CREJ - Journal

Page 6

— Multifamily Properties Quarterly — April 2015

ear-to-date multifamily invest-

ments have been an exciting

asset class to watch. They are

steady and reliable income and

expense operations that pro-

vide a high value-added opportunity

with limited risk. If you are interested

in exploring a multifamily investment,

here is a look at the current market on

a national and local level.

In an article summarizing the nation-

al 2014 multifamily market in the Janu-

ary issue of Commercial Investment

Real Estate magazine, Kenneth P. Riggs

Jr., CCIM, CRE, MAI, FRICS, quoted sev-

eral statistics from various real estate

data research companies that are

worth noting.The nation’s apartment

vacancy rate ended fourth-quarter 2014

at 4.3 percent, and the annual effective

rent increased 3.9 percent to an aver-

age monthly apartment rental rate of

$1,117, according to Reis. Reports from

Real Capital Analytics indicate the price

per apartment increased 21.5 percent

to $128,259. And ERCC reported the

initial cap rate required by investors

across the nation declined to 5 percent.

The same group also predicted that the

effective rent growth rate would be 3.1

percent in 2015 and 2.6 percent in 2016.

The Denver metro market reportedly

is one of the top multifamily markets

in the country outside of the coastal

cities. There was a record $3.25 billion

in apartment sales in the Denver area

in 2014, according to Cary Bruteig,

principal of Apartment Appraisers &

Consultants. Bruteig’s statistics indi-

cate the sales volume of apartment

buildings of 50-plus units was up 78

percent from 2013. The overall apart-

ment vacancy rate increased slightly

from 3.7 percent to 4.1 percent, but

remained the lowest fourth-quarter

vacancy rate in 11

years, he said.

There are nearly

100 apartment

projects with over

19,000 units under

construction in Den-

ver, said Bill James,

MAI, CCIM. Approxi-

mately 10,000 units

were completed

in 2014.There is

much debate and

some concern about

overbuilding. New

Class A apartments

are now receiving

as much as $2.20

per square foot, per

month, in rent, and

sales prices of over

$400 per sf.

I have heard the

expression that in

order to determine

a city’s economic

condition and vital-

ity, count the num-

ber of construction

cranes in the area.

Boulder’s landscape

is littered with cranes, and experi-

enced more construction activity in

2014 than in years past. Downtown

Boulder, the University of Colorado’s

main and east campus locations,

North and South 28th Street, north-

west Boulder and south Boulder

all have had visible cranes over the

past year. The Daily Camera’s Oct.

12 informative review of Boulder’s

growth and development focused on

12 major construction projects in pro-

cess. In that article, 12 major develop-

ments were highlighted, and many of

these are new apartment projects.

From the multifamily real estate per-

spective, the landscape has changed

considerably in the last few years. Up

until the development of Two Nine

North at 1955 30th St., newmarket-rate

apartments of any size had been con-

spicuously absent for decades.With the

exception of an occasional new dorm

for CU students, most newmultifamily

housing units were sold as individual

condos or townhomes. In addition,

Colorado’s growth in jobs and popula-

tion, and the trend toward an urban

lifestyle have created a strong demand

for apartment living.

Throughout 2014, the multifamily

resale market was exceptionally strong.

Due to continued low interest rates,

high occupancy rates, strong rates of

annual rent growth and in-migration of

millennials, Boulder multifamily invest-

ments are in great demand.The supply

of residential income properties for sale

cannot keep pace with demand. At one

point during fourth-quarter 2014, there

were only three multifamily properties

for sale in Boulder.This imbalance of

supply and demand creates an excep-

tionally strong sellers’ market, which

increases prices and compresses cap

rates. An example of this is the last

three sales of the 161-unit apartment

complex at 2850-2890 Kalmia Ave. in

north Boulder. In February 2009, the

property, previously known asThe Boul-

ders, sold for $20.9 million. In May 2011,

it sold for $33.5 million. Last October it

sold again, this time for a price of $44.2

million. Previous owners made some

improvements, but this is a 111 percent

price increase in 5

years.

From Jan. 1, 2014, through Dec. 31,

2014, there were 36 multifamily sales

in Boulder. Several of these were “off-

market sales” or placed under contract

before they became public knowl-

edge. Prices ranged from $452,500 for

a duplex to $93.5 million for the 238

apartments at Two Nine North.The

unweighted average metrics for these

36 sales are shown in the chart.

Exciting times for multifamily investment in Boulder

Boulder Update

Miles King, CCIM

Broker associate,

Colorado Group,

Boulder

Todd Walsh,

CCIM

Broker associate,

Colorado Group,

Boulder

Prudential Mortgage Capital Company combines one of the

industry’s most experienced teams with extensive lending

capabilities and consistent performance in the Colorado market.

We originated $7 billion* in multifamily loans in 2014 and

focused on a variety of specialized property types including:

market rate housing, affordable housing, student housing, senior

housing and health care senior living. Once again, the numbers

prove it: We have the talent and resources to get your deal done.

PRUDENTIAL MORTGAGE CAPITAL COMPANY

WE GET IT.

DONE.

WE GE T I T. DONE .

Andrew Dale at 720-356-6408

andrew.dale@prudential.com

Prudential Mortgage Capital Company’s

loan programs include:

Fannie Mae DUS

loans

Freddie Mac Program Plus

Specialized affordable housing programs

FHA

Conduit

Prudential’s life company portfolio and

proprietary balance sheet program

T:10.25”

T:7.25”

AAGP Andrew_NPQ_10.25x7.25.indd 1

3/31/15 1:30 PM

Boulder multifamily sales and rental numbers in 2014.