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— Multifamily Properties Quarterly — March 2016
2
015 was the year of big deals
for metro Denver multifam-
ily with record-setting sales
across all aspects of the mul-
tifamily market in the seven-
county area.
The big-deal trend began in April,
when ARA Newmark sold the 1,206-
unit Horizons at
Rock Creek for $255
million, the largest
price ever paid for a
single multifamily
asset in metro Den-
ver and the fourth
largest price ever
paid for any type
of real estate in the
history of Colorado
– only bested by
downtown Denver’s
Wells Fargo Center
(aka the Cash Reg-
ister Building), the Flatiron Crossing
Mall in Broomfield and Park Mead-
ows Mall in Lone Tree.
In October, Starwood Capital Group
announced plans to purchase a
nationwide portfolio of 23,262 apart-
ments from Equity Residential for
approximately $5.4 billion. These 72
communities are dispersed across
south Florida, Seattle, Washington,
D.C., Denver and California. The 18
properties located in metro Denver
comprise 5,945 units and, with an
average unit price of $230,634, repre-
sents a total Colorado sales volume
of $1.37 billion.
To round out the year, in mid-
October, the Breakers Resort – a
1,523-unit, 1990s-vintage property
composed of six unique villages and
a 26,000-square-foot recreation cen-
ter – came on the market.
The year of the big deals also man-
ifested in record-setting sales across
multiple different asset classes.
Retreat at the Flatirons, a 2014-built,
Class A+ property adjacent to the
Interlocken Business Corridor, sold in
November for $94.5 million, a price
per unit of $252,674. At the time, this
was the largest price per unit for a
noncore, garden-style asset ever paid
in metro Denver. (Spoiler alert: 2016
is already setting its own records
including a new high for a noncore
garden asset.)
A major record was set by Can-
terwood Apartments, a 1991-built,
216-unit, garden-style asset in Boul-
der. The property sold for $302,083
per unit – the highest price per unit
ever paid for a 1990s asset and the
highest price per unit ever paid for a
garden-style asset (of any vintage) in
Colorado.
In June, Environs, a 314-unit, 1984-
built asset inWestminster, traded for
north of $200,000 per unit – a new
record for 1980s Colorado vintage
product.
One more notable deal snuck in
before the end of 2015. One Observa-
tory Park, a concrete high-rise locat-
ed in the Observatory Park neighbor-
hood, closed on Dec. 30 for $387,324
per unit – the highest price ever paid
per unit for a 50-plus unit multifam-
ily asset in Denver. The $387,324
per unit pricing includes 23,366 sf
of retail. However, even without
including the retail, the value of the
apartments still holds the record at
approximately $345,000 per unit.
Another 2015 event was a big deal
because it was a first. Del’Arte Lofts
and Flats, which sold in September,
was the first fully completed value-
add property of this cycle.
When all was said and done,
2015 was itself a big deal because it
marked the biggest year for multi-
family in Colorado’s history with a
total sales volume of $4.4 billion, a
23.5 percent increase over the previ-
ous record set in 2014 ($3.6 billion).
ARA Newmark also celebrated a big-
deal year, reaching its highest sales
volume in the company’s Colorado
history with over $2 billion in sales.
Many investors speculated over
the last five years that Denver was
in a period of overbuilding. Due to
construction delays in 2014, many
were convinced that 2015 would
be the year that the market came
crashing down. Not only did metro
Denver disprove the concept of over-
building, the market is riding the
wave of construction with minimal
fluctuation in the occupancy levels
that Denver has maintained over the
last five years.
Vacancy in metro Denver has
remained below 6 percent since the
third-quarter 2010. We are nearly
through this wave of construction
as 9,029 units were delivered in
2015, compared to 7,588 in 2014 and
3,743 in 2013. Looking forward, 2016
is expected to see 10,719 deliver-
ies, and that number is expected to
decline to 7,828 in 2017 – much less
than what Denver just received …
and absorbed.
Absorption was strong with a total
of 6,252 units absorbed, in line with
2014’s absorption of 7,071 units and
more aggressive than 2013’s absorp-
tion of 4,461 units. With more people
moving to Colorado, high demand
for multifamily housing is expected
to grow stronger, and the deliveries
of 2016 and 2017 are projected to be
absorbed quickly.
A sizeable pool of longtime Denver
owners were (mistakenly) convinced
that Denver reached the peak of its
growth in 2013 and stopped buying
in 2014. However, cap rates remained
competitive in 2015, and with the 9.5
percent annual market rent growth
that metro Denver achieved in 2015,
values have continued to climb.
In fact, in 2015 we resold two prop-
erties that had traded not too long
ago for significantly more than their
recent sales prices – proving that the
growth in the metro market truly is
a big deal. Canyons at Saddle Rock
traded in February 2014 at a price
per unit of $172,243, and it closed
in December for over $215,000 per
unit – a 25 percent growth in just
22 months. Del’Arte Lofts and Flats
sold in 2013 for $95,043 per unit
and recently sold again for $148,860
per unit (57 percent growth in 27
months). Del’Arte is an example
of the value that a fully completed
renovation can achieve.
The skepticism of some provided
the opportunity for new buyers to
enter the market, including Bell
Partners, Steadfast and Braddock
& Logan. These buyers, plus many
more who were bridesmaid-bidders,
believe that Denver still is in the
midst of a strong growth period
and continue to aggressively pursue
assets.
With absorption levels expected
to remain strong and fundamentals
continuing in the positive direction,
2016 is poised to be another strong
year in multifamily.
s
Market Update
Anna Stevens
Transaction
manager, ARA
Newmark, Denver
• Oddly enough, there was a
dearth of core downtown Den-
ver sales this year. The Yards at
Denargo Market and 2828 Zuni
were the only two downtown
assets to trade hands.
• The Stanley is a 43-unit, fully
renovated 1950s asset that traded
in April 2015. It achieved the
highest price per square foot paid
for a fully renovated property in
metro Denver – $430.09 per sf.
• A very unique redevelop-
ment site at 17th Avenue and
Pearl Street in Uptown traded
hands, shattering price per sf
records for the neighborhood.
The site was home to Uptown
Tavern and will welcome a new
Uptown Tavern as part of the
new multifamily development
by Southern Land Co.
Other Notable
Sales Activity
Courtesy ARA Newmark
