor.
And it wasn’t all doom and
gloom at the conference.
Tim McEntee, director of
Wood Partners, spoke on the
development panel, the final
panel of the conference.
He joked that after listening to
Arsenault and Zoellner, he is not
“boarding up the windows,” in
preparation for the coming “tsu-
nami. I saw a few friends look-
ing at the balcony to jump off.”
In fact, many of the panel
members remained extremely
bullish.
That was especially the case
with the value investors on the
investment panel.
Norm Radow, CEO of the
RADCO Cos., said Denver is
in the “epicenter” of apartment
demand being driven by mil-
lennials.
He noted his company bought
a Class C apartment community
with a mansard roof in Thorn-
ton.
Average monthly rents initial-
ly were at $725 and were raised
to $966 in a year.
“That’s a 33 percent increase,”
Radow noted.
The rents, he added, are head-
ed toward $1,200, but that is still
far below the $2,000 or more that
new Class A communities need
to charge.
Whether in Denver, Atlanta
or some other fast-growing
market, he said if he can buy
a fixer-upper and charge hun-
dreds of dollars less per month
in rent than a nearby, new Class
A community, “We will win
every time.”
s
From left, Mike Zoellner, Andrew Miller and Marcel Arsenault
From left, Luke Simpson, Scott R. McClave, Noah E. Hochman, Eric Frank and Norman Radow
From left, Timothy McEntee, Jeff Wikstrom, Lee Ferguson, Scott Johnson, Spencer R. Stuart Jr. and Matthew Schildt
