Page 8
— Multifamily Properties Quarterly — August 2016
I
n the following question and
answer, Greg Price, a Denver-
based Marcus & Millichap vice
president of investments and
senior director, answers ques-
tions about the multifamily prop-
erty market in Colorado’s mountain
resort communities with the firm’s
public relations team.
Question:
What are the charac-
teristics that make the apartment
market in Colorado’s mountain
resort communities different than
Denver’s market?
Answer:
Colorado’s mountain
resort communities and Denver
are similar in that they both have
encountered apartment invento-
ries insufficient to meet still-rising
rental demand in their areas. As
a result, rents are rising tremen-
dously. The difference between the
two areas is that the supply-and-
demand imbalance is much more
amplified in mountain resort com-
munities than in Denver.
Question:
What are the economic
drivers in Colorado’s mountain
resort communities?
Answer:
Tourism is the biggest
economic driver. Peripheral eco-
nomic drivers are industries sup-
porting mountain resort tourism,
such as retail and construction.
Question:
How has employment
and population changed in the high
country region?
Answer:
Summer tourism is
booming in mountain resort com-
munities and tourism during ski
season continues to climb. Thriv-
ing year-round tourism is driving
employment growth in the area as
more hospitality, retail and con-
struction workers are needed to
accommodate
the increas-
ing needs of
mountain
resort goers.
Essentially, ris-
ing tourism is
producing a
domino effect,
which impacts
all parts of the
economy in
these commu-
nities.
Question:
How has this
impacted multifamily operations?
Answer:
There definitely is a lack
of affordable housing and rental
housing generally. Even if local resi-
dents can afford housing, they still
may not be able to find a place to
live. Supply is just that scarce.
As a result, multifamily rents and
property values in mountain resort
towns and the outlying towns are
surging. One such example is in
Leadville, where a growing number
of resort workers from Vail Valley,
over 40 minutes away, are moving
to in droves.
Tight supply also has contributed
to multifamily vacancy levels with-
in a 60-mile radius of Leadville to
compress to 2.2 percent year-over-
year in 2015. Even now, during the
summer months, vacancy continues
to constrict. This is very unusual
as the mountain resort communi-
ties normally experience vacancy,
increasing between 10 and 20 per-
cent, over summer.
Another factor worth noting is
that condominium owners are tak-
ing advantage of the attractive rent-
al market and leasing their units
to tourists at a premium and not
to long-term local residents. This
is adding fuel to what many in the
area consider to be a rental crisis.
Question:
What is being done to
address the issue of limited apart-
ment supply for area workers?
Answer:
Businesses and munici-
palities are considering a number
of options to address the issue of
limited apartment supply, but one
problem they keep running into is
finding places where they can build.
If you look at Vail Valley, it’s rela-
tively landlocked. If you then turn
to Eagle County, development would
have to be done down in the valley
away from the town, which would
produce a similar commute to those
living in Leadville. Though there is
a clear need for more living space
and initiatives are being proposed,
it still will be very challenging to get
multifamily projects constructed.
Question:
Can you elaborate on
these challenges?
Answer:
There are two key chal-
lenges, in my opinion. First, the
landscape and geography presents
a challenge with respect to the fea-
sibility of new multifamily projects.
Second, mountain communities,
in many cases, are divided when
it comes to approving new mul-
tifamily developments. Though
folks understand the need for more
multifamily housing to address the
housing shortage, they still may
resist a new development in their
community specifically.
Question:
You’ve mentioned Lead-
ville, which is where you recently
brokered the $13.5 million sale of
the Eagles Nest Apartments, one of
the largest apartment complexes in
Colorado’s high country. Could you
provide some background on this
transaction and what was the sig-
nificance of the sale?
Answer:
What was interesting
about the Eagles Nest Apartments
transaction was that when we were
beginning to market the asset there
was a complete lack of interest
from local investors, which may be
due, in part, to a reputation in Lead-
ville for lawlessness and economic
hardships over its 130-plus-year
history.
What was vital when marketing
the property was educating poten-
tial investors, who were unfamiliar
with the region’s multifamily mar-
ket, about Leadville’s apartment
inventory, the high demand from a
growing population for multifamily
rental units and little-to-no-foresee-
able threat of new construction.
What was significant was the
response from investors who were
following the national news about
the limited supply of rental proper-
ties in and around Colorado moun-
tain resort towns. They understood
the logic behind the property’s
upside potential. As it was, the
property started achieving higher
rents while it was being marketed.
We ended up with around 12 offers.
Ultimately, we secured the buyer,
a Japanese investor, via a broker in
Marcus & Millichap’s Chicago office.
The buyer recognized the upside
potential very quickly and bought
the property on what was essen-
tially a pro forma basis.
Question:
Does this transac-
Market Update
Greg Price
CONTACT US
Recently Completed:
Park Hill Apartments
156 Affordable Units
Denver, CO
Market Rate and Affordable Multifamily Housing as well as
Senior Care Facility loan requests are welcomed nationwide!
$14,186,500 FHA 221(d)(4) New Construction 1st Mortgage
in Conjunction with 4% LIHTC
Michael Thomas
303.810.5170
Scott Graber
303.647.4262
